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ASSIGNMENT – 1

1. Explain Warranties with reference to a referred case.

 In contract law, a warranty has various meanings but generally means a guarantee or promise[1] which
provides assurance by one party to the other party that specific facts or conditions are true or will
happen. This factual guarantee may be enforced regardless of materiality[2] which allows for a legal
remedy if that promise is not true or followed.

Although a warranty is in its simplest form an element of a contract, some warranties run with a product
so that a manufacturer makes the warranty to a consumer with which the manufacturer has no direct
contractual relationship.

A warranty may be express or implied, depending on whether the warranty is explicitly provided
(typically written) and the jurisdiction. Warranties may also state that a particular fact is true at one point
in time or that the fact will be continue into the future (a "promissory" or continuing warranty).

An assurance, promise, or guaranty by one party that a particular statement of fact is true and may be
relied upon by theother party.

Warranties are used in a variety of commercial situations. In many instances a business may voluntarily
make a warranty.In other situations the law implies a warranty where no express warranty was made.
Most warranties are made with respectto real estate, insurance, and sales and leases of goods and
services.

 Real Estate

When land, houses, apartments, and other forms of real estate are sold or leased, the real estate usually
comes with atleast one warranty. In a sale of realty, the seller usually includes a warranty regarding the
title to the property. In somecases the title may have a cloud on it. This means that some party other tha
n the seller has a claim to the property. Suchclaims may be made by a bank, a Judgment
Debtor, a construction company, or any other party that has obtained a lienagainst the property. If the
seller thinks that the title is clouded, the seller may offer a quitclaim deed. This type of deedcontains no
promises as to the title and releases the seller from any liability to the buyer if a lien holder later makes
a claimto the property.

In other real estate transactions, the seller may warrant that the title is clear. In this situation the seller
gives the buyer ageneral warranty deed. This kind of deed warrants that the title is clear and that the
seller will be liable for any defects in thetitle that existed at the time of the sale.

Other types of warranties related to real estate titles include special warranty deeds and covenants of furt
her assurances. Aspecial warranty deed warrants only that no party made a claim to the property during
the seller's ownership. Under a specialwarranty deed, the seller is not liable for any defects in the title
attributable to her predecessors. A seller may add to a deeda Covenant of further assurances, which
promises that the seller will take any steps necessary to satisfy any claims to theproperty.

Sellers and buyers of real estate may negotiate warranties regarding the title to the property. They also
may negotiateadditional warranties regarding the property, such as warranties on plumbing or electricity
or any other matter of specialconcern.

If the seller of real estate is the same party who constructed a building on the property, a warranty of
habitability may beautomatically included in a sale of the property. A warranty of habitability in the
context of a sale of real property is apromise that the dwelling complies with local Building
Codes, was built in a professional manner, and is suitable for humanhabitation.

Warranties also accompany leases of real property. All states, through either statutes or court decisions,
require landlords toobserve the warranty of habitability in leases of residential property. In this context
the warranty of habitability is a promisethat the premises comply with all relevant building codes and th
at they will be properly maintained and will be fit forhabitation throughout the period of the tenancy. Sp
ecifically, the landlord promises to make necessary repairs in a promptand reasonable fashion and to pro
vide such basic services as water, heat, and electricity. If a landlord breaches the Implied
Warranty of habitability, the tenant may withhold rent and sue for any financial losses resulting from th
e breach.

 Insurance

A warranty in an insurance policy is a promise by the insured party that statements affecting the validity
of the contract aretrue. Most insurance contracts require the insured to make certain warranties. For exa
mple, to obtain a Health
Insurancepolicy, an insured party may have to warrant that he does not suffer from a terminal disease. I
f a warranty made by aninsured party turns out to be untrue, the insurer may cancel the policy and refuse
to cover claims.

Not all misstatements made by an insured party give the insurer the right to cancel a policy or refuse a cl
aim. Onlymisrepresentations on conditions and warranties in the contract give an insurer such rights. To
qualify as a condition orwarranty, the statement must be expressly included in the contract, and the provi
sion must clearly show that the partiesintended that the rights of the insured and insurer would depend o
n the truth of the statement.

