How To Properly Include Or Exclude A Warranty In Your Contract?

​Dealing with products or say trading with goods, your business contract may have a warranty clause within it. 

To define it, warranty clauses are simply a promise made by the seller to the buyer indicating that the product must work effectively for “x” time period, and if fails to deliver the required performance, the seller is required to fix it at the earliest.

For example, consider you are into the manufacturing business and a recent order required you to ship 400 units of a particular item. 

It might so happen that one of these gets damaged while shipping. In this case, you take full responsibility for the product and promise to replace it at the earliest. 

However, what if the product was damaged after delivery? Is it entirely your responsibility to repair?

Or consider that you shipped a product and there arises a problem 10 years later. 

Are you still accountable for the same and would you fix it for free?

The answer will be ‘no’ in such cases. This is why you must have a warranty clause added to your contract.

What Should A Warranty Clause Mention?

Firstly, the warranty clause must be simple, specific, and to the point. You wouldn't want to spend days finding what's written in the clause. Specificity is in the way Information is added in the clause.

For example, if the clause says that the company would bear replacement charges for the next three years, it is important to mention that outset. 

This helps avoid debate as to repair and/or replacement responsibility. .

Hence, the need is to be specific. 

In totality, the clause would notify:

Who is liable to pay the cost of returns?
Do you count business hours and days or the calendar hours and days?
Who is liable for the shipping cost?
Who will install equipment and whether or not they are chargeable and to whom?
Do the replaced pieces of equipment come with a warranty?
 
Besides this, you must mention what goods are warranted and for how long. 

Do not forget to outline situations when the company is not liable to make the replacement and that is not a production error.

Another section of the warranty clause outlines what happens if either party breaches the contract and/or the damage is due to a natural occurrence.

All in all, your warranty clause must have all this information, taking into consideration all possibilities of damage, keeping it clear and concise.

Why Is A Warranty Clause Important?

For some, a “warranty clause” is only an additional section in the business contract with little or no use. 

However, in reality, this is not the case. The warranty clause promotes reliability as well as product quality. 

It acts as a protection tool, whereby promising and assuring the customers that the company would take serious action against defective products or the ones that fail to act in the desired manner.

Legal Terms:

When creating a legal contract specifying the warranty terms, there are a few things you must be aware of.

Indemnity: obligation of one party to compensate for the loss of the other given certain situations.
Repudiate: to refuse to accept something
Assertion: Claiming something to be true.

Note that while you are creating the warranty clause, you might come across a few terms that aren't easily understandable. Research, contact a lawyer and/or the parties to make sure that the clause is in the best interest of all.

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Yoel Molina, Esq. (AKA “Mo”)

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