What is the key difference between "terms" and "representations" in a contract?

The distinction between "terms" and "representations" in a contract is crucial in understanding the enforceability and implications of various statements made during the negotiation process. Terms refer to the clauses or provisions within a contract that outline the specific obligations and rights of the parties involved. These terms are legally binding promises; if one party fails to fulfill their obligations as stipulated in the terms, the other party can take legal action for breach of contract.

On the other hand, representations are statements or assertions made by one party to another during negotiations, which may induce the other party to enter into the contract. While representations can influence a party's decision to agree to a contract, they are not necessarily incorporated as binding elements within the contract itself. Therefore, if a representation turns out to be false, it may lead to claims of misrepresentation, but it does not constitute a breach of contract in the same way that violating a term would.

This distinction underscores the significance of how parties communicate their intentions and the weight that their statements carry in forming legally enforceable agreements. Thus, the assertion that terms are legally binding promises while representations are not necessarily part of the contract accurately captures the key difference between the two concepts.