Warranties in insurance contracts can be divided into two types: affirmative or promissory. An affirmati
ve warranty is astatement regarding a fact at the time the contract was made. A promissory warranty is a
statement about future facts orabout facts that will continue to be true throughout the term of the policy.
An untruthful affirmative warranty makes aninsurance contract void at its inception. If a promissory war
ranty becomes true, the insurer may cancel coverage at suchtime as the warranty becomes untrue. For ex
ample, if an insured party warrants that property to be covered by a fireinsurance policy will never be us
ed for the mixing of explosives, the insurer may cancel the policy if the insured partydecides to start mix
ing explosives on the property. Warranty provisions should contain language indicating whether they are
affirmative or promissory.

Many states have created laws that protect insureds from cancellations due to misrepresented warranties.
Courts tend tofavor insureds by classifying indefinite warranties as affirmative. Many state legislatures
have created laws providing that nomisrepresented warranty should cancel an insurance contract if the
Misrepresentation was not fraudulent and did notincrease the risks covered by the policy.

 Sales and Leases of Goods

Every contract for the sale or lease of goods contains a warranty that the seller or lessor actually owns th
e property. Courtshold that this warranty is implied if it is not included in the contract, and a seller or les
sor cannot disclaim it.

The two basic types of sales warranties are express warranties and implied warranties.
Express warranties are specificpromises made by the seller and include oral representations, written re
presentations, descriptions of the goods or services,representations in samples and models, and proof of
prior quality of the goods or services. Puffing, or the seller'sexaggerated opinion of quality, does not con
stitute a warranty. For example, if a car salesperson says, "This car will lastyou a lifetime," a court woul
d likely consider such a statement puffing and not an express warranty.

Implied warranties are warranties that courts assume are implied in sales made by merchants.A
merchant is a person whois in the business of selling the good or service being sold in the contract. All
sales contracts made by merchants containan implied warranty of merchantability. This is a promise that
the goods, as they are described in the contract, pass withoutobjection in the merchant's trade, are fit for
the ordinary purpose for which they are normally used, are adequately contained,packaged, and labeled,
and conform to any promises or affirmations of fact made on the container or label. If the goods are
fungible, or easily replaced or substituted, such as grain or oil, the replacement goods must be of fair and
average quality, fitfor their ordinary purposes, and similar to previous goods delivered in the same
contract or previous similar contracts.

In some situations a sales contract may include an implied warranty of fitness for a particular purpose. T
his kind of warrantyis a promise that the goods are useful for a special function. Courts infer this warrant
y is implied when the seller has reasonto know of a particular purpose for which the goods are required a
nd also knows that the buyer is relying on the seller's skilland knowledge in choosing the goods. The buy
er does not need to specifically inform the seller that the goods are for aparticular purpose; it is enough t
hat a reasonable seller would be aware of the purpose.
For example, assume that a farmer, intending to plant no-
till soybeans, approaches a seller to buy herbicide. Assume furtherthat the buyer requests a particular her
bicide mix but the seller suggests a less expensive mix. If the chemicals fail to killcrabgrass and the farm
er has a low yield of soybeans, the farmer could sue the seller for breach of the warranty of fitnessfor a p
articular purpose because the seller knew what the farmer required.

In some cases an implied warranty may be lost or waived. If a seller issues a disclaimer—
for example, states that thegoods are as is—
and the buyer examines or refuses to examine the goods, the buyer may lose any implied warranties. On
eimportant caveat is that courts will not find that an implied warranty has been waived if, under the
circumstances of the sale,it is unreasonable to expect that the buyer would have understood that there we
re no warranties under the circumstances ofthe transaction.

A seller may disclaim the warranty of merchantability either orally or in writing, but a seller cannot orall
y disclaim a warrantyof fitness for a particular purpose. A disclaimer of the warranty of fitness for a part
icular purpose must be in writing, and thedisclaimer must be conspicuous to the buyer. Express warranti
es made by a seller may not be disclaimed. However, if adisclaimer and an express warranty can be
construed as consistent, a court may uphold the disclaimer.