Reps (representatives) and warranties are statements that a party makes about itself or its property in a contract. For example, a party may represent that a certain asset isn’t subject to any liens. Reps and warranties are standard in many more-complex types of agreements. Having at least a few basic reps and warranties in most (if not all) of your China-related agreements is a good idea.
Somewhere, the agreement should contain (in reps and warranties, termination, or elsewhere) a provision that allows you to terminate without penalty if the other party breaches a rep or warranty. Sometimes, you can specify that you’re entitled to compensation for the breach of a rep or warranty.
The reps and warranties you need depend on your circumstances. You should discuss this idea with your lawyer. At a minimum, the counterparty should represent that
✓ | It’s duly authorized to enter into the agreement. |
✓ | It’s duly organized under the laws of China (or some other jurisdiction). |
✓ | It isn’t violating any law, regulation, rule, or policy by entering or performing the agreement. |
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