Liverpool Law Review (2022) 43:361–388

https://doi.org/10.1007/s10991-022-09302-w

Construing the Written Warranty

Manasi Kumar1 · Nishtha Pant2

Accepted: 29 April 2022 / Published online: 1 June 2022

© The Author(s), under exclusive licence to Springer Nature B.V. 2022

Abstract
In common law, the question of whether the express warranty is one that sounds in
contract or tort has been a question of some debate. This question is not one of mere
academic or historical interest, but an urgent one even today. Its contemporary rel-
evance is most apparent in the US, where the discussions around the tortious roots
of the warranty are found in the current debates around “sandbagging”, which is
concerned with whether a buyer has to prove that it actually relied upon the truth of
the written warranty expressly incorporated into a commercial contract. This paper
demonstrates that it is unjustified to require a showing of reliance with respect to the
written warranty, which was even historically understood as simply a term of the
contract, subject to a contract construction approach. Instead, the only appropriate
role for a buyer’s pre-contractual knowledge of falsity is to serve as a relevant factor
in evaluating the parties’ intention regarding the scope of the written warranty – an
approach followed by UK courts, which have for over a century cast the warranty
as a creature of contract. It is, however, pointed out that there are dangers presented
by trying to create too much of a divide between the law of contract and tort with
respect to the warranty, as demonstrated by a contemporary line of cases in the UK
High Court, because the creation of artificial bright-line rules actually undermines a
robust inquiry into the parties’ intentions.

Keywords Express warranty · US · UK · Sandbagging · Reliance

* Manasi Kumar
manasi@jgu.edu.in
Nishtha Pant
npant@jgu.edu.in
1
Professor, Jindal Global Law School of O.P. Jindal Global University, Sonipat, Haryana 131001,
India
2
Academic Tutor and Teaching & Research for Intellectual Pursuit (TRIP) Fellow, Jindal Global
Law School of O.P. Jindal Global University, Sonipat, Haryana 131001, India

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362 M. Kumar, N. Pant

Introduction

In 2018, in its Eagle Force Holdings, LLC. v. Campbell judgment, the Delaware
Supreme Court remarked, in passing and in a footnote, that the issue of whether or
not reliance was a necessary element of a breach of warranty claim was as of yet
unsettled in the state of Delaware.1 This seemingly anodyne statement sent ripples
of alarm across the legal profession, because, previously, the lower courts’ decisions
in Delaware had bolstered the state’s reputation as being a “pro-sandbagging” juris-
diction, i.e. one where the buyer’s knowledge of the falsity of warranties is not a
complete defense to a breach of warranty claim (Cleary, 2019: 824; Chase, 2020:
1668 and Kimball, 2021: 572). And with a stray comment, the Delaware Supreme
Court had thrown into question whether or not it would affirm the lower courts’
approach, should the issue come up in front of it. This recent development throws
into stark relief the continuing battles in the US about the proper role for reliance in
a breach of warranty claim. Indeed, this is an old debate. What is newer, however, is
that this discussion is taking place exclusively within the context of a warranty that
is expressly incorporated into a written agreement.
This paper is an attempt to engage with the question of whether there is any role
for reliance within the context of written warranties. The authors argue that the writ-
ten warranty should be subject only to a contract construction approach, whereby the
buyer’s conduct and knowledge are relevant factors to ascertain the parties’ intention
regarding the scope and effect of the statement, and not as a complete defense to a
claim of breach of warranty.
Part I demonstrates how the question of reliance originally came up within the
context of the warranty by laying out the historical development of the express war-
ranty in broad brushstrokes, showing that the warranty shared much in common with
tort law even though it eventually came to sound in contract. Part II then explores
the modern development of the warranty within the context of the twentieth century
harmonization projects, paying special attention to the influential work of Samuel
Williston. It will here be demonstrated that there is scant evidence to support the
role of reliance as a complete defense in the face of a written warranty, and even
someone as acutely aware of the “quasi tort” nature of the warranty as Williston
(Williston, 1909: § 197), stated that a written warranty was simply subject to an
exercise in contract construction.
Part III will then engage with the modern jurisprudence in New York and Dela-
ware dealing with written warranties, in the face of the buyer’s knowledge of the
falsity of the warranty. New York is of course a very active commercial jurisdiction.
Moreover, the Eagle Force judgment indicated that, if the question ever came up
in front of it, the Delaware Supreme Court would consider New York law, includ-
ing the seminal and highly-influential CBS Inc. v. Ziff-Davis Publishing Co. judg-
ment.2 It will be argued that the New York jurisprudence – CBS and its progeny
– are far from satisfactory in their approach and have developed a framework that

