Warranty has a number of different usages in contracts and in normal talk:
- When we talk about a consumer warranty [an agreement], we normally mean an agreement between the buyer and the product’s manufacturer to replace or repair the product for a specific period of time.
- When we consider a collateral warranty [an agreement], we are referring to an agreement between a stakeholder on a construction project and a supplier to compensate the stakeholder if the supplier breaches its agreement with its own employer.
- When we consider a warranty clause [a term in an agreement], we are referring to a specific type of promise made by the supplier to its employer.
In this post, we consider the last of these usages.
Warrants, acknowledges and undertakes
In a collateral warranty relating to the construction of a leisure centre, clause 1 stated:
‘The Contractor warrants, acknowledges and undertakes that… it has carried out and shall carry out and complete the Works in accordance with the Contract’
The court had to interpret this clause and decide whether warrant was the same as acknowledge, and whether acknowledge was the same as undertake; and – if they were not – what was the precise difference.
Mr Justice Akenhead said:
‘Clause 1 contains express wording whereby [the contractor] “warrants, acknowledges and undertakes”. One should assume that the parties understood that these three verbs, whilst intended to be mutually complementary, have different meanings.
A warranty often relates to a state of affairs (past or future); a warranty relating to a motor car will often be to the effect that it is fit for purpose.
An acknowledgement usually seeks to confirm something.
An undertaking often involves an obligation to do something.
It is difficult to say that the parties simply meant that these three words were absolutely synonymous.’
The issue was whether the warranty related to works to be carried out or works already completed.
The court decided that warranty related to both future and past actions. If the drafters had used ‘acknowledges’ then it is more likely they were just referring to past actions.
What should you do?
For anyone reviewing a collateral warranty, you can try and spot some of the pitfalls (critical questions for reviewing collateral warranties). For anyone writing collateral warranties, work out precisely what you mean and keep it succinct.
Case: Parkwood Leisure Ltd v Laing O’Rourke Wales and West Ltd [2013] EWHC 2665 (TCC)
