Keith Mack
A warranty is a legally binding commitment that forms part of a sales contract, assuring the buyer that the product or service is free from defects and will work as it claims. It is a promise or guarantee from one party to another that certain facts or conditions are true and reliable. Warranties may be express or implied. An express warranty is explicitly stated, usually in writing, while an implied warranty is automatic coverage for most goods above a certain value, providing a baseline assurance of quality or functionality. If a warranty is breached, the buyer can seek legal remedies such as repair, replacement, or refund.
| Characteristics | Values |
|---|---|
| Definition | A warranty is a promise, assurance, or statement made by the warrantor regarding the existence or accuracy of specific facts or the condition, quality, quantity, or nature of a good or property. |
| Legality | A warranty is a legally binding commitment that forms part of a sales contract. |
| Types | Express warranty, implied warranty, statutory warranty, and continuing warranty. |
| Express Warranty | An express warranty is expressly stated, usually in writing, and forms part of the contract upon which the sale has been made. |
| Implied Warranty | An implied warranty is automatic coverage for most goods above a certain amount. It is created by law and provides a baseline assurance of quality or functionality. |
| Statutory Warranty | Warranties imposed by law and cannot be disclaimed or excluded. |
| Continuing Warranty | States that a particular fact is true at a point in time or that the fact will continue into the future. |
| Remedies | In the event of a breach of warranty, remedies may include repair, replacement, or refund. |
| Indemnity | A promise to reimburse the claimant for losses suffered, providing pound-for-pound compensation. |
| Puffery | Exaggerated claims that are not legally enforceable, unlike warranties. |
| Disclaimers | Sellers can disclaim implied warranties using terms like "as-is," but consumer protection laws may limit such exclusions. |
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What You'll Learn
Express and implied warranties
A warranty in contract law is a promise or guarantee from one party to another that the facts are true and reliable. Warranties are commonly used in commercial situations and often occur when a business voluntarily enters a warranty.
On the other hand, implied warranties are automatic and arise from the law, providing a baseline assurance of quality or functionality. They are not made by the seller but are implied and created by law upon a sale. Most consumer purchases are covered by an implied warranty of merchantability, which means that the product is promised to work as it claims it will. For example, a fridge that is not cold enough to keep food relatively cold could be considered a breach of the implied warranty of merchantability. There are also other types of implied warranties, such as the warranty of fitness for a particular purpose, which applies if the seller knows the buyer will be using the goods for a certain purpose.
Both express and implied warranties provide legal relief for the purchaser. They should be construed as being consistent and cumulative with each other. However, if this is impossible, an express warranty generally prevails over an implied warranty, except in the case of an implied warranty of fitness for a particular purpose.
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Warranties and indemnities
An implied warranty is automatic coverage for most goods above a certain value, providing a base level of consumer protection. Most consumer products are covered by an implicit merchantability warranty, promising that the product will work as claimed. For example, a fridge that is not cold enough to keep food relatively cold could be considered a breach of the implied warranty of merchantability.
An express warranty is explicitly stated, forming part of the contract upon which the sale is made. A warranty can also be both express and implied. In some cases, the seller expressly guarantees the quality of the product purchased. In other cases, the law implies a warranty where no express warranty was made, and these arise automatically from the fact that a sale has been made.
Indemnities, on the other hand, are contractual promises by the seller to meet a specific potential legal liability that a buyer may incur as a result of an acquisition. An indemnity acts as a promise to reimburse the buyer for a specific event occurring, so there is no need to show that a breach has occurred or that a loss has been incurred. The key advantage of an indemnity over other forms of recovery is that it can avoid issues regarding the quantum of loss, allowing the claimant to recover all losses suffered as a result of a breach.
In the context of a business and asset sale, warranties and indemnities serve as important protection mechanisms for a buyer, whether the assets or the company itself are being sold.
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Puffery vs. binding warranties
A warranty in contract law is a legally binding promise or guarantee from one party to another that the facts are true and reliable. Warranties are commonly used in commercial situations and often occur when a business voluntarily enters a warranty.
Puffery, on the other hand, refers to exaggerated claims that are not legally enforceable. For example, a car salesperson saying that a car "will last until you are 100 years old" would likely be considered puffery by a court and not an actual warranty. Puffery is a legal term for obvious sales talk or exaggerated claims that are not legally binding. It is important to distinguish puffery from binding warranties, which are specific promises included in a contract.