1
187 A.3d 1209, 1236 fn.185 (Del. 2018) (Valihura J.).
2
554 N.Y.S.2d 449 (N.Y. 1990).

13
Construing the Written Warranty 363

is altogether sui generis, with little historical or doctrinal antecedent. The Delaware
courts, on the other hand, have followed a more robust and recognizable approach
to the written warranty, grounded in contract law. Therefore, instead of the Dela-
ware Supreme Court turning its gaze to New York, it should affirm its lower courts’
approach. It will also be proposed that perhaps some lessons may be drawn from the
UK.
Part IV is, in part, an attempt to explain why the UK has not faced similar ten-
sions with the role of reliance in warranty law, despite being the historical source of
the common law. It will be shown that the UK’s House of Lords managed a clean
split in the early twentieth century of the warranty from tort law.3 This did not mean
that there was no role left for an inquiry into the buyer’s knowledge or conduct.
Instead, this was deemed relevant to making the determination of whether the seller
intended to provide a binding promise, i.e. a warranty. It will also be demonstrated
that this development has resulted in a robust contract construction approach in
modern transactions. However, not all developments in the UK are worthy of equal
consideration. There is a growing trend in the UK High Court, which is a court of
first instance, of ascribing legally technical meanings to the parties’ use of the words
“represents” or “warrants” in their written contracts. Since this development is being
noted by some US commentators as relevant to domestic debates (West, 2016), the
authors will identify how such a strict approach actually has the potential of obfus-
cating a robust inquiry into the parties’ intent, and may not even be affirmed by the
higher courts in light of precedent.
James White had noted that “reliance lives” in the US despite the efforts of Karl
Llewellyn to sever the express warranty from tort in Article 2 of the Uniform Com-
mercial Code (White, 1998: 2106). The authors suggest that this was a conservative
statement. Reliance does not merely live. It has invaded territory that it was never
intended to occupy, and the modern challenge is to reclaim the written warranty as a
creature of contract.

The Tortious Beginnings

The history of the warranty is tied to the development of the modern English com-
mon law of contracts. A breach of warranty action was originally pled in tort as an
action for trespass on the case. It was only after the warranty was relocated to the
writ of assumpsit that it eventually became an action that sounded in contract. This
historical evolution demonstrates the futility of fitting the warranty neatly within
either category – tort or contract.
The English common law, historically, maintained a strict distinction between
contracts under seal and those that were not under seal, also known as parol con-
tracts. The terms of a sealed contract could be enforced as is (Hare, 1887: 120;
Deiser, 1911–1912: 438), while a parol contract could only be enforced in the very
limited circumstances of an action of debt, where the contract was performed to the

