Representations: the New Law or the Institute of English Contract Law?

Limarev Victor, School of Governance and Politics

Abstract. Sweeping changes occurred in the Russian civil law in 2015. The institute of representation was enshrined in law in the article 431.2 of Russian Civil Code. Russian lawyers debate on the content of this article. Some of them deny the fact of borrowing from English law. The vast majority of lawyers recognize that this rule has a similar content with the institute of English Contract Law. What institute: representation or warranty?

Key words: Russian Civil Code, Representation, Warranty, Liability of the parties, Principal obligation

1. Introduction

For today, that provision of the Russian Civil Code to make contract that has a structure of a contract under common law. The main purpose was to facilitate the work of courts in determining contractual clauses. It is important to note that representation applied in the practice of making contracts. Therefore, the inclusion of Art. 431.2 in the Civil Code was easy. The primary function of the representation was to bring contracting parties to responsibility but also allowed to avoid many litigation cases. Here’s the real issue. There is uncertainty in the interpretation of this institution. The sense of the representation is to protect contractors in case of a complex subject of the contract. It is possible to manage risks, specifically, in the situation when the parties have lack of privity.

The problem is that Russian lawyers do not have a common conception for the interpretation of this new institute of the Civil Code. Some confirm that this institute was formed as an independent institute. It is hard to believe because the practice of application of representations, warranties featuring in total several centuries in the UK. It is impossible not to draw a parallel between these two institutes of English Contract law. If we go back to our legislation, the question may arise: «Why representation, maybe warranty?».

In order to specify the nature of new law of the Russian Civil Code the necessity arises to define the difference between representations and warranties under Common law.

2. When we use warranties and representations under English Contract law

Before 1778, warranties were not considered as obligations. That is why the inclusions of warranties in a contract was something similar to the practice of application of civil legislation in the Russian Federation up to 2015. A sufficient number of contradictory precedents developed in the practice of the English courts. The concept of warranties was called «ugly hybrid of a forbidden intercourse of a tort and a contract».

Today there is a clear distinction between representations and warranties. The representation means a statement that encourages the contracting party to enter into the contract. The form may be written but is possible by words of mouth. Contracting parties use representations in relation to the facts of the past or the present. False representations do not affect the principal obligation. The provision of false representations is a delict and cannot be considered as a breach of contract. As a measure of judicial protection, it can be produced by recovery of damages. In case of a willful delict, all unforeseeable damages can be recovered. Another measure is a rescission of the contract. Misrepresentation Act 1967 details all legal nuances of representations.

The warranty means a statement guaranteed by one of the contracting parties. In this case, the contracting party guaranties the future facts and the facts that have relation to the present moment. If the asseverations are found to be fictitious, it is a breach of contract. An infraction of the warranty does not give the right to repudiate the contract or to disaffirm the contract.

The difference of these two institutes is rather obvious. Even it is quite easy to tell the difference between warranties and representations in the construction of the contract («I warrant…», «I represent…»). It is logical and systematical but what form is in Russian legislation.

3. The article 431.2: we face representations or warranties.

The Art. 431.2 Of the Civil Code says: «the recognition of the void contract does not in itself preclude the consequences». Then there is a point about compensation for damages and an annulment of the contract. It is indicia of representations. Then there is a form: «to pay a penalty under the contract». If there is a penalty, the contract exists but it refers to the warranty. What does it mean?

The conclusion suggests itself. The legislator enacted this article to the Civil Code, apparently, with the purpose to help the contracting parties and courts, but he did not distinguish representations from warranties. As a result, there is complexity in interpreting and in using of this provision in the contractual relationship. The solution is to remove this uncertainty in subsequent amendments.

4. Conclusion

The major amendments were inserted in the Russian Civil Code, especially, in the field of contract law. There is a tendency that more and more lawyers in Russian Federation benefit from the experience of Common law. These two institutes of warranties and representations under Russian law provide the opportunity to ensure the rights of all contracting parties, to reduce business risks. There is a need for more thorough editing of the provisions of the Russian civil code to exclude possible misunderstanding in contractual relations.

5. References

McKendrick E. Contract law: text, cases, and materials. Oxford, 2012.

West G.D., Lewis W.B., Jr. Contracting to Avoid Extra-Contractual Liability - Can Your Contractual Deal Ever Really Be the "Entire" Deal? // The Business Lawyer. 2009. Vol. 64. N 4. P. 1009-1010.