An assurance, promise, or guaranty by one party that a particular statement of fact is true and may be relied upon by the other party.
Warranties are used in a variety of commercial situations. In many instances a business may voluntarily make a warranty. In other situations the law implies a warranty where no express warranty was made. Most warranties are made with respect to real estate, insurance, and sales and leases of goods and services.
When land, houses, apartments, and other forms of real estate are sold or leased, the real estate usually comes with at least one warranty. In a sale of realty, the seller usually includes a warranty regarding the title to the property. In some cases the title may have a cloud on it. This means that some party other than the seller has a claim to the property. Such claims may be made by a bank, a judgment debtor, a construction company, or any other party that has obtained a lien against the property. If the seller thinks that the title is clouded, the seller may offer a quitclaim deed. This type of deed contains no promises as to the title and releases the seller from any liability to the buyer if a lien holder later makes a claim to the property.
In other real estate transactions, the seller may warrant that the title is clear. In this situation the seller gives the buyer a general warranty deed. This kind of deed warrants that the title is clear and that the seller will be liable for any defects in the title that existed at the time of the sale.
Other types of warranties related to real estate titles include special warranty deeds and covenants of further assurances. A special warranty deed warrants only that no party made a claim to the property during the seller's ownership. Under a special warranty deed, the seller is not liable for any defects in the title attributable to her predecessors. A seller may add to a deed a covenant of further assurances, which promises that the seller will take any steps necessary to satisfy any claims to the property.
Sellers and buyers of real estate may negotiate warranties regarding the title to the property. They also may negotiate additional warranties regarding the property, such as warranties on plumbing or electricity or any other matter of special concern.
If the seller of real estate is the same party who constructed a building on the property, a warranty of habitability may be automatically included in a sale of the property. A warranty of habitability in the context of a sale of real property is a promise that the dwelling complies with local building codes, was built in a professional manner, and is suitable for human habitation.
Warranties also accompany leases of real property. All states, through either statutes or court decisions, require landlords to observe the warranty of habitability in leases of residential property. In this context the warranty of habitability is a promise that the premises comply with all relevant building codes and that they will be properly maintained and will be fit for habitation throughout the period of the tenancy. Specifically, the landlord promises to make necessary repairs in a prompt and reasonable fashion and to provide such basic services as water, heat, and electricity. If a landlord breaches the implied warranty of habitability, the tenant may withhold rent and sue for any financial losses resulting from the breach.
A warranty in an insurance policy is a promise by the insured party that statements affecting the validity of the contract are true. Most insurance contracts require the insured to make certain warranties. For example, to obtain a health insurance policy, an insured party may have to warrant that he does not suffer from a terminal disease. If a warranty made by an insured party turns out to be untrue, the insurer may cancel the policy and refuse to cover claims.
Not all misstatements made by an insured party give the insurer the right to cancel a policy or refuse a claim. Only misrepresentations on conditions and warranties in the contract give an insurer such rights. To qualify as a condition or warranty, the statement must be expressly included in the contract, and the provision must clearly show that the parties intended that the rights of the insured and insurer would depend on the truth of the statement.
Warranties in insurance contracts can be divided into two types: affirmative or promissory. An affirmative warranty is a statement regarding a fact at the time the contract was made. A promissory warranty is a statement about future facts or about facts that will continue to be true throughout the term of the policy. An untruthful affirmative warranty makes an insurance contract void at its inception. If a promissory warranty becomes true, the insurer may cancel coverage at such time as the warranty becomes untrue. For example, if an insured party warrants that property to be covered by a fire insurance policy will never be used for the mixing of explosives, the insurer may cancel the policy if the insured party decides to start mixing explosives on the property. Warranty provisions should contain language indicating whether they are affirmative or promissory.
Many states have created laws that protect insureds from cancellations due to misrepresented warranties. Courts tend to favor insureds by classifying indefinite warranties as affirmative. Many state legislatures have created laws providing that no misrepresented warranty should cancel an insurance contract if the misrepresentation was not fraudulent and did not increase the risks covered by the policy.
Sales and Leases of Goods
Every contract for the sale or lease of goods contains a warranty that the seller or lessor actually owns the property. Courts hold that this warranty is implied if it is not included in the contract, and a seller or lessor cannot disclaim it.
The two basic types of sales warranties are express warranties and implied warranties. Express warranties are specific promises made by the seller and include oral representations, written representations, descriptions of the goods or services, representations in samples and models, and proof of prior quality of the goods or services. Puffing, or the seller's exaggerated opinion of quality, does not constitute a warranty. For example, if a car salesperson says, "This car will last you a lifetime," a court would likely consider such a statement puffing and not an express warranty.
Implied warranties are warranties that courts assume are implied in sales made by merchants. A merchant is a person who is in the business of selling the good or service being sold in the contract. All sales contracts made by merchants contain an implied warranty of merchantability. This is a promise that the goods, as they are described in the contract, pass without objection in the merchant's trade, are fit for the ordinary purpose for which they are normally used, are adequately contained, packaged, and labeled, and conform to any promises or affirmations of fact made on the container or label. If the goods are fungible, or easily replaced or substituted, such as grain or oil, the replacement goods must be of fair and average quality, fit for their ordinary purposes, and similar to previous goods delivered in the same contract or previous similar contracts.