3
Heilbut, Symons & Co. v. Buckleton, [1913] A.C. 30.

13
364 M. Kumar, N. Pant

extent that there was a right of a set sum to be paid in return (Hare, 1887: 121–123).
The difficulties arising from parol contracts may be put into two categories – cases
involving wrongful performance (or misfeasance), and cases involving non-per-
formance (or non-feasance)4 – neither of which provided a remedy to a wronged
party under the traditional rules regarding parol contracts. By recourse to chapter 24
of the Statute of Westminster II, and inspired by the recognized action of trespass
vi et armis (for property damage caused by forcible entry), the courts of equity
established the novel action of trespass on the case in cases of wrongful perfor-
mance (Hare, 1887: 123). Unlike with the forceful trespass cases, the wrongful per-
formance cases involved an invited entry upon the plaintiff’s property, but the courts
got around that by characterizing the invitation as one induced by the defendant’s
skill (Hare, 1887: pp 123). Therefore, in order to successfully plead a trespass on
the case, the plaintiff had to demonstrate that the defendant had induced the plaintiff
into the relationship by representing that he had the requisite skill, that the defend-
ant did not exercise due care, and the plaintiff’s property was thereby harmed (Hare,
1887: 123–126; Ames, 1888–1889: 2–4). The parol contract between the parties was
not significant as a contract but merely provided evidence of the nature of the rela-
tionship between the parties which, once established, imposed upon the defendant a
duty to use due care (Hare, 1887: 124). Thus, the parol contract was but one, albeit
necessary, piece of evidence in an action sounding in tort (Deiser, 1911–1912).
A defendant’s failure to perform altogether added yet another complication,
because there was no trespass, on the case or otherwise, only inaction. In this case,
the writ of deceit provided some inspiration, for one who refused to do that which
he undertook and induced the plaintiff to his detriment, prima facie made his prom-
ise with the intent to deceive (Hare, 1887: 134; Ames, 1888: 10–15). Again, the
parol contract did not provide the basis for relief but was essential evidence to make
out the case of deceit. So, if the plaintiff could prove that he was not only induced
into the parol contract by the defendant’s deceitful statements, but that he also relied
upon those statements to his detriment, then the plaintiff could get relief for the inju-
ries he suffered (Hare, 1887:132–34). This was the action on the case on promises,
also known as assumpsit (Hare, 1887: 134–35). The action for assumpsit swiftly
became an action ex contractu and was seen as encompassing all matters involv-
ing a contract, even the erstwhile wholly separate action for debt5 (Hare, 1887:
135; Ames, 1888–1889: 15–16). But, it had its roots in the writ of deceit (Ames,
1888–1889: 2). And thus, even in an action of assumpsit, initially the pleas included
allegations of fraudulent intent (Hare, 1887: 142).
In light of the above, the warranty, predating as it did the action of assumpsit,
was not originally understood as an action sounding in contract6 (Williston, 1908:
555; Ames, 1888–1889: 8). Indeed, at first a breach of express warranty was pleaded

4
The language of tort is intentionally inserted into the brackets because both situations were understood
by contemporary jurists to give rise to a claim that was ex delicto and not ex contractu.
5
Slade v. Morley (Slade’s case) [1601] 80 E.R. 15.
6
See also Medina v. Stoughton, 90 ER 1014 (1705) (breach of warranty brought as an action of trespass
on the case).

13
Construing the Written Warranty 365

as an action of trespass on the case,7 and the action of assumpsit only became the
proper vehicle for such a claim sometime in the second half of the eighteenth cen-
tury, when it was finally affirmed as the proper and prevailing practice in Stuart v.
Wilkins.8
Unlike the writ of deceit, a cause of action based upon the breach of a warranty
did not require the plaintiff to prove that the defendant knew of the falsity of his war-
ranty (Williston, 1908: 557). But two elements were critical – one, a strict pleading
requirement whereby the plaintiff had to use the words “warrantizando vendidit”
in their plaint,9 (Williston, 1908: 555) and second, proof of inducement (Williston,
1908: 557–558).
Initially, the failure to use the words “warrantizando vendidit” was fatal. And so,
in Chandelor v. Lopus, the King’s Bench had held that the “bare affirmation” of
a stone as a bezoar stone by the seller did not constitute a warranty.10 The “bare
affirmation” was understood to refer to pleading requirements, as the court stated
that “the declaration contains not matter sufficient to charge the defendant, viz. that
he warranted it to be a bezoar-stone.”11 However, the strict pleading requirement
was relaxed over time,12 with Lord Chief Justice Holt expressly stating in Medina
v. Stoughton that “where one, who has possession of any personal chattel, sells it,
the bare affirming it to be his amounts to a warranty, and action lieth on the affirma-
tion.”13 Intriguingly, in Medina, Lord Holt contrasted cases where the seller was out
of possession of the goods, or there was a sale of land, because in such cases “there
may be room to question the seller’s title” and “the buyer is at his peril to see it.”14
This suggests that, at least for an action for trespass on the case, the buyer’s actions
were also being scrutinized to determine whether they were reasonable, i.e. whether
the buyer was induced into the contract. If a seller sold goods in his possession and
stated them to be his, that would constitute an express warranty and the buyer could
bring an action for breach of warranty. However, in some situations the reasonable
buyer would know better than to simply go by the seller’s words and would need
to conduct his own investigation,15 thereby negating any inference of inducement.
After the breach of warranty action shifted to an action of assumpsit, while there
seems to have been some passing doubt about the correctness of a requirement of
inducement,16 at the very turn of the twentieth century, the UK Court of Appeal

