Define: Warranties
Warranties are contractual promises that certain facts or conditions are true, or will remain true, as of a specified date or throughout the agreement. If a warranty proves false, the wronged party can typically claim damages. Contracts often collect warranties in a dedicated clause or schedule, distinguishing them from broader representations or conditions.
Legal accuracy standard set & glossary spot-checked by Imad Mohammed Nazar , Skadden-trained M&A lawyer, Legal Engineer at GenieAI
What Warranties Means in a Contract
Warranties are statements of fact or promises made by one party to another, confirming that specific circumstances are, or will be, true at a given point in time. Unlike vague assurances, warranties are contractual terms in their own right, meaning that if they turn out to be inaccurate, the counterparty generally has a right to claim damages for breach of contract. This distinguishes warranties from mere sales talk or opinion, giving them binding legal weight within the agreement.
In many agreements, warranties are grouped together in a single clause or, as is common practice, set out in a dedicated schedule attached to the main body of the contract. This structure allows the parties to list numerous factual assertions, covering matters such as ownership of assets, financial standing, compliance with the law governing the contract, and the absence of undisclosed liabilities, without cluttering the operative clauses.
Warranties serve a risk-allocation function. They shift the burden of certain facts being true onto the party giving them, so that if those facts are wrong, the other party has a clear contractual remedy rather than needing to prove misrepresentation or negligence from scratch.
How Warranties Is Defined or Measured
A warranty is measured by comparing the factual position stated in the contract against the actual state of affairs, usually as of signing or completion. If there is a discrepancy, the innocent party generally must show that the warranty was untrue and that they suffered loss as a result, with damages typically calculated to place them in the position they would have been in had the warranty been accurate.
Contracts often qualify warranties with materiality thresholds, knowledge qualifiers such as.
Relevant Circumstances
- When a party gives contractual assurances about facts, condition or performance under a deal
- If a breach of warranty could trigger a claim for damages or price adjustment
- Where survival periods, caps or disclosure schedules limit the warranties given