What It Means to Make Representations

When you’re negotiating a deal, it’s normal to “talk up” what you can do - a delivery timeframe, a product feature, an expected sales result, or the condition of an asset you’re selling. In contract law, those statements can matter far more than most business owners realise.

That’s because you may be making representations - and if a representation is wrong (even unintentionally), it can trigger serious legal consequences such as termination, damages, or regulatory action under the Australian Consumer Law (ACL).

If you’re a small business owner, this topic comes up everywhere: quoting clients, pitching investors, signing supply agreements, buying or selling a business, or even onboarding customers through website terms. The good news is that once you know what to look for, you can manage the risk without slowing down your commercial momentum.

Below, we break down what it means to make representations, how representations differ from contractual promises, the main legal risks in Australia, and the practical steps you can take to protect your business in negotiations and in your written agreements.

What Does It Mean To “Make Representations” In A Contract?

In plain English, a representation is a statement (spoken or written) that one party makes to another, usually before the contract is signed, to persuade the other party to enter into the deal.

Representations often relate to:

what something is (for example, the condition of equipment or an asset)
what something does (for example, software features or performance)
what will likely happen in the future (for example, forecast revenue or delivery timeframes)
your authority or capacity (for example, that you own IP, or that you have the right to sell something)

In many contracts, you’ll see a section called “Representations and Warranties”. That’s the contract trying to clearly spell out which statements are being relied on - and what happens if they’re wrong.

Representations Can Be Made In More Places Than You Think

You can make representations in many everyday business contexts, including:

emails, proposals and quotes
pitch decks and sales calls
website claims and product descriptions
heads of agreement or term sheets
due diligence Q&A when buying or selling a business

Even if the contract is later signed, earlier statements can still matter if the other party relied on them in deciding to enter the agreement.

Representations vs Terms, Warranties And Puffery: Why The Label Matters

Not every statement made during negotiations has the same legal weight. One of the most practical things you can do is understand which “bucket” your statement is likely to fall into, because different buckets come with different remedies.

1) Representations (Pre-Contract Statements)

As above, representations are statements that induce the other party to enter the contract. If a representation is false and the other party relied on it, the claim is often framed as misrepresentation (or misleading conduct under the ACL, depending on context).

2) Contractual Terms (Promises In The Contract)

A term is a promise that becomes part of the contract. If you breach a term, the remedies typically involve breach of contract (for example, damages, termination rights, or specific performance).

Practically, if you want certainty, you generally want key statements captured as clear written terms (and drafted carefully).

3) Warranties (Contractual Assurances)

A warranty is a contractual assurance about a particular fact or state of affairs. In Australian contracts, what a “warranty” does (and what remedies follow) depends on the drafting and context, and sometimes the contract will also specify the consequences of a breach.

Commonly:

breach of a warranty can give the other party a right to claim damages, and
termination is usually only available if the contract provides for it (or if the breach is otherwise serious enough under general contract principles).

4) Puffery (Sales Talk That’s Not Meant To Be Taken Literally)

Some statements are obvious “puff” - general sales talk like “best in the industry” or “top quality”. Puffery is less likely to be treated as a representation of fact.

But be careful: if you make a specific claim that a reasonable person would rely on (for example, “this system reduces processing time by 40%”), that’s less likely to be puffery and more likely to be a representation that needs to be accurate and supportable.

When Can Making Representations Create Legal Risk In Australia?

The risk isn’t just that you were “wrong”. The risk is that the other party entered the contract because they relied on what you said - and your statement wasn’t true, wasn’t properly qualified, or wasn’t supported by reasonable grounds.

Misrepresentation: The Classic Contract Risk

Misrepresentation usually involves a false statement of fact that induces someone to enter a contract. Depending on the circumstances, consequences can include:

the contract being set aside (rescinded) in some cases (or other remedies being ordered)
damages (money compensation)
negotiation leverage swinging dramatically to the other side (often leading to settlement pressure)

This can arise even if you didn’t intend to mislead - which is why managing representations is as much about process and documentation as it is about honesty.

Australian Consumer Law: Misleading Or Deceptive Conduct

If your representations are made “in trade or commerce” (which is very common for businesses), they can also trigger claims under the ACL. This is especially relevant for advertising, promotions, product descriptions, and sales conversations.

It’s a good idea to keep your marketing and sales claims aligned with how the ACL treats misleading conduct - including how courts look at the overall impression you created, not just the fine print. This is closely connected to the elements of misleading or deceptive conduct that regulators and courts consider.

Future Matters: Promises, Forecasts And “We’ll Definitely Hit That Target”

Be particularly cautious with statements about the future, like revenue projections, completion dates, or business growth. Under the ACL, representations about future matters can be risky if you don’t have reasonable grounds for making them.

In practice, if you’re going to state forecasts or timelines, you should:

base them on evidence (past performance, supplier lead times, written commitments)
qualify them appropriately (for example, “estimated”, “subject to”, “based on assumptions”)
avoid absolute language unless you’re prepared to be held to it

Common Examples Of Representations Small Businesses Make (And How They Go Wrong)

Most disputes don’t start with dramatic fraud. They start with normal commercial conversations that weren’t properly framed.

Example 1: “This Will Be Delivered By Friday”

If your client relies on that statement and you miss the deadline, you might face:

a breach of contract claim (if the deadline is a term), and/or
a misleading conduct / misrepresentation claim (if the statement induced the contract)

To reduce risk, ensure your timelines are:

written as estimates unless they truly are fixed, and
backed by contract terms that deal with delays, dependencies, and remedies

Example 2: “This Product Is Compatible With Your Existing System”

Compatibility claims are common in tech, equipment supply, and professional services. If it turns out to be incompatible and your customer relied on your statement, the dispute can escalate quickly.

