Most commonly we hear of consumer warranties, but what more generally or fundamentally does this concept denote?
Contract terms come in 3 types:
- Conditions, the breach of which entitles the innocent party to damages and to terminate the contract.
- Warranties, the breach of which allows damages but not termination.
- Intermediate terms, that can be a warranty or can be a condition depending on the severity of the breach.
A condition is a thing that is critical to the performance of the contract. For example, if I contract to buy your car, it’s a condition that you will supply the car and that I will pay you the agreed amount. When those things are to happen is not critical, even if it is a term of the contract - time is usually a warranty. However, if you don’t deliver the car, or I don’t pay, for an egregiously long time, then it may convert the warranty into a condition and give the innocent party the right to terminate the contract.
Contracts usually don’t explicitly identify terms as conditions, warranties, or intermediate: that must be determined from context. However, they can do so and that will be definitive. The usual formulation is something like “Party X warrants …” for warranties and “Y is of the essence” for conditions. Hence “time is of the essence” names time a condition: if you fail to deliver the car by the agreed date, I can terminate the contract.
Warranty as a statement of facts about the world
A related use of the word warranty, is that it represents a contractural statement about how the world is or will be. While terms generally impose an obligation on someone to do something, a warranty is often more passive - an assertion that the world is a certain way and I will be held responsible if it isn’t.
So I might warrant that the painting I am selling you is a genuine Rembrandt - that’s not something I have to do, it’s a statement about how the world is. A warranty like that is so central to the contract that even though I warrant it, it’s also a condition - if it isn’t a Rembrandt, I couldn’t hold you to the contract.
Warranties of this sort may also be statements about the future: that the goods and services will perform satisfactorily for a certain time into the future.
Which leads us to …
One common type of warranty, and the use that is the most common, is that of the after-sales warranty.
A supplier will warrant (in both senses above) that their goods or services will operate correctly for a given period of time. If they don’t, then they will bear the cost of repair or replacement.
In many jurisdictions, such warranties are often legislatively imposed - that is, they are implied by law even if the contract is silent. Such legislative warranties may or may not allow contracting out.
A warranty is not a guarantee and vice-versa although the two are closely related. Exactly what the difference is varies by jurisdiction and is probably worth a question on its own.
In contract law: A promise that something in furtherance of the contract is guaranteed by one of the contractors, especially 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.
One example where warranty is defined by statute may be found at section 8(3), Supply of Goods (Implied Terms) Act 1973, which states that:
(3) ... the terms implied by subsections (1)(b), (2)(a) and (2)(b) above [now below for ease of reading] are warranties.
(1) In every relevant hire-purchase agreement, other than one to which subsection (2) below applies, there is—
- (b) an implied term that—
(i) the goods are free, and will remain free until the time when the property is to pass, from any charge or encumbrance not disclosed or known to the person to whom the goods are bailed or (in Scotland) hired before the agreement is made, and
(ii) that person will enjoy quiet possession of the goods except so far as it may be disturbed by any person entitled to the benefit of any charge or encumbrance so disclosed or known.
(2) In a relevant hire-purchase agreement, in the case of which there appears from the agreement or is to be inferred from the circumstances of the agreement an intention that the creditor should transfer only such title as he or a third person may have, there is—
(a) an implied term that all charges or encumbrances known to the creditor and not known to the person to whom the goods are bailed or hired have been disclosed to that person before the agreement is made; and
(b) an implied term that neither—
(i) the creditor; nor
(ii) in a case where the parties to the agreement intend that any title which may be transferred shall be only such title as a third person may have, that person; nor
(iii) anyone claiming through or under the creditor or that third person otherwise than under a charge or encumbrance disclosed or known to the person to whom the goods are bailed or hired, before the agreement is made;
will disturb the quiet possession of the person to whom the goods are bailed or hired.
There's an important destinction between "Garantie" ("warranty") and "Gewährleisung" ("warranty obligation").
The law only defines the second (OR 197ff). Customers have an implicit warranty right for the duration of two years from the date of purchase. If the object breaks within that time, the customer can ask either for a refund, a replacement or a reduction of the price. The law does not specify a "right to get the item fixed", but this is generally a good thing, because an attempt to fix the thing might take a long time and is not certain to help. And maybe the customer isn't interested in something that breaks that easily and rather wants his money back (e.g. for buying another item from the competition).
A professional vendor may not waive this customer right, but he may (and many do) add the option to first try to repair the thing before he provides a new one. That is then called "Garantievertrag" (warranty contract). But as said, it is not necessarily an improvement for the customer.