Q: What is breach of representations and warranty ?

Ans: Breach of representations and warranties:  Where a party enters into a contract on the basis of representations from the other party and these do not turn out to be true, the other party may not want to continue to be part of the contract anymore, For example, if a borrowing company represented to the Bank that it had secured all the requisite approvals under the law for entering into the contract and it is later on discovered that the required shareholders' approvals were not taken, this will be a breach of representation. This can result in issues if the shareholders do not provide the approval as required under the law and the borrowing entity is penalised for not following the law. In such circumstances, the lender may not wish to continue releasing the later disbursements of the loan and may even wish to take back the funds already lent. This will result in a loss to the lender because those funds may have rather been provided to an entity which was in compliance with the law and the lender could have earned interest on them.