A warranty is a contractual promise made by a seller or service provider assuring the buyer or customer of the quality, condition, and performance of goods and services involved in the transaction. They are key elements in commercial sales contracts.
Should the warranty be inaccurate, false or misleading, the buyer may have a contractual claim for a breach of warranty against the seller. For example, the seller breaches the warranty if they deliver goods below the agreed standard or specification, or if they perform the service poorly or incompletely. For businesses, such breaches can lead to significant financial loss, which may impact operations and profitability. However, there are legal remedies available to the injured party to protect their interests and mitigate or recoup their losses.
Remedies
The main remedy involves a claim for financial compensation (damages), specifically aimed at restoring the injured party for the loss suffered. For instance, this could encompass costs associated with repairing defective goods or equipment, or revenue losses resulting from the product’s failure to meet the required standard. Unlike conditions of a contract, breach of warranties do not usually give the right to terminate the contract however, it allows for damages.
Other legal remedies include repair or replacement and price reductions. In some cases, the contract might specify what should occur if a warranty is breached, like including a fixed compensation amount or a formula for calculating losses. These are commonly referred to as liquidated damages clauses and must be drafted with care to ensure they are legally enforceable.
In some cases, the contract may additionally set out important rules around the claim timing, financial thresholds and dispute resolution processes, such as mediation or arbitration. These are most common in share purchase agreements and must be carefully observed to prevent jeopardising the claim.
The typical process for bringing a breach of warranty claim involves:
- Identifying the breach – Determining which warranty has been breached and how
- Documenting the issue – Gathering evidence and records to support the claim. Evidence includes contracts, correspondence, financial records and expert reports etc
- Notifying the seller – Formally informing the seller of the breach and the losses suffered
- Considering legal action – Exploring options for resolution, which may include negotiation, mediation, or court proceedings
Ultimately, businesses dealing with suspected breach of warranty should seek specialised legal advice as soon as possible in order to assess their position, gather evidence, and determine the most effective route to remedy losses and enforce contractual rights.
At Nath Solicitors, we have a strong track-record in handling breach of warranty claims for businesses, especially in commercial contracts and sale/purchase agreements. We will guide you through the process of establishing your claim and securing a favourable result.
Contact Nath Solicitors
If you need legal assistance with your contract, contact Nath Solicitors today. Please call us on 0203 983 8278 or email us at enquiries@nathsolicitors.co.uk.