The substantive definition is a type of representation made to a person for the purpose of getting that person to enter into and accept a contract.2 min Reading time (n) Physical representation is the statement, information or explanation given to a person in order to induce him or her to make a decision that he or she would not have made otherwise. Chancellor Bouchard takes the meaning of “substantial” based on Vice Chancellor Vice`s disclosure and applies it to several different contractual representations that the buyer considered inaccurate. Given that the undisclosed facts included the existence of some falsified documents in reports submitted to the FDA, it may seem far from clear how the use of the disclosure-based materiality standard could have produced a different result from the use of the “non-trivial” or “important enough to merit” standard. Finally, it is difficult to imagine that even a few falsified documents could be regarded as insignificant or insignificant, even if the existence of those documents did not affect the viability of the scheme in question. And Chancellor Bouchard actually concluded that the disclosure standard “affects the decision” was met in all but one of the accounts involved, in which he concluded that the buyer had indeed “identified no evidence of a real material defect.” But in all cases where, after applying the materiality test, Chancellor Bouchard concluded that the statement was inaccurate, he concluded that a reasonable purchaser would have considered the existence of the falsified documents to be a significant risk that FDA approval would not be obtained. As insignificant as the falsified documents themselves were, more was needed to meet the disclosure standard of materiality; and one could imagine a scenario in which it is determined that the falsified documents are not of sufficient importance for a reasonable acquirer to conclude that there is a significant risk that FDA approval will not be obtained. Of course, Chancellor Bouchard then concluded that, despite the fact that the materiality standard had been met to render the various representations inaccurate, no real significant adverse effects had occurred. A better case that shows the potential difference that the two materiality standards can make is Frontier Oil Corp. v. Holly Corp., No. Civ. 20502, 2005 WL 1039027 (del ch. 29 April 2005).

In Frontier Oil, Vice-Chancellor Noble found that an undisclosed indemnification agreement that held Frontier directly liable for matters that were the subject of certain “threats of litigation” was not an essential contract for the purposes of establishing a breach of a warranty made by Frontier with respect to the existence of material contracts. He did so because (using the meaning of the phrase “affects the decision” of material) the risk that liability would arise from such a threat of litigation and thus implied that the compensation at the time of the warranty was too uncertain to be “material”, although it later turned out that the actual litigation was larger and potentially more effective. [9] However, it is difficult to imagine that the existence of such compensation would not have been considered “material” in the sense of “significant enough to merit attention”, since the existence of the threat of litigation was identified as potentially problematic and it was presumed to be hosted in a separate subsidiary of Frontier without the existence of the indemnity agreement. Material representation is a statement, information or persuasive statement made to a person for the purpose of inducing him or her to enter into a contract or make a decision that he or she would not have made without that belief. In short, it is a representation that a reasonable person would attach importance to when deciding how to proceed with a transaction.