7
Cross v. Gardner, [1689] 89 E.R. 453 (breach of warranty brought as an action of trespass on the case);
Medina, 90 ER 1014.
8
Stuart v. Wilkins, (1778) 1 Douglas 18.
9
See also, discussion of Chandelor v. Lopus, [1603] 79 E.R. 3, infra notes 10–13.
10
Chandelor v. Lopus, [1603] 79 E.R. 3.
11
Chandelor, 79 E.R. at 4 (emphasis supplied).
12
Cross, 89 E.R. at 453.
13
Medina, 90 ER at 1014.
14
Ibid.
15
Lord Buller disagreed with this assessment in a case where the vendor was out of possession, stating
by way of dicta, “the case is strongest against the vendor when he is out of possession, because then the
vendee has nothing but the warranty to rely on.” Pasley v. Freeman, [1789] 100 E.R. 450 [454].
16
In addition to his skepticism as to Lord Holt’s distinction between a seller being in or out of posses-
sion in Medina, Lord Buller did state that he doubted whether any distinction mattered at all in an action
for a breach of warranty: “…and if an affirmation at the time of sale be a warranty, I cannot feel a distinc-

13
366 M. Kumar, N. Pant

described the decisive test of whether a statement constitute a warranty as being one
that invoked a statement of fact of which the buyer was ignorant thus, reinforcing
the importance of inducement well through the nineteenth century.17 Even Williston,
while reviewing the history of the express warranty, stated that “[i]n theory all that
seems necessary is that the affirmation should have been such as to lead a reasonable
man to believe that a statement of fact was made to induce the bargain.” (Williston,
1908: 560).
Thus, inducement and reliance continued to have salience in an action for breach
of warranty, even when the action had become one that was ex contractu.
Of course, for a warranty action, there had to be an assertion of fact as well. A
statement of opinion or puffery would not constitute a warranty as held in the case
of Harvey v. Young,18 where a seller was held not to be liable upon a statement that
the lease term was “worth” a particular sum.19 And so, over a century after the cases
discussed thus far, in the late eighteenth century, the King’s Bench in Pasley v. Free-
man summarized the legal principle as “uniformly adopted…that an affirmation at
the time of a sale is a warranty, provided it appear on evidence to have been so
intended.”20 The intention identified here was concerned with whether the speaker
was stating a fact or an opinion, as this is clarified by the very next statement in the
judgment “But the true ground of that determination [in Harvey v. Young] was, that
the assertion was of a mere matter of judgment and opinion; of a matter of which
the defendant had no particular knowledge, but of which many men will be of many
minds, and which is often government by whim and caprice. Judgment or opinion,
in such case, implies no knowledge.” However, this notion of intention was miscon-
strued in later years to interesting effect in the UK.21
This brief history of the evolution of the warranty demonstrates that there was
nothing self-evident in the nature of the warranty to suggest that it was a creature
of tort or contract. Thus, it may be rather expected for jurisdictions to struggle with
the express warranty. The next part will give a broad overview of this very strug-
gle in the development of the warranty, starting with the profound work of Samuel
Williston.

