Representations & Warranties, Fraud, and Risk Shifting: An Analytical Framework

35 Pages Posted: 29 Oct 2022 Last revised: 19 Jan 2023

Date Written: October 23, 2022


Do breaches of contractual representations and warranties 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 litigation involving mortgage-backed securities. Many agreements governing the issuance of these securities, for example, limit representation-and-warranty breach claims to a sole remedy—curing the breach or repurchasing breaching loans. Parties making the representations and warranties argue that this sole remedy should adequately shift risk. Investor-plaintiffs contend, however, that this remedy insufficiently shifts risk if the breaches are extensive, and that extensive representation-and-warranty breaches should constitute fraud. They also argue that, in the presence of fraud, their remedies should not be limited. This Article seeks to resolve these issues as well as to provide a more systematic framework for analyzing representation-and-warranty breaches in contracts.

Keywords: representation, warranty,contract, sole remedy, securitization, mortgage-backed securities, MBS, fraud

Suggested Citation

Schwarcz, Steven L., Representations & Warranties, Fraud, and Risk Shifting: An Analytical Framework (October 23, 2022). Duke Law School Public Law & Legal Theory Series No. 2022-56, Available at SSRN: or

Steven L. Schwarcz (Contact Author)

Duke University School of Law ( email )

210 Science Drive
Box 90362
Durham, NC 27708
United States
919-613-7060 (Phone)
919-613-7231 (Fax)

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