In some situations a sales contract may include an implied warranty of fitness for a particular purpose. This kind of warranty is a promise that the goods are useful for a special function. Courts infer this warranty is implied when the seller has reason to know of a particular purpose for which the goods are required and also knows that the buyer is relying on the seller's skill and knowledge in choosing the goods. The buyer does not need to specifically inform the seller that the goods are for a particular purpose; it is enough that a reasonable seller would be aware of the purpose.
For example, assume that a farmer, intending to plant no-till soybeans, approaches a seller to buy herbicide. Assume further that the buyer requests a particular herbicide mix but the seller suggests a less expensive mix. If the chemicals fail to kill crabgrass and the farmer has a low yield of soybeans, the farmer could sue the seller for breach of the warranty of fitness for a particular purpose because the seller knew what the farmer required.
In some cases an implied warranty may be lost or waived. If a seller issues a disclaimer—for example, states that the goods are as is—and the buyer examines or refuses to examine the goods, the buyer may lose any implied warranties. One important caveat is that courts will not find that an implied warranty has been waived if, under the circumstances of the sale, it is unreasonable to expect that the buyer would have understood that there were no warranties under the circumstances of the transaction.
A seller may disclaim the warranty of merchantability either orally or in writing, but a seller cannot orally disclaim a warranty of fitness for a particular purpose. A disclaimer of the warranty of fitness for a particular purpose must be in writing, and the disclaimer must be conspicuous to the buyer. Express warranties made by a seller may not be disclaimed. However, if a disclaimer and an express warranty can be construed as consistent, a court may uphold the disclaimer.
Clark, Barkley, and Christopher Smith. 2002. The Law of Product Warranties. 2d ed. Eagan, Minn.: West Group.
Crawford, Franklin E. 2002. "Fit for Its Ordinary Purpose? Tobacco, Fast Food, and the Implied Warranty of Merchantability." Ohio State Law Journal 63 (August).
Glatzova, Vladimira. 1998. "When Is a Warranty Not a Warranty? Common Law Versus Civil Law." International Business Lawyer 26 (November).
What It Means
In legal terminology, a warranty is a promise or assurance made by one party to another concerning the truth or integrity of a certain statement of fact. In other words, a warranty is a kind of guarantee that governs the terms of a transaction between two parties. Warranties are used in a variety of business contexts. The three most common situations in which a warranty is used are the sale of goods and services, the sale of real estate, and the sale of insurance.
In the sale or lease of goods and services, the seller or manufacturer of a product (for example, a dishwasher) provides the consumer with a warranty, which certifies that the product is truthfully represented (meaning that it will work as promised). This warranty is a form of contract that also specifies the conditions under which the seller will grant a refund, provide an exchange, or repair the product at no extra charge to the consumer. The warranty also specifies various restrictions, including how long the terms of the warranty will remain in effect and under what circumstances they will be void. This type of warranty usually accompanies the sale of cars, appliances, and electronic goods such as computers.
In real estate, the most common form of warranty is a general warranty deed. Provided by the seller of a house, apartment, land parcel, or other property, it certifies that the title to the property (a certificate of proof of ownership), which will be transferred to the buyer at the time of sale, is free from encumbrances. This means that no one else, such as a bank, construction company, or judgment debtor (someone who is awarded a claim to the house in a court settlement), has a preexisting claim to the house.
In insurance, the validity of an insurance policy (or contract) is often contingent upon certain warranties provided by the insured party at the time the policy is written. Insurance companies require these warranties as a way to limit and control the amount of risk they assume in extending insurance to the party in question. So, for example, a health insurance company might require that the insured person provide a warranty certifying that he or she has not been diagnosed with cancer or some other potentially fatal disease. If this warranty is found to be untrue, it is considered a breach of contract, and the insurer has the right to refuse coverage and terminate the policy.
In each of these scenarios, the purpose of the warranty is to limit the risk associated with the transaction: the risk that the dishwasher will stop running after one month, the risk that the property title is encumbered by hidden claims, and the risk of insuring someone whose illnesses will be costly to treat.
When Did It Begin
The word warranty has been used for various kinds of guarantees and assurances since the fourteenth century. Under feudal law in England at that time, for example, the grantor of a freehold estate provided a warranty to the grantee (the relationship between grantor and grantee was similar to that between landlord and tenant), promising that if the grantee were to be evicted from that particular piece of land, the grantor would provide him with another, equally valuable piece of land somewhere else. The earliest known usage of the word warranty in relation to the sale of consumer goods has been traced to 1543; in relation to insurance, the earliest known usage of the word dates to 1817.
