Final answer:
A statement made by an applicant that becomes part of the contract during the application process is known as a representation. This factually induces the other party to enter into the contract and differs from a warranty, which is an explicit contractual commitment, or a waiver and exclusion, which relate to relinquishing rights or limiting contract terms respectively.
Step-by-step explanation:
During the application process, a statement made by an applicant that becomes part of the contract is considered to be a representation. A representation is an assertion made by one party to a contract that entices or induces the other party to enter into the contract. It is important to differentiate this term from others that might appear similar, such as a warranty, waiver, or exclusion:
- A warranty is a guarantee or promise in a contract that a certain statement or condition is true or will happen. This is a factual commitment that has to be met and is part of the contractual obligations.
- A representation, on the other hand, is typically defined as a statement of fact made by one party to induce another party to enter into a contract and is not necessarily a part of the contractual promises, but if found to be false, it can lead to remedies for misrepresentation.
- A waiver is the intentional relinquishment or abandonment of a known right or conduct suggesting the abandonment of such a right.
- An exclusion refers to a provision within a contract that eliminates coverage for certain acts, property, types of damage, or locations.
This distinction is important when considering the consequences of a false statement. For example, if a warranty turns out to be false, it could constitute a breach of contract, whereas a false representation may lead to a claim for misrepresentation, potentially allowing the misled party to rescind the contract and/or seek damages.