The Historical Development of the Warranty in the US

At the turn of the twentieth century, the Commissioners for Uniform State Laws
requested Samuel Williston to draft a sales act which could be adopted by all the
states, in order to promote uniformity of contract law (Williston, 1909: iii). Sect. 12

Footnote 16 (continued)
tion between the vendor’s being in or out of possession. The thing is bought of him, and in consequence
of his assertion…” Pasley, [1789] 100 E.R. [454].
17
De Lassalle v. Guildford, [1901] 2 KB 215.
18
[1601] 80 E.R. 15.
19
Ibid. [15].
20
Pasley v Freeman, [1789] 100 E.R. 450 [453] (Buller J.) (emphasis supplied).
21
See discussion infra Part IV(A).

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Construing the Written Warranty 367

of the Uniform Sales Act, drafted by Williston, defined the express warranty as “[a]
ny affirmation of fact or any promise by the seller relating to the goods is an express
warranty if the natural tendency of such affirmation or promise is to induce the buyer
to purchase the goods, and if the buyer purchases the goods relying thereon.”22
Within the larger historical context, one notes that Sect. 12 contained recog-
nizable elements of the warranty – a fact as opposed to opinion, that a reasonable
buyer would be induced by (“natural tendency”) (Williston, 1908: 560; Williston,
1909 § 201), and that the buyer was induced to enter into the contract. However,
the language of reliance, as framed, immediately gave rise to difficulties in inter-
pretation and courts started viewing the statutory language as requiring an absolute
requirement of actual reliance, affirmatively proved by the buyer (Hodaszy, 1991:
471–472). Williston himself deemed such a rigid approach to be misconceived, stat-
ing that while the burden of showing reliance rests on the buyer, generally the buyer
need not show any positive evidence of reliance other than that the statements by the
seller had the natural tendency to induce him into making the purchase and that he
did make the purchase consequently (Williston, 1908: 570). Such rule lays down a
presumption that the plaintiff relied on the seller’s affirmations in making the pur-
chase if the affirmation was such that a reasonable buyer would have been induced
by it (Williston, 1908: 570). Indeed, as early as 1909, directly on the heels of pub-
lishing the Uniform Sales Act, in his treatise on the sale of goods, Williston stated
clearly:
There is danger of [sic] giving greater effect to the requirement of reliance
than it is entitled to. It is, of course, true that the warranty need not be the
sole inducement to the buyer to purchase the goods. And as in assumpsit, as a
general rule no evidence of reliance by the buyer is necessary other than that
the seller’s statements were of a kind which naturally would induce the buyer
to purchase the goods and that he did purchase the goods. (Williston, 1909: §
206).
Therefore, Sect. 12 does not appear to have ever been intended to require a strict
burden of proof of reliance by the buyer, although some have characterized this as
a “revisionist interpretation,” due to the plain meaning of Sect. 12 (Hodaszy, 1991:
473; Murray, 1982: 285).
Williston’s understanding, then, was that if the buyer can prove that a statement
of fact was made that would have induced a reasonable buyer into the contract and
that the buyer actually entered into the contract, the burden fell upon the seller to
disprove the buyer’s reliance by showing that the buyer had knowledge of the defect.
This knowledge requirement was much narrower than sometimes understood, and
especially if the warranty was within a written contract, it was simply a matter of
contract construction (Williston, 1908: 570–574; Bogert, 1923: 30–32).
Normally, a warranty in general terms is held not to cover defects which the buyer
must have observed (Williston, 1908: 570; Bogert, 1923: 30–32), or that the buyer

