Why one word can cost millions
A statement of fact in a deal can be a warranty, a representation, or both - and the label decides the remedy if it turns out untrue. A breach of warranty is a contract claim; a misrepresentation is a tort claim, with a different and often larger measure of damages. In Sycamore Bidco Ltd v Breslin [2012] EWHC 3443 (Ch), that difference was worth around GBP 12 million on a single acquisition.
Yet warranties and representations are among the least carefully drafted provisions in commercial agreements. Sophisticated parties assume "represents and warrants" gives them both; because a court reads the whole agreement, the label alone may not settle it.
Warranties are not automatically representations
The starting point from Sycamore Bidco is that a warranty in a contract is not also a representation unless the drafting makes it one. Courts read the whole agreement: if the provisions are labelled warranties, sit in a warranty schedule, and the limitations are written for breach of warranty, a court will usually find warranties only - even where "represents and warrants" appears - because that is what the structure shows the parties intended.
If you want dual liability - in contract and in misrepresentation - you have to build it in explicitly, with reliance and inducement language. The warranty-versus-representation guide below shows how.
How the damages differ
The measures diverge. Breach of warranty asks what you were promised minus what you got - the difference between the asset's value as warranted and its actual value. Misrepresentation, in tort, instead restores you to the position as if the statement had never been made, which on a deceit measure can reach much further - potentially the whole price, if you would not have done the deal at all.
And how those damages are quantified has its own rule. In MDW Holdings Ltd v Norvill [2022] EWCA Civ 883, the Court of Appeal held that value is assessed at completion on the risks then existing - you cannot use hindsight to argue a risk that reduced value never materialised. The damages guide below covers this.
The UCTA trap: English law does not always mean UCTA
Whether you can exclude or limit liability for these assurances often turns on the Unfair Contract Terms Act 1977 and the Misrepresentation Act 1967. But UCTA does not automatically apply just because the contract says it is governed by English law. Section 27 of UCTA can switch off its core protections for a contract that would naturally be governed by foreign law and only chose English law by agreement.
So a cross-border deal can carry an English-law clause and still have no UCTA reasonableness test on its exclusions. The section 27 guide below explains when that happens.
Where this connects to limitation of liability
Excluding pre-contractual representations is done through entire-agreement and non-reliance clauses, covered below. The mechanics of limiting liability for breach - caps, carve-outs, the fraud distinction, and UCTA reasonableness - are the same as for any liability clause, and are covered in depth in the limitation-of-liability guides. The one rule to carry across: you can never exclude fraud that induced the contract, however you draft it.
Each guide below takes one part: the warranty and representation distinction, the damages measure, entire-agreement and non-reliance clauses, the section 27 UCTA gap, and how to draft warranties and representations that hold.
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Practical checklist
- Decide whether each assurance is a warranty, a representation, or both - and draft it so the label is unmistakable.
- Do not assume "represents and warrants" creates dual liability; add reliance and inducement language to be sure.
- Remember warranty and misrepresentation damages differ, and value is assessed at completion without hindsight (MDW Holdings [2022] EWCA Civ 883).
- Check whether UCTA actually applies before relying on its reasonableness test (the section 27 international gap).
- Use entire-agreement and non-reliance clauses to exclude pre-contractual representations - and always carve out fraud.
- For caps, exclusions, and UCTA reasonableness mechanics, see the limitation-of-liability guides.
This guide is informational only and is not legal advice. It does not replace advice from licensed counsel on the facts of a specific transaction.
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