warranty

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Warranty

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.

Real Estate

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.

Insurance

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.

Further readings

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).

Cross-references

Cloud on Title; Consumer Protection; Landlord and Tenant; Merchantable; Product Liability; Sales Law.

warranty

n. a written statement of good quality of merchandise, clear title to real estate, or that a fact stated in a contract is true. An "express warranty" is a definite written statement and "implied warranty" is based on the circumstances surrounding the sale or the creation of the contract. (See: warrant)

warranty

noun assurance, certificate, contractual assurance, contractual promise, contractual representation, covenant, guarantee, guaranty, pledge, promise, satisdatio, voucher
Associated concepts: affirmative warranty, breach of warranty, disclaimer of warranty, express warranty, implied warranty, limited warranty, material warranty, prospective warranty, warranty deed, warranty of fitness, warranty of merchantability, warranty of title
Foreign phrases: Ea quae, commendandi causa, in vendiiionibus dicuntur, si palam appareant, venditorem non obligant.Those things which are said as praise of the things sold, if they are openly apparent do not bind the seller.
See also: assurance, bond, certainty, consent, contract, covenant, coverage, guaranty, insurance, pact, pledge, promise, recognizance, security, specialty, warrant

warranty

a promise or undertaking by one party to a contract to secure the other party in the enjoyment of anything agreed between them. In particular, warranty is used in connection with a contract of sale whereby the vendor warrants that the thing sold is the vendor's to sell and is good and fit for use, or at least such use as the purchaser wishes to make of it (see Sale of Goods Act 1979). A warranty may be express or implied. In marine insurance, an express warranty is an agreement expressed in the policy whereby the assured stipulates that certain facts are or that certain acts shall be done relative to the risk. It may relate to an existing or past fact, or it may be promissory and relate to the future. An implied warranty is such as necessarily results from the nature of the contract. In a colloquial sense, it applies to promises by manufacturers to consumers to repair or replace goods.

WARRANTY, contracts. This word has several significations, as it is applied to the conveyance and sale of lands, to the sale of goods, and to the contract of insurance.
     2.-1. The ancient law relating to warranties of land was full of subtleties and intricacies; it occupied the attention of the most eminent writers on the English law, and it was declared by Lord Coke, that the learning of warranties was one of the most curious and cunning learnings of the law; but it is now of little use even in England. The warranty was a covenant real, whereby the grantor of an estate of freehold, and his heirs, were bound to warrant the title; and either upon voucher, or judgment in, a writ of warrantia chartae, to yield other lands to the value of those from which there had been an eviction by paramount title Co. Litt. 365; Touchst.; 181 Bac. Ab. h.t.; the heir of the warrantor was bound only on condition that he had, as assets, other lands of equal value by descent.
     3. Warranties were lineal and collateral.
     4. Lineal, when the heir derived title to the land warranted, either from or through the ancestor who made the warranty.
     5. Collateral warranty was when the heir's title was not derived from the warranting ancestor, and yet it barred the heir from claiming the land by any collateral title, upon the presumption that he might thereafter have assets by descent from or through the ancestor; and it imposed upon him the obligation of giving the warrantee other lands, in case of eviction, provided he had assets. 2 Bl. Com. 301, 302.
     6. The statute of 4 Anne, c. 16, annulled these collateral warrantees, which bid become a great grievance. Warranty in its original form, it is presumed, has never been known in the United States. The more plain and pliable form of a covenant has been adopted in its place and this covenant, like all other covenants, has always been held to sound in damages which after judgment may be recovered out of the personal or real estate, as in other cases. Vide 4 Kent, Com. 457; 3 Rawle's R. 67, n.; 2 Wheat. R. 45; 9 Serg. & Rawle, 268; 11 Serg. & Rawle, 109; 4 Dall. Rep. 442; 2 Saund. 38, n. 5.
     7.-2. Warranties in relation, to the sale of personal chattels are of two kinds, express or implied.
     8. An express warranty is one by which the warrantor covenants or undertakes to insure that the thing which is the subject of the. contract, is or is not as there mentioned; as, that a horse is sound; that he is not five years old.
     9. An implied warranty is one which, not being expressly made, the law implies by the fact of the sale; for example, the seller is, understood to warrant the title of goods be sells, when they are in his possession at the time of the sale; Ld. Raym. 593; 1 Salk.. 210; but if they are not then in his possession, the rule of caveat emptor applies, and the buyer purchases at his risk. Cro. Jac. 197.
     10. In general there is no implied warranty of the quality of the goods sold. 2 Kent, Com. 374; Co. Litt. 102, a; 2 Black Comm. 452; Bac. Abr. Action on the case E; 2 Com. Contr. 263; Dougl. 20; 2 East, 31 4; Id. 448, n.; Ross on Vend. c. 6; 1 Johns. R. 274; 4 Conn. R. 428; 1 Dall. Rep. 91; 10 Mass. R. 197; 20 Johns. Rep., 196; 3 Yeates, R. 262; 1 Pet. Rep. 317; 12 Serg. & Rawle, 181; 1 Hard. Kent. Rep. 531; 1 Murphy, Rep. 138; 2 Id. 245; 4 Haywood's Term. R. 227; 2 Caines' Rep. 48. The rule of the civil law was, that a fair price implied a warranty of title; Dig. 21, 2, 1; this rule, has been adopted in Louisiana; Code, art. 247 7; and in South Carolina. 1 Bay, R. 324; 2 Bay, R. 380 1 Const. R. 182; 2 Const. R. 353. Vide Harr. Dig. Sale, II. 8; 12 East, R. 452.
     11.-3. In the contract of insurance, there are certain warranties which are inducements to the insurer to enter into it. A warranty of this kind is a stipulation or agreement on the part of the insured, in the nature of a condition precedent. It may be affirmative; as where the insured undertakes for the truth of some positive allegation: as, that the thing insured is neutral property: or, it may be promissory; as, that the ship shall sail on or before a given day. 6 N. S. 53.
     12. Warranties are also express or implied. An express warranty is a particular stipulation introduced into the written contract, by the agreement of the parties; an implied warranty is an agreement which necessarily results from the nature of the contract: as, that the ship shall be seaworthy when she sails on the voyage insured.
     13. The warranty being in the nature of a condition precedent, it is to be performed by the insured, before he can demand the performance of the contract on the part of the insurer. Marsh. Inst. B. 1, c. 9. See, generally, Bouv. Inst. Index, h.t.

WARRANTY, VOUCHER TO, practice. A warranty is a contract real, annexed to lands and tenements, whereby a man is bound to defend such lands and tenements from another person; and in case of eviction by title paramount, to give him lands of equal value.
     2. Voucher to warranty is the calling of such warrantor into court by the party warranted, (when tenant in a real action brought for recovery of such lands,) to defend the suit for him; Co. Litt. 101, b; Com. Dig. Voucher, A 1; Booth, 43 2 Saund. 32, n. 1; and the time of such voucher is after the demandant has counted. It lies in most real and mixed actions, but not in personal. Where the voucher has been made and allowed by the court, the vouchee either voluntarily appears, or there issues a judicial writ (called a summons ad warrantizandum,) commanding the sheriff to summon him. Where he, either voluntarily or in obedience to this writ, appears and offers to warrant the land to the tenant, it is called entering into the warranty; after which he is considered as tenant in the action, in the place of the original tenant. The demandant then counts against him de novo, the vouchee pleads to the new count, and the cause proceeds to issue. 2 Inst. 241 a; 2 Saund. 32, n. 1; Booth, 46.
     3. Voucher of warranty is, in the present rarity of real actions, unknown in practice. Steph. Plead. 85.