warranty

Warranties are statements of fact which are terms of contracts, and asserted to be true by the person giving them. Warranties are one of the two types of terms forming part of binding contract, the other being conditions of contract. They relate to status, performance, knowledge, or any other matter which the parties see fit to incorporate into the agreement. A warranty may be described as a term of a contract that is collateral to the main purpose of the contract, otherwise it would be characterised as a condition of contract. Collateral warranties are warranties given in respect to another contract and not forming part of the contract in question or dispute.

Uses of Warranties

The terms are usually used by contracting parties to establish the requirements for future performance and set out the basis of the agreement upon which the other contracting party or parties rely. For instance, contracting parties may choose to include warranties in a contract that:

1. The seller of property is the owner of the property which is to be transferred or licensed under the agreement;
2. Each of the parties they will cooperate to provide one another accurate and adequate information to perform the relevant services to be supplied under the contract in a timely fashion;
3. The supplier it is able of performing the services or supplying the goods contracted to be supplied;
4. each party is entitled to grant such licences as may be required to obtain a particular objective;
5. the statements made in the contract and pre-contractual statements were and remain true and correct at the time of the contract.

Implied Warranties

Warranties may be implied by statute, such as the Sale of Goods Act or the Sale and Supply of Services Act; also, legislation may provide that parties are not permitted exclude implied warranties by agreement.

Qualifications to Warranties

Where the warranty is not within entirely within the knowledge of the warrantor, the warrantor is able to qualify the warranty by use of the words "to the best of the knowledge of [party] ..." or "as far as the warrantor is aware", when further enquiries may reveal further information knowledge or facts which affect the accuracy of the warranty. For instance, further enquiries would be prohibitively expensive, time consuming or other impractical to obtain.

Breach of Warranty

When a party is in breach of a warranty to a contract, it will be liable for damages for breach of contract, however the innocent party will not be entitled to terminate for breach of contract; a repudiatory breach is required to entitle an innocent party to terminate. As such, warranties contrast with conditions of contract.

Liability for breach of warranties are often capped or form part of a limitation of liability clause or exclusion of general application for all breaches of contact.