Practically, you can manage this by:

documenting assumptions (what system version, what integrations, what environment)
scoping your obligations clearly in a written agreement
building a testing/acceptance process into the contract

Example 3: “There Are No Encumbrances Over These Assets”

If you’re selling equipment, vehicles, or other business assets, a buyer may ask whether any third party has rights over them (for example, a lender).

In Australia, security interests can be registered on the Personal Property Securities Register (PPSR). If you represent that the assets are “free and clear” when they aren’t, you could be exposed.

As part of good deal hygiene, it helps to understand the PPSR and when registrations matter - particularly if your transaction involves financed assets or retention of title arrangements. The PPSR is a key concept for businesses buying and selling personal property.

Example 4: “Our Terms Say…” (When You Don’t Actually Have Proper Terms)

Many small businesses rely on informal “standard terms” that aren’t properly integrated into the contract process. This creates two risks:

you may have made representations about protections you don’t actually have, and
you may be exposed to disputes over what was agreed in the first place

Solid Terms of Trade (or service terms) help ensure everyone is on the same page about scope, payment terms, risk allocation, and limits.

How To Manage The Risk When You Make Representations (Without Killing The Deal)

You don’t need to become overly cautious or stop selling confidently. The goal is to build a system where your contract and your sales process work together.

1) Identify The “High-Risk” Statements Early

Some representations are more likely to trigger disputes, especially those about:

price and total cost
deliverables and timelines
performance metrics or results
ownership of intellectual property
compliance (for example, “this is fully compliant with Australian Standards”)

Once you identify these, decide whether they should be:

turned into a contractual term (so it’s clear and manageable),
qualified (for example, made subject to assumptions), or
removed from the negotiation narrative entirely.

2) Put The Key Statements In Writing (And Make Them Precise)

Verbal statements are often where things go wrong, because people remember them differently. Written documents help, but only if they’re drafted clearly.

For service businesses, capturing your scope, exclusions, and customer responsibilities in a Service Agreement can significantly reduce disputes about “what we thought we were buying”.

3) Use “Entire Agreement” Clauses Carefully

Many contracts include an “entire agreement” clause, which says the written contract is the whole agreement and the parties aren’t relying on earlier statements.

This can help reduce arguments about what was said in negotiations, but there are two key cautions:

It won’t necessarily protect you from ACL claims for misleading or deceptive conduct.
If you’ve made strong promises and then try to “wipe them away” with a boilerplate clause, you may still face dispute risk (and a relationship breakdown) if expectations aren’t aligned.

In other words, these clauses are helpful, but they’re not a magic shield. The safer approach is to ensure important points are dealt with clearly in the contract itself.

4) Qualify Forecasts And Estimates (And Keep Evidence Of Your Assumptions)

If you’re providing projections, “best case” numbers, or estimated delivery dates, consider:

documenting the basis for your figures (even internally)
using assumption-based language (for example, “based on current supplier lead times”)
adding contractual mechanisms like change requests or timeline extensions where dependencies are outside your control

This is especially important where the other party is making a major decision based on your numbers (like committing to a long-term contract or purchasing a business).

5) Make Sure Your Team Knows What They Can And Can’t Say

Representations aren’t only made by business owners. They can be made by:

sales staff
account managers
customer support
contractors acting as your “front line”

If you have staff involved in selling or onboarding customers, having consistent documents and processes matters.

What Should You Include In Your Contract When Making Representations?

If you want your contract to handle representations well, the contract should do two things:

clearly state what representations are being made and relied on, and
allocate risk if those representations are incorrect.

Common “Representations And Warranties” Topics

Depending on the deal, you might include representations about:

Authority: each party has the power to enter the contract
Accuracy: information provided is true and not misleading
Ownership: the seller owns the assets/IP and can transfer or license them
Compliance: the business complies with relevant laws (where appropriate)
No litigation/claims: there are no existing disputes that would impact the deal

For growing businesses, ownership and authority issues are common pain points - particularly where there are multiple founders, investors, or related entities.

Limitations, Disclosure And Risk Allocation

Representations are often paired with clauses dealing with:

disclosure: a disclosure schedule that lists exceptions (for example, “the equipment is subject to finance”)
liability caps: limits on damages, often linked to fees paid
time limits: how long a party can bring a claim
exclusive remedies: a clear set of remedies that apply if a representation is false

If you use limitation clauses, they should be drafted carefully, especially for standard-form customer contracts. Unfair contract terms risk is a real issue in Australia for small business and consumer-facing agreements, so it’s important the overall approach is reasonable and transparent.

Key Takeaways

To make representations is to make statements (often before a contract is signed) that the other party may rely on when deciding to enter the deal.
Representations are different from contractual terms and warranties - and the remedies and risks can be different too.
In Australia, incorrect representations can trigger misrepresentation claims and also ACL claims for misleading or deceptive conduct, even if you didn’t intend to mislead.
High-risk representations often involve timelines, performance claims, compatibility, ownership, and “future matter” forecasts.
You can reduce risk by documenting key statements clearly in the contract, qualifying estimates, and using fit-for-purpose agreements like Terms of Trade and Service Agreements.

If you’d like help reviewing your contracts or managing risk around the representations you’re making in negotiations, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.

What It Means To Make Representations In Contracts