Question

What main factors distinguish contractual terms that are conditions from those that are warranties?

Answer 1

Terms of contract conditions and warranties are used to designate the responsibilities of the parties involved in the agreement. They are set out in a contract in order to determine remedies in a case of a breach of obligations on the part of either party. There are distinct differences between the two.

A condition is essentially the basis for a contract. It provides for the obligations of each party in an agreement. The simplest way to think of a condition in contract law is found in the terms “If…then.” “If” one party fulfills an obligation as contained in the agreement, “then” the other party to the agreement must fulfill their obligation to that party.

For instance, a condition in a contract for a sale of goods might include the terms that the successful completion of a contract relies upon an agreed upon delivery date of the goods. In order to fulfill the terms of that contract, the seller will only receive compensation for their goods if the buyer receives those goods by that set date.

If the seller should fail to meet that deadline, then the seller can be held in breach of the contract. The injured party can treat this failure of the seller to meet their obligations as “repudiatory,” meaning the injured party has two options:

• Terminate the contract (acceptance of the repudiation) and walk away from any obligations they may owe the seller; or
• Treat the contract as continuing (affirmation of the contract).

In either case, the injured party can sue for damages, no matter the reason for the breach or how little the loss to the party may be.

Two Types of Conditions

Two types of conditions can be found in a contract: Expressed or Implied Conditions.

• Expressed Conditions: As the name implies, these are conditions that have been clearly described and agreed upon by both parties to an agreement. If obligations laid forth in an expressed condition are not met, a breach of contract can be determined with liability assessed and damages awarded.
• Implied Conditions: These are conditions that are assumed to be accepted by both parties regarding their obligations. These may include conditions that ownership is not in question, the goods are not damaged, or that it is not necessary to provide detailed descriptions of the goods being sold beyond its name. For instance it’s accepted that a bowling ball is a bowling ball and not a basketball, and thus no further description is required. However, implied conditions can be superseded by an expressed condition if the parties prefer to place emphasis on that issue.

There are often misunderstandings as to whether a representation constitutes a condition in a contract. Throughout the negotiation process, discussions may have taken place that are considered to be “representations,” or statements of fact, that are made with the sole purpose of getting a person to sign a contract.

The major difference between the two is that failure to deliver on a representation can only result in liability for misrepresentation, not breach of contract. The responsibility for determining whether damages can be awarded for misrepresentation rests with the aggrieved party. They must prove that they relied on statement as a term of the contract, that they placed considerable importance on the statement, and they believed the statement was true.

A warranty is a term in a contract that is more like a promise by one party than a condition agreed upon by both parties. A major difference is that if a party fails to live up to a warranty, the aggrieved party can sue for damages, but that failure does not provide cause for termination of the contract.

If the other party considers the warranty by one party important enough, then it could be classified as a condition. Generally, however a warranty is usually only a statement of facts. They can be expressed or implied and can be for the lifetime of the contract or be contractual only for a limited time.

If you suspect that an agreement has been breached, it’s always a good idea to seek legal counsel in order to more thoroughly identify the different terms in a contract and determine what remedies are available. Remedies can vary greatly depending on the type of term for which the other party has not met their obligations, and the strategies to deal with the failure may also be different.