22
Uniform Sales Act 1906, § 12.

13
368 M. Kumar, N. Pant

should have discovered23 (Williston, 1908: 571). The same logic extends to circum-
stances where although the defect is not obvious, the buyer has been notified about
it by the seller or the buyer knows of it through any other source24 (Williston, 1908:
570–71). Williston described the legal principle underlying these conclusions as “a
rule of construction, … based on an endeavor by the court to give effect to the inten-
tion of the parties” wherein he explained this by way of an example that if a buyer
purchases an obviously blind horse with a warranty that the horse is “sound”, then
the warranty will be deemed to cover all aspects of the horse except for the blind-
ness, as the true intention of the parties (Williston, 1908: 570–72). Just as a reason-
able buyer would not understand an opinion or mere puffery as a warranty that the
seller was binding himself to, a reasonable buyer would either walk away from the
deal upon learning of the defects or negotiate a better deal in light of the defects. If
the buyer stayed with the deal, a presumption could arise that, in the buyer’s judg-
ment, the deal as closed was worthwhile despite the defect and, therefore, the defect
was never intended to be covered under the ambit of the warranty. Therefore, a seller
has a good chance of defeating a claim for breach of warranty by demonstrating
knowledge. However, as the conclusions were informed by a contract construction
approach, where the words of the warranty are such that they directly cover a pat-
ent defect, Williston said the principled approach was that the seller should be held
liable for breach of warranty as he should be held responsible for his statements that
were made to induce the buyer (Williston, 1908: 571).
Williston went a step further while discussing situations where the warranty is
incorporated into a written contract, noting that,
If the seller’s obligation as a warrantor is based on express contract, the con-
struction of that contract is to be determined according to the rules which gov-
ern the construction of contracts generally. These rules cannot here be con-
sidered at length, but it is enough to say that if the warranty is in writing a
construction of it will be for the court, and that if the language used is doubt-
ful, the court will seek to give the meaning to the language which the parties
intended it should bear. (Williston, 1909: § 214) (emphasis supplied).
Inducement and reliance are thus irrelevant in the face of a written warranty,
which has been expressly incorporated into the written agreement, which is deemed
to accurately reflect the parties’ intent. The seller’s liability must be adjudged by
an application of general principles of contract construction to give effect to that

23
Citing Harwood v. Breese, 73 Neb. 521, 524 (S. Ct. Ne., 1905) (upholding a jury instruction which
provided that even if the buyer “from the exercise of his sense of sight might have discovered” the defect
in the pony, the buyer could not maintain a claim for breach of warranty)). In fact, according to Willis-
ton, even if the buyer could have discovered the truth of the matter through an inspection, as long as the
affirmation was one that would have induced a reasonable buyer, the buyer was entitled to rely upon the
seller’s affirmation; requiring any additional, affirmative proof of reliance “misinterprets the requirement
of reliance.” Williston, 1908: 572–73 (referring to Crocker-Wheeler Electric Co. v. Johns-Pratt Co., 29
A.D. 300 (N.Y. App. Div. 1898)).
24
Citing Knoepker v. Ahman, 72 S. W. 483 (Ct. App. Mo., 1903) (upholding a jury instruction that if
the seller disclosed the defect in the horse, the buyer cannot maintain a claim for breach of warranty)).

13
Construing the Written Warranty 369

intention. However, this aspect of Williston’s approach – the construction of the

