What is Warranty in Contract Law?

A warranty in contract law is a promise or guarantee from one party to another that the facts are true and reliable. A contractual warranty is a obligation that the facts that relate to the subject of the contract are true. In the case that those facts ever become untrue, the warranty is also a protection to the recipient to cover any losses that may arise.

Warranties are commonly used in commercial situations and often occur when a business voluntarily enters a warranty. Two examples of a warranty include:

  • “Company A warrants to the customer that it has not received any written notice or claim that the licensed technology misappropriates the proprietary rights of any other person.”
  • “Company X warrants to Company Z that the technical specifications provided here will be the same as those used in the design, production, installation, and maintenance of the products made in its factories.”

Express Warranties

An express warranty is clearly declared either in writing or verbally. No matter if it is spoken or written, an express warranty is a guarantee that the product or service will meet certain quality levels. In the case of a broken or defective product that does not meet the promised level of quality, the manufacturer will replace or repair the product.

An express warranty is a specific promise made to the buyer and can include things like an oral or written representation, a description of the good or service, a sample or model of the product, or proof of quality from prior goods or services. Common law considers an express warranty as a seller's confirmation to the buyer regarding the quantity or quality of goods or services. Warranties are often put on a product's packaging.

An express warranty made verbally can be something like a phone salesman saying to a buyer, “I guarantee this phone will last for three years.” If that promise ends up not being true, the buyer can take action against the seller. However, it can be difficult to prove that a verbal warranty exists.

Some warranties are put in writing but don't look like typical warranties. The words "guarantee" or "warranty" don't have to be included for a claim to be valid, such as a flashlight manufacturer putting the phrase “lasts 10,000 hours” on the package.

The Uniform Commercial Code says that an express warranty is created with any affirmation of fact or promise relating to the product or service that a seller makes to a buyer. However, a seller's obviously exaggerated claim about the quality of a product, such as a car salesperson saying that a car “will last until you are 100 years old” doesn't create a warranty. A court is likely to consider that type of statement a form of puffery and not an actual warranty.

Implied Warranties

An implied warranty is automatic coverage for most goods that are valued above a certain amount. However, it only provides a base level of consumer protection. Most consumer products are covered by an implicit merchantability warranty. This means that the product is promised to work as it claims it will. If a fridge isn't cold enough to keep food relatively cold, it could be considered a breach of the implied warranty of merchantability.

Under federal law, a product must meet these criteria to be considered merchantable:

  • Must comply with the trade standards in the sales contract
  • Must work as that type of product is regularly used, even if the customer ordered it to work differently
  • Must be consistent with quality and quantity
  • Must be labeled and packaged as stated in the sales contract
  • Must follow the specifications stated on the label of the package

In the case of goods that are easily substituted, such as oil or wheat, the replacement goods are required to be at the same level of quality as the contracted goods and fulfill the ordinary purpose for that type of item.

An implied warranty can even apply to used or previously owned goods. Many states allow sellers to state a product is sold “as is” to disqualify it from being covered by an implied warranty.

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