If you read this, I warrant you’ll be glad

If you read this, I warrant you'll be glad Warrant (verb) and (noun) and Warranty (noun)

Warranty, noun

a) A statement of fact or promise, often made in a contract

b) In contract law, a term in a contract, breach of which will give the innocent party a right to claim damages but not to terminate the contract

Confusingly a) and b) are different

c) In insurance law, a promise by the insured, breach of which will permit the insurer to terminate the insurance contract – the same meaning as ‘condition’ in contract law

d) In general, non-legal use a manufacturer’s promise to repair defective goods etc

People will also talk of a “manufacturer’s guarantee” to mean the same thing although in strict legal terms it probably won’t be a guarantee

Warrant, noun and verb

a) A document issued by the court to the police so they can arrest somebody or search premises

b) The right to acquire something such as shares

c) Verb – how a person gives / makes a warranty as described in 1 a) above e.g. I warrant that……etc

Warranties in contracts as used in 1 a) and 2 c) above

These are promises about what the buyer’s buying

They’re necessary because of the doctrine of “buyer beware” (Latin: caveat emptor)

This states that there is no duty on the prospective seller to disclose anything, including “bad things”, about what the prospective buyer is considering buying

If there are no representations and warranties, after completion it will be difficult for the buyer to sue the seller if the asset sold doesn’t work or has hidden defects

On the other hand, if the seller makes representations or gives warranties, the buyer can sue for misrepresentation or breach of warranty within the normal limitation period (six years) and with no limit on the amount of the claim

As a result ….

The seller will often try to limit its liability

It will usually do this in three ways:

  • shortening the warranty period to say two or three years by having a defined “Warranty Period”;
  • limiting its total liability to £X; and
  • saying that the buyer can’t bring claims for small amounts, called a “de minimis” exclusion

This is part of the important exercise of allocating risk as agreed by the parties

A further part of this exercise is disclosure in which a seller tells a buyer of a defect so the buyer cannot sue 

In summary, a buyer will usually insist on representations and warranties in order to make the seller liable while a seller will attempt to limit liability

Are representations and warranties the same?

No

Sometimes a misrepresentation and a breach of warranty will have the same consequences, sometimes they won’t

The position under the law of England and Wales is different to the position in other common law countries, principally the USA

In addition, contracts in English governed by the law of jurisdictions which have civil law systems sometimes use the words representation and warranty

What is their effect?

I have no idea – you’ll have to ask a lawyer qualified in the jurisdiction in question

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