|Ask any experienced contracting professional to name one of the most contentious clauses in a negotiation and the answer usually includes the warranty provision.
(The other contentious clauses are Limitation of Liabilities and Indemnity, followed closely by who owns the IP).
Many business people assume these clauses are strictly “legal” issues. If you’ve ever attended my seminars, you know my opinion: Even the most highly “legal” clause – such as the indemnity clause – boils down to who’s going to pay the money. In my seminars, I break down the issues and language and educate people how to make sense of and negotiate these clauses.
|WHAT’S THE PROBLEM?
I think business people frequently view the warranty clause as a “legal” issue primarily because:
THE FOREGOING WARRANTY IS THE SOLE AND EXCLUSIVE WARRANTY MADE BY SUPPLIER. SUPPLIER DISCLAIMS ALL OTHER WARRANTIES, EXPRESS AND IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
Business people tell me that while they’re not entirely sure what the above clause means, they know it doesn’t sound good for them. As a result, what do many people do? They turn the entire clause/ contract over to the legal department.
What if I were to tell you that most Buyers’ lawyers will actually agree to the Seller’s inclusion of this disclaimer language?
Most lawyers will tell you that as long as you insert into your contract:
then you can agree to the above disclaimer.
This Supplier disclaimer language is negating highly legal UCC warranties that may prove helpful to the Buyer if you go to court, but will be of limited value otherwise.
|RESOLVING THE ISSUES
I have concluded that what lawyers refer to as “Warranty” are the issues that business people refer to as “Quality”.
In plain English, warranties are promises made by the Supplier about its products/ services.
More specifically, warranties deal with the following issues:
Approaches to the limitations of liabilities issue:
Your warranty will only be as good as your specs/ requirements/ SOW
I go into much more detail about warranty and many other clauses in my Legal Aspects of Purchasing and Contracts: Reading, Writing & Negotiating” seminars.
Please contact me if you have any questions.