If you’ve ever skimmed through a Master Services Agreement (MSA), a consulting contract, a SaaS agreement, or even an investor agreement, you’ve probably stumbled across a section labeled “Representations and Warranties” (or just “Reps & Warranties”).
At Counsel Club, we know this section can feel like dense legal jargon, but it’s actually pretty straightforward once you break it down. And yes, it’s important.
So, what are reps and warranties? Why do they matter? And what should you watch out for when negotiating them? Let’s get into it.
What Are Representations and Warranties?
Think of representations and warranties as assurances that both parties make to each other in a contract. They’re statements of fact about:
- Your business (Is it legit? Do you have the authority to sign this contract?)
- The work you’re doing (Is it original? Are you following the law?)
- The deliverables you’re providing (Are they infringing on anyone’s IP?)
These aren’t just fluffy legal statements, they’re promises that can create legal liability if they turn out to be false. If you breach a rep or warranty and the other party suffers a loss because of it, they can potentially sue you for breach of contract.
Common Reps & Warranties You’ll See in Business Contracts
- Authority to Enter Into the Agreement
This is a basic one. It’s a promise that, you (or your company) have the legal authority to sign the contract. The person signing on behalf of the company is actually authorized to do so. This matters because you don’t want to sign a deal only to find out the other party isn’t even a real business, or that the person signing didn’t have the authority to bind the company.
- Intellectual Property (IP) Ownership & Non-Infringement
If you’re a design agency, branding studio, web developer, or any kind of creative service provider, this one’s big. You’re often asked to promise that, the work you deliver is original and does not infringe on anyone else's IP rights (like copyrights or trademarks). Seems straightforward since few people actively copy other people's work but, this is tricky.
In today’s digital world, it’s nearly impossible to guarantee that something is 100% unique. There’s just too much content out there. You might create a logo that unintentionally resembles another design without even realizing it. Also, many social media posts and designs tend to follow a certain aesthetic - what is "copying" and what is "inspiration"? (We'll get into that in more detail in another post).
This is gray area is why we often suggest adding language like:
“To the best of your knowledge” - This limits your promise to what you reasonably know, not an absolute guarantee.
“You’ve used commercially reasonable efforts” - This shows you’ve done your due diligence but aren’t promising perfection.
- Compliance with Laws
This rep provides that you’re following all applicable laws when providing your services or products.
Sounds simple, right? But here’s where it gets complicated:
What laws apply? Federal? State? Local? International? Are you supposed to know every obscure regulation out there?
We often recommend narrowing this to:
“Applicable laws related to the services provided” This keeps the focus on laws that are actually relevant to your work.
- Standard of Care or Professionalism
This is where you promise to perform your services, in a professional manner, using commercially reasonable or even sometimes, best, efforts and in line with industry standards.
It’s basically saying, “I’m going to do the job I promised, and I’m going to do it well.”
This is typical language and usually not a place for discomfort, but you should read through it and understand the level of services or quality that you're being asked to represent to.
Why Should You Care About Reps & Warranties?
If you breach a rep or warranty, even unintentionally, it could lead to, breach of contract claims, financial liability (you might have to pay damages) and of course, reputational risk for your business. This isn’t just about legal exposure, it’s about managing business risk.
What’s a Materiality Threshold (and Why Does It Matter)?
When negotiating reps and warranties, you might see terms like “material breach” or “material misrepresentation.” This is a way to set a threshold for what counts as a serious issue. Not every small mistake should trigger a lawsuit. For example:
- Without materiality: A tiny, irrelevant mistake in your business info could technically be a breach.
- With materiality: Only significant errors that actually affect the deal will be considered a breach.
We often recommend adding materiality qualifiers where it makes sense, especially when the reps are broad.
Should Both Parties Give Reps & Warranties?
Yes. While service providers often make the most reps (since they’re delivering the work), it’s smart to get some in return. For example, you might want your client to promise that:
- They’re a legitimate business with the authority to sign the contract.
- They’ll provide accurate information needed to complete the work.
- They won’t misuse the deliverables in a way that creates legal issues for you.
Negotiating Reps & Warranties: What to Watch For
- Overly Broad IP Reps - Be cautious of language like, “The deliverables will not infringe any third-party rights, anywhere in the world.” Instead, limit it to “to your knowledge” or based on reasonable efforts.
- Absolute Compliance with All Laws - Narrow this down to laws that are relevant to the specific services or products you’re providing.
- Unlimited Liability - If a rep is breached, does it trigger unlimited liability? Consider adding caps on liability or limiting liability to direct damages only.
How Counsel Club Can Help
At Counsel Club, we’ve designed templates that include balanced reps and warranties that protect your business without overexposing you to risk, walk you through what each clause means so you’re not blindly agreeing to legal language, and we offer concierge support if you’re negotiating a high-stakes contract and need expert guidance.
The Bottom Line
Reps and warranties aren’t just legal fluff, they’re promises that can have real consequences if things go wrong. But once you understand what they mean, they’re not as scary as they seem.
- Read them carefully.
- Negotiate when needed.
- Make sure the risks match the business relationship.
And if you’re ever unsure, Counsel Club is here to help.
