ABSTRACT
Do violations of contractual representations and warranties (‘R&Ws’) merely shift risk by giving rise to contract-breach damages, or can they also give rise to fraud claims? This question is at the heart of numerous lawsuits, including billions of dollars of securitization-related litigation. Many agreements governing the issuance of securities in these transactions limit R&W breach claims to a sole contractual remedy—curing the violation or repurchasing nonconforming loans that caused the violation. Although parties making the R&Ws argue that this sole remedy should adequately shift risk, investor plaintiffs contend that it insufficiently shifts the risk if the violations are extensive. Plaintiffs also argue that extensive R&W violations should constitute fraud, and that in the presence of fraud, their remedies should not be limited. This Article seeks to resolve these issues and provide a more systematic framework for analyzing R&W breaches.
Steven L Schwarcz, Representations and Warranties, Fraud, and Risk Shifting: An Analytical Framework (2024) 92 George Washington Law Review 549 (27 June 2024).
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