Warranties in Contracts

Wed, 07 Sep 2011 12:29:00 GMT

In a recently reviewed contract, an engineer replaced the word “warrants” with the word “represents,” believing that this would alleviate the possibility of an uninsured claim for express warranties. Unfortunately, it did not solve the problem. A warranty is a promise of a given result. If the promised result does not occur, the consultant can still be held responsible, even if the damages were not caused by the consultant’s negligence. Warranties can be created in many ways without using the word “warrant.” Using words such as “assure,” “ensure,” “insure,” “promise,” “represent,” and even “shall” could result in uninsurable warranties.

Express warranties and guarantees establish liability even though no proof of negligence is required. Under U.S. common law, design professionals have the responsibility of using due care in providing their services. There is no warranty of the efficacy of professional services, nor does the design professional provide a warranty for the work of the contractor or others based on the services or instruments of service provided by the design professional. Courts have not extended the duty to provide a guarantee to design professionals because they provide services based on judgment and expertise; a design professional is applying its professional skills and reasoning on a unique set of facts for each project. Professional liability insurance policies exclude coverage for claims arising out of express warranties or guarantees. Because coverage is for professional services provided and not assumed contractual obligations, professional liability insurance does not "stretch" to provide coverage for a warranty of services beyond meeting the standard of care.

Schinnerer's RM Blog - warranties tag

Warranties in Contracts