A warranty is:

A promise in an agreement by one party to another that all matters disclosed are true and will happen.

When will you use them:

A list of warranties that each Party gives to the other is useful in an agreement as you can then hold a Party accountable if a promise turns out to be untrue or a promise made is not fulfilled.

As most agreements contain “general law stuff” or boiler plate clauses which exclude any warranties not contained in the agreement or in writing between the Parties you want to have each Party explicitly state what they warrant in writing.  If a Party has made any promises to you which are not recorded in the Agreement the Party will not be obliged to fulfil them for example if when buying a car the sales person says “of course there is a service plan”, unless it is recorded it writing they won’t be bound.

Real world examples:

If you are entering into a Sale Agreement for a car you might want the seller to warrant they are the legal owner of the vehicle and/or have the right to sell the vehicle and pass ownership to you and that the car is not burdened in any way as security for a debt.

Sample wording from a Kleva Contract:

 “The Seller gives to the Purchaser the following undertakings and warranties ( “the Warranties”), that:

(a) the Seller is and on the Closing Date will be able to give free and unencumbered title to Asset to the Purchaser;

  • the Seller is and on the Closing Date will be the sole owner of Asset;
  • the Asset is, at the Closing Date, not subject to any hire purchase or credit agreement, lease, pledge, lien, hypothec, mortgage, notarial bond or other encumbrance…”
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