Condition or Warranty: Which one is best?

Condition or Warranty: Which one is best?

When it comes to the specific wording of an Offer and Acceptance form it is very important to get it right. This particularly applies to the inclusion of any special Conditions or Warranties stipulated by the buyer.

When a Condition or a Warranty is used inappropriately, a buyer may not be adequately protected in the event of a dispute or worse still, may end up out of pocket if they have to pursue a seller to rectify an unfulfilled Warranty after settlement.

So when is it best to use a Condition or a Warranty?

A Warranty can be seen as a form of a promise or undertaking made (usually) by the seller to the buyer. Commonly used as a subsidiary term to the main purpose of the O & A agreement, it is not detrimental to the operation of the contract. Typical warranties state that all gas, electrical and plumbing appliances will be in “working order” at settlement.

In most cases, warranties serve to make the seller take action to repair any defects to a property’s fixed appliances, chattels and fittings. However, sometimes a seller will refuse to put things right, especially when the repair is large, costly or where they have simply run out of money.

Unfortunately, in most circumstances the buyer won’t be able to hold up settlement. Only after settlement can they seek compensation from the seller. This can be done either through the court system or by taking the matter to the Department of Commerce, both of which can be time consuming and expensive options.

A Condition on the other hand is designed to clearly state what needs to be done, who is responsible and when it is to be done.

For example, a buyer may stipulate as a Condition of their O & A that “The rusted downpipe outside the laundry door must be replaced by the Sellers at their own expense prior to settlement.” This means that if this condition is not met and the gutters are not replaced, the buyer has the option to delay settlement until this is completed.

It is important to use the right tool for the right job when applying the use of Warranties and Conditions.

Where something can’t be specified or known (eg all gas, electrical and plumbing appliances to be in working order at settlement) then a Warranty is the best option. However, where the issue is clear, as in the case of the guttering, then a Condition should be used.

Image by Eirik Solheim via Flickr.