Updated 2026-05-19

Warranty of validity

The business promises the invoice is real, owed, and not already disputed.

Why it matters

If an invoice breaches this warranty, the factor may reject the invoice or charge it back. The warranty of validity is the seller promise that every funded invoice represents a real, completed, undisputed transaction. It is the primary contractual protection against invoice fraud and misrepresentation. Breaching this warranty—even unintentionally by submitting an invoice before delivery is complete—can trigger chargeback, default, or fraud-related remedies under the factoring agreement. Sellers should establish internal controls to confirm that invoices meet validity requirements before submission.

How it appears in contracts

The warranty of validity appears in the Representations and Warranties section of the factoring agreement and applies to each invoice submitted. Typical representations: the invoice is genuine, the goods or services have been delivered and accepted, the amount is correct, no disputes or offsets exist, and no credits have been issued. Breach of any representation is typically treated as an independent default, separate from the payment default provisions. Some agreements make warranty breaches subject to immediate chargeback without a cure period, even if the underlying invoice would otherwise be within the recourse window.

Related terms

• Eligible receivable
• Chargeback
• Repurchase
• Invoice verification