An example of puffery in advertising might be a company claiming to have the "best pizza in the world". This statement is an exaggerated claim that is not legally enforceable. It is simply a marketing tactic used to promote the company's product. On the other hand, a binding warranty would be a specific promise made in a contract, such as a company guaranteeing that its product is free from defects.
In some cases, the line between puffery and binding warranties can be blurred. For example, if a buyer has reason to believe that the seller has unique or expert knowledge of the market and requests the seller's crafted opinion as an expert, the buyer may be entitled to rely legally on the warranty. In this case, what might have been considered puffery could become a legally binding warranty.
It's important to note that warranties can be express or implied. An express warranty is a statement or binding document provided by the seller relating to the goods or services, which is part of the basis of the bargain. An implied warranty, on the other hand, is one that is not made explicitly by the seller but is implied by law. In certain instances, the law implies a warranty into a sale even though the seller did not make it.
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As-Is sales
"As-Is" sales are a type of transaction where the buyer accepts the product without any warranties, often in the context of second-hand goods. This means that the buyer agrees to take the item as it is, with all its potential defects and issues, and the seller is released from any legal obligations or liabilities that would typically arise from a warranty.
In "As-Is" sales, disclaimers play a crucial role in ensuring legal compliance. These disclaimers must be explicitly included in the sales contract or product documentation, clearly stating that the item is being sold without any warranties. This protects the seller from potential claims related to the condition or functionality of the product.
While "As-Is" sales disclaimers waive express warranties, some jurisdictions may still enforce implied warranties to protect consumers from defective products. Implied warranties are automatic and created by law, providing a baseline assurance of quality and functionality. For example, an implied warranty of merchantability promises that a product will work as claimed. If a product fails to meet this standard, it could be considered a breach of the implied warranty, and the buyer may still have legal recourse despite the "As-Is" nature of the sale.
It's important to note that consumer protection laws often limit the exclusion of implied warranties, even with an "As-Is" disclaimer. Laws such as the Magnuson-Moss Warranty Act are in place to prevent consumer exploitation and ensure that buyers still have some level of protection, even in "As-Is" transactions.
Overall, "As-Is" sales shift more risk to the buyer, who agrees to accept the product with all its potential flaws. While the seller is protected from many legal claims, they must still ensure compliance with federal and state laws to maintain the integrity of the transaction and avoid consumer exploitation.
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Legal compliance
A warranty in contract law is a legally binding commitment that forms part of a sales contract. It assures the buyer that the product or service is free from defects and that certain facts or conditions are true and reliable. Warranties are commonly used in commercial situations and often occur when a business voluntarily enters a warranty.
To comply with legal requirements, sellers must ensure that their warranty exclusions and disclaimers adhere to federal and state laws. While sellers can use disclaimers like "as-is" to exclude implied warranties, consumer protection laws often limit such exclusions. For example, some jurisdictions may still enforce implied warranties, such as fitness for a specific purpose, regardless of disclaimers, to protect consumers from defective products.
Additionally, federal law states that a manufacturer cannot require consumers to use specific parts or services to maintain warranty coverage unless those parts or services are provided for free or the manufacturer obtains a waiver from the Federal Trade Commission (FTC). The FTC works to prevent fraudulent, deceptive, and unfair business practices and provides information to help consumers identify and avoid such practices.
It is important to note that warranties can be express or implied. Express warranties are explicit guarantees, usually provided in writing, while implied warranties are automatic and arise from the sale of a product, providing a baseline assurance of quality or functionality. Implied warranties are created by law and provide a minimum level of consumer protection. They cover most goods valued above a certain amount and ensure that the product will work as claimed.
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Frequently asked questions
A warranty in contract law is a promise or guarantee from one party to another that the facts are true and reliable. It is a legally binding commitment that forms part of a sales contract, assuring the buyer that the product or service is free from defects.
An express warranty is a written guarantee from the seller to the buyer that the product or service has certain qualities. It is created through written statements, advertisements, or even samples of the product. An implied warranty, on the other hand, is automatic coverage for most goods above a certain value and provides a base level of consumer protection.
Yes, sellers can use disclaimers like "as-is" to exclude implied warranties, although consumer protection laws often limit such exclusions.
When a warranty is breached, the seller may honour it by offering a refund or replacement. If the seller refuses to honour the warranty, it may be considered an unfair business practice and the buyer may seek legal remedy.
Puffery refers to exaggerated claims that are not legally enforceable, such as a seller claiming to have "the best pizza in the world". These are not considered legally binding warranties unless the buyer has reason to believe the seller has unique or expert knowledge.
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