contract – has had less influence upon US courts than a plain reading of the statutory
language, which has had an unfortunate impact upon the jurisprudence concerning
transactions that do not involve a sale of goods. And even Karl Llewellyn’s subse-
quent attempts to reemphasize these components were not particularly successful.
Llewellyn carried on the torch with Article 2 of the Uniform Commercial Code
(“UCC”). Section 2–313(1) of the UCC changed the definition of the warranty, from
the language of the Uniform Sales Act, to read as follows: “[a]ny affirmation of fact
or promise made by the seller to the buyer which relates to the goods and becomes
part of the basis of the bargain creates an express warranty that the goods shall con-
form to the affirmation or promise.”25 It is immediately evident that here the words
“inducement” and “reliance” are nowhere to be found, and are instead replaced by
the terminology of “part of the basis of the bargain”. The “basis of the bargain” has
been criticized for being uncertain and vague, leaving it open to interpretation as
to whether the tort-trappings of the warranty were being left behind or not (White,
1998: 2094–2096; Spolar, 1999: 460–463; Murray, 283). Comment 3 to Sect. 2–313
also seems to suggest that, although “no particular reliance” is required, some reli-
ance might remain as a necessary element and that the burden of proof would be on
the seller to demonstrate a lack of reliance.26 This is eerily reminiscent of Willis-
ton’s approach to reliance. However, others have forcefully argued that re-inserting
the inducement and reliance requirements into the “basis of the bargain” would be
incorrect in light of other comments to Sect. 2–313, which equate the warranty as
“part of the contract”,27 and Article 2 in general (White, 1998: 2094–95; Heckman,
1987; Murray: 288). In fact, Murray argued that the true innovation of Article 2 is
to replace the classical notion of contract as a “bargained-for-exchange” with the
“bargain-in-fact”, and within such context the true test of a warranty rests neither on
inducement nor reliance, but upon the “reasonable expectations of the buyer” (Mur-
ray: 288).
While fascinating and ongoing, this academic debate unfortunately seems to have
had little jurisprudential impact. As a survey of case law suggests, courts around
the country have overwhelmingly addressed reliance in their Sect. 2–313 cases,
irrespective of whether they read the reliance element into the statutory text or not
(White, 1998: 2098–102). This discomfort that modern courts appear to feel at the
prospect of severing the connection with the Uniform Sales Act and the reliance
requirement, led White to declare “reliance lives” (White, 1998: 2106). Indeed, if
severing the express warranty’s connection with its tortious roots was Llewellyn’s
goal, his efforts appear to have been largely wasted.
However, it bears repeating that at no point in this journey was the incorporated,
written warranty alluded to as being a different beast than any other term of the

25
U.C.C. § 2–313(1)(a) (1978).
26
U.C.C. § 2–313, comment 3.
27
See U.C.C. § 2–313, comment 7; see also, U.C.C. § 2–313, comment 3, which goes on to provide that
affirmations are dealt with “exactly as any other part of a negotiation which ends in a contract is dealt
with.”.

13
370 M. Kumar, N. Pant

contract. It is then truly unfortunate that the incorporated, express warranty has fared
worse in the twentieth century, even in putatively “pro-sandbagging” states such as
New York, than it would have before. This is true even in circumstances that do not
invite the application of the law of the sale of goods. In the next section, we turn
our sight onto the New York experience with the written warranty, demonstrating
its shortcomings, and contrast it with the sounder approach of the Delaware courts.

The Fate of the Written Warranty: New York and Delaware

New York

Historically, New York had required a rigid form of reliance wherein the New York
Supreme Court, Appellate Division held that a buyer who had conducted its own
investigation into the material of the goods could not sustain a breach of express
warranty claim because it did not rely upon the seller’s warranty.28 Williston criti-
cized such kind of reliance as a “misinterpretation of the reliance element” (Wil-
liston, 1908: 572–73). But, in the 1990s, the New York Court of Appeals changed
its approach in the seminal case of CBS v. Ziff-Davis.29 The issue that came into play
was whether an action based on breach of an incorporated, express warranty can be
precluded on account of the buyer’s lack of reliance, wherein the buyer’s investiga-
tion led to its disbelief in the truth of the seller’s warranty.30 It is important to note
that the court was faced with an appeal of the lower courts’ dismissal of the plain-
tiff’s breach of warranty claim for failure to plead that it relied upon the defendant’s
warranties.31 In other words, this was not a case about the scope of the warranty, but
merely whether reliance was a necessary element to allege and prove in a cause of
action based upon an expressly incorporated warranty.
In deciding the case, the Court of Appeals conceptualized the warranty as a
promise to indemnify if a fact turns out to be untrue,32 relying upon the federal court
judgment of Ainger v. Michigan Gen. Corp.33 and Judge Learned Hand’s opinion
in Metropolitan Coal Co. v. Howard34 wherein he had stated that warranty is “[a]n
assurance by one party to a contract of the existence of a fact upon which the other
party may rely. It is intended precisely to relieve the promisee of any duty to ascer-
tain the fact for himself; it amounts to a promise to indemnify the promisee for any
loss if the fact warranted proves untrue, for obviously the promisor cannot control
what is already in the past.”

