Disclaiming Warranties

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 What Is a Contract?

A contract is a legally binding arrangement between two or more parties. A contract supplies details of what the parties agree to perform or exchange. A contract may be in written or oral form. In most circumstances, to be legally binding, a contract must be in writing and signed by all parties involved.

Courts typically demand three things for a contract to be enforceable:

  • Mutual assent, or agreement to the contract terms;
  • A valid offer and acceptance; and
  • Consideration.

Contracts are deemed the basis of the business world. They may be uncomplicated or very intricate. Examples of contracts include employment agreements, real estate purchase agreements, and insurance arrangements.

Contracts must be entered into by all parties willingly. All parties signing the contract must do so of their own free will and not under duress. Contracts can be used whenever parties want to document an agreement to ensure all parties’ rights are safeguarded.

Drafting a contract refers to writing the terms and details of an agreement to define and delineate the legal responsibilities of all parties to the contract. This permits all parties to the agreement to clearly understand their responsibilities and legal obligations to one another.
Anyone can draft a contract, but it would be in the best interest of all parties involved to have an attorney draft a contract, especially if it is complicated or intricate.

For instance, a real estate agreement often involves numerous parts, multiple parties, and complex land descriptions. To ensure your sale or purchase, financial investment, and rights are covered, having an attorney draft this type of contract would be preferable.

A contract will also supply sections outlining whether or not it may be canceled and how to cancel it. The agreement will also summarize the consequences if a party breaches the contract terms. A well-written contract will contain explicit definitions of what constitutes a breach of the contract so all parties can uphold their responsibilities.

What Are the Elements of a Legally Binding Contract?

To be legally binding, a contract is required to have specific features. Some agreements must be in writing to be valid, such as contracts for over $500.00. A contract must be made for a legal objective. For instance, an individual cannot contract to perpetrate criminality. It is essential to be familiar with the requirements of a valid contract.

A valid contract must include:

  • An offer;
  • An acceptance of the offer;
  • A promise to perform;
  • A valuable consideration;
  • A date, a time window, or an event when the performance must be completed;
  • Terms and conditions of the performance; and
  • Performance.

The offer and acceptance elements of a contract are also known as the “meeting of the minds” or mutual agreement of the parties. All parties’ signing of the contract is often used as evidence of that agreement. In some circumstances, offers may have an expiration period, where the offer is open for a reasonable time. Some offers may not have a time limit. Offers can be withdrawn until the time of acceptance.

What Is a Warranty?

A warranty is a guarantee made by the seller of goods or products about the good or product. Through a warranty, a seller assures the quality of the goods, products, or services the seller delivers. A warranty is helpful to a buyer because if the product fails to perform in the way the buyer believed it would, the seller may be held liable.

There are generally two types of warranties, each offering certain levels of security and privileges.

Express Warranties

Express warranties are warranties formed by overt words or actions. An express warranty can be created by:

  • A promise by the seller about a product
  • A description of the product
  • A model of the product

Implied Warranties

An implied warranty is a warranty created by the law. Implied warranties automatically apply when the seller offers some product for sale, even if the seller says nothing about how the product will perform. Two standard implied warranties are for merchantability and fitness for a particular use.

Implied Warranty of Merchantability

The implied warranty of merchantability guarantees that the product is fit to use in a way that the product is supposed to be used. When a seller sells a product, the implied warranty of merchantability guarantees that:

The product is fit and suitable and can therefore be used for the ordinary purposes that consumers would plan to use it

  • The quality of the product is adequate
  • The product conforms to any promises made by the manufacturer, usually found on the container or label

Implied Warranty of Fitness for a Particular Use

When you tell the seller that you want to use a product in a specific way and the seller gives you a product, they warrant that the product they delivered is fit for the use you had in mind. The implied warranty of fitness for particular use applies when:

  • The seller understands that the buyer will be using a product or good for a particular purpose
  • The seller understands that the buyer is relying on the seller’s expertise and knowledge about the product’s ability to be used in the way the seller would want

How Can Warranties Be Disclaimed?

As a general rule, parties to a commercial contract can disclaim any warranties for the product being sold. Nevertheless, there are several rules regarding the method of the disclaimer and the type of warranty, either express or implied.

What Are Express Warranties and How Are They Disclaimed?

Statements from the seller create express warranties. This can include:

  • An affirmation of fact or a promise which relates to the goods;
    A description of the goods;
    A sample or model used in the transaction.

Any statement that depicts the product or otherwise affects the decision to complete the transaction can create a warranty, and there doesn’t need to be an intent to create the warranty.
An express warranty can be easily disclaimed by statements in brochures, models, and samples stating that those terms create no warranty.

Also, salespeople must be cautious not to make any verbal promises without such a condition. Express warranties can also be disclaimed by statements in a contract for a sale, excluding any express warranties.

What Are Implied Warranties and How Are They Disclaimed?

Certain warranties are implied by law. There are two major types of implied warranties:

  • The implied warranty of merchantability: guarantees that the product is fit to use for the ordinary purposes that consumers would intend to use it;
  • The implied warranty of fitness for a particular purpose: applies when the customer intends to use a product for a specific purpose, and the seller knows this. The buyer relies on the seller’s expertise to choose a product for this use.

Implied warranties can also be disclaimed in most places, though federal restrictions and state regulations restrict disclaimers on consumer goods. To disclaim implied warranties, the seller must notify the buyer in writing that the seller would not be liable if the product is defective or does not perform as the buyer thought it would.

Alternatively, the seller can label a product as being sold “as is” or “with all faults,” which will disclaim implied warranties but not dismiss liability for defective or dangerous products. Depending on the state, there are also some restrictions on selling “as is” products.

Do I Need a Lawyer?

The law of contracts and warranties can be very complicated and differ dramatically from state to state. An experienced business attorney can help draft a contract to exclude warranties or advise you of any warranties you may have for an already purchased product. A lawyer can also represent you in court if needed.

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