Business and Legal Insights

Introduction: Import of Representations and Warranties

Representations and warranties define parties’ factual assumptions and assurances and allocate risk when those assumptions prove false, making them heavily negotiated provisions in commercial contracts. In litigation, representations and warranties are central in shaping claims and corresponding remedies. Ultimately, the scope of warranties and corresponding disclaimers defines the economic risk allocated in a transaction.

Representations: The Reliance Engine

Representations are statements of fact intended to induce reliance. When a representation proves inaccurate or false, an injured party relying upon that representation may pursue remedies beyond breach of contract, including fraud, negligent misrepresentation, or rescission. Sellers often seek to narrow the scope of representations to limit such exposure.

Litigation about inaccurate or false representations often turns on the issues of causation and reliance. Buyers argue that, but for the false statement, they never would have entered the transaction. Disputes involving representations can transform an ordinary contractual disagreement into a challenge to the underlying integrity of the bargaining process itself.

Express Warranties: The Accuracy Guarantee

Warranties are contractual assurances that a fact is true and will remain so for a defined period. As explained in Shoemaker v. Hearst Corp., 246 Wis.2d 990 (2001), a warranty is “an assurance by one party to a contract of the existence of a fact upon which the other party may rely” and “amounts to a promise to indemnify the promisee for any loss if the fact warranted proves untrue.”

When a warranty applies, damages become mechanical: the difference between what was promised and what was delivered. Breach of warranty is a strict liability concept, meaning intent does not matter. If the warranted fact proves inaccurate, liability follows.

Some buyers prefer warranties because warranties convert uncertainty into a mechanical claim. Because warranties can create liability even where a seller acted reasonably, sellers often limit the scope of certain warranties and disclaim others entirely.

Implied Warranties: Public Policy in Action

In sales transactions, Florida law implies warranties of merchantability and fitness for a particular purpose. Merchantability requires goods to be fit for their ordinary purpose § 672.314(c), Fla. Stat.  The warranty of fitness for a particular purpose arises when the seller knows the buyer’s intended use and the buyer relies on the seller’s skill or judgment in selecting suitable goods. § 672.315. Fla. Stat.

Warranty Disclaimers: Where the Rubber Meets the Road

From a seller’s perspective, warranty disclaimers can include “AS IS” clauses, exclusive-remedy provisions, knowledge qualifiers, materiality thresholds, survival limitations, and anti-reliance clauses to narrow exposure and shift risk. When negotiated from a buyer’s perspective, warranty disclaimers can include sandbagging rights (allowing the buyer to pursue a claim for inaccurate representations despite the buyer’s independent pre-closing knowledge), expanded definitions, and fraud carve-outs preserving remedies despite those limitations.

Implied warranties may only be disclaimed through specific and conspicuous language. Compare Orange Motors of Coral Gables, Inc. v. Dade County Dairies, Inc., 258 So. 2d 319 (Fla. 3d DCA 1972) (holding disclaimer was inconspicuous where the same color and size was used for other provisions of the contract) with First New England Financial Corp. v. Woffard, 421 So. 2d 590 (Fla. 5th DCA 1982) (finding disclaimer sufficiently conspicuous where disclaimer was in bold, capital letters in a clearly designated section). Florida law also permits disclaimers through phrases such as “as is” or “with all faults” § 672.316, Fla. Stat.; Osborne v. Genevie, 289 So. 2d 21 (Fla. 2d DCA 1974). The scope of implied warranties can also be divined from the parties’ course of conduct.

Case Illustrations: Warranty Disclaimers in Practice

The following two cases illustrate the effectiveness of warranty disclaimers. In Henningsen v. Bloomfield Motors, Inc., 161 A.2d 69, 97 (N.J. 1960), Plaintiffs sued Defendant Bloomfield Motors, Inc., for breach of an implied warranty of merchantability after Plaintiff was injured when the steering mechanism of the car malfunctioned. Defendant asserted that the warranty had been disclaimed by the fine print on the back of the purchase contract. The court, noting the inequality in bargaining positions between an automobile dealer and a consumer, refused to enforce the warranty disclaimer on the basis that it was not brought to the Plaintiffs’ attention and was neither clear nor explicit.

In Bayliner Marine Corp. v. Crow, 257 Va. 121, 509 S.E.2d 499 (1999), Plaintiff sued the seller and manufacturers of a fishing boat alleging that the boat manufacturer breached an express warranty. Plaintiff claimed that the boat was significantly slower than what was allegedly represented. The court held that information in “prop matrices” was not an express warranty about the performance capacity of the boat. In part, the court relied upon the information explicitly referring to a boat that carried less weight and had different propeller sizes than the one that Plaintiff purchased. Further, the court found that generalized promotional statements regarding offshoring fishing performance were simply statements of opinion, and that such statements are not, standing alone, express warranties.

Read together, Henningsen and Crow illustrate the premise that warranty disclaimers are generally enforceable when they are negotiated, conspicuous, and precise, and fail when they are hidden, overreaching, or contrary to public policy.

Conclusion: Practical Takeaways

Representations and warranties serve as a contract’s risk allocation architecture. Representations protect reliance and the integrity of the bargaining process, while express and implied warranties allocate post-closing risk. Warranty disclaimers, in turn, adjust and limit that risk. These provisions embody the adage published on February 4, 1735, in The Pennsylvania Gazette and later attributed to Ben Franklin, “An ounce of prevention is worth a pound of cure.” Representations, warranties, and disclaimers are proactive risk-management tools, forcing parties to confirm critical facts upfront to help prevent costly disputes, financial losses, or contract rescission down the road.

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This is the second of a ten-part series of blogs by Eric Adams and Melodie Khosrovani, discussing the ten most impactful contract provisions in commercial litigation.