Representations, Warranties, and Covenants in Texas Commercial Contracts

By Hank FasthoffJuly 6, 2026

Commercial contracts use representations, warranties, and covenants to describe facts, allocate risk, and govern conduct. Those labels guide interpretation, but they don't select a remedy by themselves. Courts also examine the statement, the transaction, the cause of action, and the agreement's remedy provisions.

A single sentence may serve more than one contractual function. The parties can state whether a false factual assertion constitutes breach, supports indemnification, excuses closing, permits termination, or receives another negotiated consequence.

Representations Address Existing or Past Facts

A representation states a fact about the present or the past. Commercial agreements commonly address authority, ownership, financial information, regulatory compliance, litigation, taxes, intellectual property, and conflicts with other contracts.

The word representation alone doesn't establish fraud. A Texas fraud claimant must prove a material false statement, knowledge or reckless disregard of falsity, intent, actual and justifiable reliance, and injury. In Mercedes-Benz USA, LLC v. Carduco, Inc., 583 S.W.3d 553 (Tex. 2019), the written agreement directly contradicted the asserted belief underlying the fraud verdict. The Supreme Court of Texas held that the contradiction defeated justifiable reliance as a matter of law.

Contractual liability follows a different inquiry. The agreement may make the accuracy of a representation a contractual obligation even when the claimant can't prove knowledge, intent, or reliance. Remedy sections can connect a false representation to damages, indemnification, termination, refusal to close, or another stated result.

Rescission also requires more than the representation label. The remedy sets aside the transaction and restores the parties to their prior positions, subject to equitable requirements and the election of remedies. In Bombardier Aerospace Corp. v. SPEP Aircraft Holdings, LLC, 572 S.W.3d 213 (Tex. 2019), the Supreme Court of Texas enforced provisions that barred exemplary damages despite a fraud finding where sophisticated purchasers affirmed the contracts and sought damages. Fraud didn't erase the agreed bar on exemplary damages.

Warranties Allocate Contract Risk

A warranty allocates the risk that a stated fact, condition, product, or performance conforms to an agreed standard. Examples include authority to enter the agreement, title to an asset, conformance to specifications, service quality, system availability, and freedom from specified intellectual property claims.

For sales of goods, Texas Business and Commerce Code Section 2.313 provides that an affirmation of fact, description, sample, or model can establish an express warranty when it becomes part of the basis of the bargain. Words such as warrant or guarantee are unnecessary. A seller's opinion or commendation ordinarily supplies no warranty.

The available remedy depends on the agreement and governing law. Section 2.714 permits damages for accepted goods, generally measured by the difference between their value as accepted and their value as warranted, with incidental and consequential damages available in a proper case. Section 2.608 also permits revocation of acceptance when a nonconformity substantially impairs value and the statutory conditions are met. A warranty claim can therefore produce remedies beyond repair costs alone.

Service, software, and licensing agreements often define their warranty regime directly. The text can establish a warranty period, notice procedure, cure opportunity, repair or replacement obligation, refund, service credit, exclusive remedy, disclaimer, liability limit, and indemnification right. Indemnification applies only when its coverage includes the asserted breach.

Covenants Govern Conduct

A covenant requires a party to act or refrain from acting. It may apply before closing, during the term, or after termination. Examples include maintaining insurance, protecting confidential information, operating a business in the ordinary course, providing audit cooperation, meeting security requirements, and refraining from specified competitive conduct.

Breach of covenant commonly supports contract damages and may support termination when the agreement or material breach doctrine permits it. Specific performance follows a separate equitable analysis. In White Knight Development, LLC v. Simmons, 718 S.W.3d 203 (Tex. 2025), the Supreme Court of Texas described specific performance as an alternative to legal damages when damages are inadequate. In that real estate case, the Court also held that narrow circumstances permitted equitable monetary relief to accompany the decree. The remedy isn't a separate cause of action and doesn't arise merely because the contract uses the word covenant.

Negative covenants may also support injunctive relief when the claimant establishes the governing equitable and statutory requirements. A confidentiality restriction, noncompete, or nonsolicitation provision receives the analysis applicable to that obligation rather than an automatic order based on its label.

Conditions Perform a Different Function

A condition identifies an event that must occur before a contractual duty becomes due or an event that ends an existing duty. Failure of a condition may excuse performance even when no party breached a promise.

That distinction affects acquisition agreements and other transactions with separate signing and closing dates. A seller may represent a fact at signing, repeat the representation at closing, and agree that its accuracy then is a condition to the buyer's duty to close. The representation, repetition, and closing condition perform separate functions even when they concern the same fact.

The Paired Labels Depend on the Surrounding Text

The phrase represents and warrants can show that the parties intend both a factual assertion and a contractual risk allocation. Its remedial effect comes from the surrounding text and applicable law. For goods, a warranty can arise without either traditional word under Section 2.313.

Remedies depend on the operative provisions. A contract can define breach, require notice and cure, provide indemnification, establish an exclusive remedy, permit termination, or subject a claim to a liability cap. Pairing two labels doesn't supply terms the parties omitted from those sections.

Timing and knowledge qualifiers also affect the obligation. A statement may speak as of signing, closing, delivery, or another date. The agreement can allocate the risk of unknown facts through a knowledge definition and can state whether later discovery affects closing, indemnification, or termination.

Fraud and Contractual Risk Allocation

Fraud claims depend on their elements, including justifiable reliance. An integration clause, a disclaimer of reliance, an exclusive remedy, and a fraud exception address different issues. Their wording and the circumstances of negotiation affect enforcement.

Carduco shows how the signed agreement can defeat reliance when its terms directly contradict the alleged representation. Bombardier confirms that sophisticated parties may agree to bar exemplary damages for fraud when they affirm the contract and seek actual damages. A fraud exception preserves the treatment stated in that exception, while the claimant must establish the cause of action and available remedy.

Acquisition Agreements Require Separate Treatment

Representations in an acquisition agreement describe the target, seller, assets, liabilities, authority, and other facts allocated between buyer and seller. Covenants govern conduct before and after closing. Closing conditions state which facts and performances must exist before a party becomes obligated to complete the transaction.

Survival provisions can state how long contractual claims remain available and how a claim must be preserved. Texas law limits some of that freedom. Texas Civil Practice and Remedies Code Section 16.070 generally voids a contractual period shorter than two years for filing suit, but exempts an agreement concerning the sale or purchase of a business entity when the covered consideration has an aggregate value of at least $500,000. Section 16.071 generally voids a contractual claim notice period shorter than 90 days and contains the same business sale exception.

Baskets, deductibles, caps, special limits, and fraud exceptions are negotiated allocations rather than fixed legal categories. Their application can differ among general representations, authority and title statements, tax obligations, covenants, and fraud claims. The definitions of loss and claim also affect whether direct contractual claims, third party claims, fees, and consequential damages receive coverage.

Reading the Statements with the Remedy Provisions

The parties can connect each statement to its date, knowledge qualifier, closing condition, cure right, indemnification treatment, liability limit, survival period, and exclusive remedy. A representation section read alone provides only part of that allocation.

The final agreement can identify which facts support closing, which promises govern later conduct, and which remedies follow a failure. That structure provides more certainty than relying on the words represents, warrants, or covenants to supply unstated consequences.