In the United States consumer warranties are governed by the Magnuson-Moss Warranty Act, which was passed by Congress in 1975, largely as a result of the consumer-protection movement that began in the 1960s. The first federal statute to address the issue of warranties, the act was intended to eradicate the widespread problem of merchants issuing false or misleading warranties with their products. Magnuson-Moss does not require manufacturers or sellers to provide written warranties with their products; it does, however, stipulate that any warranties that are provided must disclose their terms and restrictions in clear, easy-to-understand language. The act also states that written warranties must be clearly identified as either “full” or “limited.” A full warranty states that defects, malfunctions, or other problems with the product must be repaired or otherwise remedied by the responsible party in a timely way at no extra charge to the consumer. A limited warranty may include reasonable restrictions that limit the responsibility of the manufacturer or seller for the repair or replacement of the product. Magnuson-Moss is enforced by the Federal Trade Commission (FTC), an independent agency of the federal government whose responsibilities include protecting American consumers from various kinds of fraud and deception.
More Detailed Information
A consumer warranty is either express or implied. An express warranty is one in which the manufacturer or seller explicitly guarantees the quality or performance of the product and specifies the circumstances under which the product can be returned, exchanged, or repaired. This kind of warranty is usually, but not necessarily, given in the form of a written document that assures the quality of the product, its workmanship, and its materials. An express warranty might also apply to services rendered: for example, a house painter might guarantee his paint job to last for two years and promise to repaint at no charge any spots that should peel before that time. An advertisement describing a product (for instance, stating that a table is “solid oak” or that a necklace is “22-karat gold”) may also be considered as an express warranty, such that the consumer is entitled to a refund if the terms of the advertisement turn out to be untrue. An express warranty can even be delivered orally by a salesperson—for example, if she states, “These shoes are ergonomically designed; they are recommended for people with back problems by the National Association of Orthopedic Medicine.” Still, however, many promises made by salespeople are recognized as “puffery” (a term for unverifiable exaggerations), which does not constitute an express warranty. An example of puffery is “These shoes will make you feel like you’re walking on air.”
An implied warranty is one that is not explicitly stated by the seller but rather can be understood (or expected) by the buyer as a basic fact of the sales transaction. Implied warranties are based on the common-law principle that a consumer should expect to receive “fair value for money spent.” The two main forms of implied warranty are the “warranty of merchantability” and the “warranty of fitness for a particular purpose.”
A warranty of merchantability refers to the basic assumption that a given product is in good working condition and can be used in the intended way. For example, a water heater can be expected to provide hot water; a lawn mower can be expected to cut grass; and a coffeemaker can be expected to brew coffee. A warranty of fitness for a particular purpose relates to the consumer’s stated purpose in purchasing a product and his right to assume that the salesperson will sell him a product that is appropriate for that purpose. For example, if you go to a camping store and tell the salesperson you need a sleeping bag for snow camping, you should be able to rely upon his judgment to sell you a sleeping bag that is designed for sub-zero temperatures. If, in fact, the salesperson sells you a sleeping bag that is only good down to 50 degrees, he can be said to have breached (or broken) the implied warranty of fitness for a particular purpose.
Retailers often encourage customers to buy “extended warranties” in addition to the manufacturer’s express warranty that normally comes with home appliances, electronic equipment, power tools, and many other consumer goods. An extended warranty (sometimes called a service contract) is a form of product insurance that is sold separately from the product itself; it promises to protect the consumer if something goes wrong with the product after the manufacturer’s warranty has expired.
Say, for example, you go to an electronics store and, after much deliberation, decide to purchase a new laptop computer for $999. The computer comes with a one-year warranty from the manufacturer, but the salesperson strongly urges you to buy an extended three-year warranty for an additional $300. This seems like a hefty price increase on the original $999, but what if your computer breaks just a month after the manufacturer’s warranty expires? The $300 for the extended warranty is a lot less than the cost of a whole new laptop. Indeed, under considerable pressure from salespeople, many consumers agree to buy the extended warranty because it seems to offer some sense of security about the investment they are making in a given product.
Extended warranties were first introduced in the 1980s and have since become big business. According to Stores magazine, a retail-trade journal, extended warranties accounted for more than $5 billion worth of sales in North America in 2002. Yet Consumer Reports and many other consumer-protection groups routinely advise consumers against buying these extended warranties, citing evidence that they are usually not worth the cost.
war·ran·ty / ˈwôrəntē; ˈwä-/ • n. (pl. -ties) a written guarantee, issued to the purchaser of an article by its manufacturer, promising to repair or replace it if necessary within a specified period of time: the car comes with a three-year warranty | as your machine is under warranty, I suggest getting it checked. ∎ (in contract law) a promise that something in furtherance of the contract is guaranteed by one of the contractors, esp. the seller’s promise that the thing being sold is as promised or represented. ∎ (in an insurance contract) an engagement by the insured party that certain statements are true or that certain conditions shall be fulfilled, the breach of it invalidating the policy. ∎ (in property law) a covenant by which the seller binds themselves and their heirs to secure to the buyer the estate conveyed in the deed. ∎ (in contract law) a term or promise in a contract, breach of which entitles the innocent party to damages but not to treat the contract as discharged by breach. ∎ archaic justification or grounds for an action or belief: you have no warranty for such an audacious doctrine.