Key Takeaways

  • A warranty clause is a contractual promise about the truth, quality, or performance of goods or services.
  • Generic warranties can leave gaps in protection if they fail to account for timelines, performance measures, or critical business needs.
  • Warranty clauses should be specific, covering time frames, costs, remedies, and definitions of breach.
  • Different types of warranties exist, including express warranties, implied warranties, limited warranties, and exclusive remedy clauses.
  • Courts often look closely at the scope, language, and remedies in warranty provisions, especially when disputes arise.

A warranty clause is a provision in a contract that generally provides a promise specifying that something is true or will happen. In contract law, this clause can have more than one meaning, and it tends to be one of the most misunderstood.

What Is a Warranty Clause?

A warranty is simply a promise that something is true, nothing more. Not all warranties benefit the customer.

Due to the confusion surrounding warranty clauses, it's not uncommon for even professionals to misunderstand them. The reason for this misunderstanding is that standard warranty language in contracts isn't specific to what you're buying.

These generic templates might apply to toilet paper or rocket engine parts. The only person who can make a warranty clause useful for a specific purchase is you.

Most purchasing professionals don't understand what a warranty actually is. As a result, they may think a warranty is good based on how long it lasts, but there are other factors to consider.

Types of Warranty Clauses

Warranty clauses are not one-size-fits-all. They can vary depending on the goods or services being provided. Common types include:

  • Express Warranty: A direct promise from the seller that the product or service meets certain standards. For example, stating that machinery will operate without defects for three years.
  • Implied Warranty: These arise automatically under law, even if not written in the contract. Two common implied warranties are:
    • Implied Warranty of Merchantability (goods are fit for ordinary use).
    • Implied Warranty of Fitness for a Particular Purpose (goods are suitable for the buyer’s specific intended use).
  • Limited Warranty: Restricts the scope of the seller’s responsibility, such as limiting remedies to repair or replacement rather than refund.
  • Exclusive Remedy Warranty: Specifies that a certain remedy (like replacement of defective parts) is the sole recourse available to the buyer.

Each type of warranty clause can shift risk and responsibility between the contracting parties.

When Warranties Are Too Generic

You must consider all the details when assessing a warranty clause. For instance, say you're purchasing manufacturing equipment. It's critical that this equipment works; any downtime could adversely affect your business. To protect your bottom line, consider adding a standard warranty clause in a contract, which may state that the product should work for four years from the purchase date. If it fails to perform to those specifications during those four years, the buyer can notify the seller, and the seller can replace or repair, at his or her discretion.

While this may sound ideal on the surface, keep in mind the contract doesn't factor in the critical nature of the goods you're purchasing. How can this end up hurting you? If the supplier doesn't hurry to replace or repair your item, you won't have the necessary parts for running your business. After all, the clause doesn't give a time frame.

If the supplier takes weeks to replace your equipment, your company could potentially lose a great deal of money.

In addition, the supplier hasn't even breached the contract by taking a long time to service your item because there was no time frame for replacement or repair spelled out in the contract. As a result, you cannot file a lawsuit, and your only recourse is to wait.

Common Warranty Clause Examples

Real-world contracts often use warranty clauses to allocate risk clearly. Examples include:

  • Product and Services Warranty: A seller warrants that any goods or services provided will conform to agreed specifications and be free from defects for a set period.
  • No Infringement Warranty: The seller promises that products or services do not infringe on third-party intellectual property rights.
  • Compliance Warranty: The goods or services comply with all applicable laws, regulations, and industry standards.
  • Title Warranty: The seller guarantees that they have valid ownership and the right to sell the goods free of encumbrances.

These sample provisions show how contracts often spell out warranties to avoid ambiguity and provide remedies in case of breach.

Warranty Language Should Be Specific

If the contract dictates that a situation must be remedied within “days” or “hours," what exactly does that mean? You need to know the following:

  • Do you count business hours and days or calendar hours and days?
  • Who covers the cost of airfare, if required?
  • Who pays the cost of return shipping?
  • Who is responsible for installing the new equipment?
  • Does new equipment get a brand new warranty?

These are just examples of language in a warranty clause should be customized to fit that purchase. You should also consider:

  • Specifying what you want warrantied in exact terms, including service performance or the product.
  • Making the performance a measurable quantity. Otherwise, you need a way to identify a contract breach.
  • Stating that if the part or item that fails is a critical purchase, it's a material breach of contract.

Make it clear what happens in the event a warranty is breached, such as the following:

  • What you want to be done.
  • How fast you want services performed.
  • Who you want to perform the necessary services.
  • How you want services performed.
  • Who will pay for repairs/replacements.
  • If liquidated damages will be in place if a breach of warranty occurs.

In the event of a disaster, you need to make sure you have effective coverage for damages. You also want adequate limitation of liability and detailed insurance clauses.

Contract law can be a complex arena. You should always understand what you're signing before you agree to a contract's terms. Consider consulting with an experienced professional in the contract law field if you have any questions about reviewing or drafting a contract. In particular, it's important to have a warranty in place that will adequately protect your equipment and, therefore, your business. The small price you pay for consultation could save you a great deal of money if something goes wrong in the future.

Drafting Considerations for Warranty Clauses

When drafting a warranty clause, specificity is key. Consider the following:

  • Scope of Warranty: Define exactly what is covered—performance, durability, safety, or compliance.
  • Time Frame: State how long the warranty applies and whether it starts at delivery, installation, or acceptance.
  • Remedies: Clarify the buyer’s rights if the warranty is breached—repair, replacement, refund, or damages.
  • Limitations: Identify exclusions, such as misuse, unauthorized repairs, or normal wear and tear.
  • Interaction with Other Clauses: Align warranty clauses with limitation of liability, indemnification, and insurance provisions to avoid conflicts.

Courts frequently scrutinize whether remedies are exclusive or allow for broader recovery. For example, if the only remedy is replacement, buyers cannot claim consequential damages unless expressly allowed.

Frequently Asked Questions

1. What is the purpose of a warranty clause in a contract?

A warranty clause provides assurances about the condition, performance, or legality of goods or services and allocates risk between the contracting parties.

2. What is the difference between an express and implied warranty?

An express warranty is a specific written or spoken promise, while an implied warranty arises automatically under law, such as the warranty of merchantability.

3. Can warranty clauses limit liability?

Yes. Many contracts include limited or exclusive remedy warranties that restrict the buyer’s options to repair or replacement, excluding broader damages.

4. What happens if a seller breaches a warranty clause?

The buyer may be entitled to remedies outlined in the contract—such as repair, replacement, or damages—or pursue legal claims depending on the jurisdiction.

5. Why should warranty clauses be specific?

Vague warranties create uncertainty. Specific language ensures clear expectations, defines remedies, and reduces the risk of costly disputes.

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