Representations and warranties are the assertions in a purchase agreement that turn diligence into contract. The buyer relies on them, and if one is wrong they have a claim. For a seller they are the reason the deal is not finished at the closing table, and the reason a negotiated cap matters more than any single sentence in the schedule.
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What is being asserted
Ownership of what is being sold, accuracy of the financial statements, validity of material contracts, compliance with law, tax filings, condition of assets, employment matters, and the absence of undisclosed litigation. The list is long because it is a checklist of every way a business can turn out to be different from its description.
Survival, cap and basket
Survival is how long a claim can be made. The cap is the ceiling on what you can be made to pay. The basket is the floor below which claims cannot be brought at all. Those three settle a seller's real exposure, and they are negotiated as a package: a longer survival is often traded for a lower cap.
Disclosure is the cure
Each assertion is qualified by the disclosure schedule. A known problem written into the schedule is not a breach, so the schedules are where a careful seller spends time. The cost of a rushed schedule is measured after closing, when a buyer's lawyer reads it looking for what was left out.
Questions people ask about representations and warranties
Are representations and warranties the same as reps and warranties?
Yes. Reps and warranties is the shorthand every practitioner uses for the same clauses.
Can I refuse to give them?
Not in practice. A buyer with no contractual assurances will discount the price to cover the risk, which costs more than the exposure you avoided.
What is a fundamental representation?
A small group, usually title, authority and tax, that survives far longer and is often capped at the whole price rather than at the escrow.