28
Crocker Wheeler Electric Co. v. Johns-Pratt Co., 29 A.D. 300 (N.Y. App. Div. 1898),).
29
CBS (n 2, [452]-[454]).
30
Ibid. at 452.
31
Ibid.
32
CBS, (n 2, 452) (citing Metropolitan Coal Co. v. Howard, 155 F.2d [780], [784]).
33
Ainger v. Michigan Gen. Corp., 476 F.Supp. [1209], [1225] (S.D.N.Y. 1979).
34
Metropolitan Coal, 155 F.2d [784].

13
Construing the Written Warranty 371

Thus, the court rejected the seller’s defense based upon the buyer’s knowledge of
falsity, stating:
The critical question is not whether the buyer believed in the truth of the war-
ranted information, as Ziff-Davis would have it, but “whether [it] believed [it]
was purchasing the [seller’s] promise [as to its truth].”… This view of “reli-
ance” – i.e., as requiring no more than reliance on the express warranty as
being a part of the bargain between the parties – reflects the prevailing per-
ception of an action for breach of express warranty as one that is no longer
grounded in tort, but essentially in contract.35
The right to indemnification in this regard is only dependent on establishing that
the breach of warranty has occurred and is not affected if the truth of such assur-
ances of fact was not in fact believed, or should not have been believed.36 Despite
asserting that the warranty is a creature of contract, the court, rather unfortunately,
went on to state that “[w]e do not hold that no reliance is required, but that the
required reliance is established if, as here, the express warranties are bargained-for
terms of the seller.”37 Such a statement is unclear – is reliance conclusively estab-
lished where the warranty is a bargained-for term, or only presumptively? If the
required reliance is conclusively established where there is a written warranty, then
such a warranty is essentially an exception to the reliance requirement. It would be
more accurate, then, to simply state that where the warranty is expressly incorpo-
rated in the written agreement, then it is just as any other term of the contract and
reliance is unnecessary. This was Judge Learned Hand’s point in Metropolitan Coal
Co. v. Howard, cited approvingly by the CBS court, when he rejected the defend-
ant’s argument that they were discharged of any liability for breach of warranty due
to the alleged negligence of the plaintiff to discover the falsity of the affirmation,
by forcefully stating that because a warranty is a promise to indemnify, “[t]o argue
that the promisee is responsible for failing independently to confirm [the truth of the
warranty], is utterly to misconceive its office.”38 If on the other hand, the required
reliance is only prima facie established where there is a written warranty, then such
a showing could be overcome with proof that the buyer did not in fact rely upon the
warranty – akin to Williston’s separate approach to unincorporated warranties that
were not written down.
Even more curiously, the contract in CBS contained what would today be called
a “pro-sandbagging” clause, which provided that the “representations and warran-
ties…shall survive the closing, notwithstanding any investigation made by or on
behalf of the other party.”39 If the warranty is just like any other term of the con-
tract, then it is subject to the other terms of the contract, and by the terms of this
particular agreement the buyer’s investigation (post-contract but pre-closing) should

35
CBS (n 2, [452]-[453]) (citing Ainger, 476 F.Supp. at 1225) (emphasis supplied).
36
Ibid. [453].
37
CBS (n 2, [457]).
38
Metropolitan Coal, 155 F.2d [784]; see also Ainger, 476 F.Supp. [1224]-[1225].
39
CBS (n 2, [451]) (emphasis added).

13
372 M. Kumar, N. Pant

not make any difference to the seller’s liability. This was not lost upon the dissenting
judge, who pointedly remarked that even the majority did not appear to consider the
implications of the non-merger survival clause in the contract, because they must
have recognized that “[i]f this issue were dispositive, it would render the case and
the contract entirely sui generis and there would be no need to address or alter the
long-standing test with its reliance element.”40
Therefore, despite the CBS majority’s attempt to assert that a warranty was a con-
tractual term, they diluted the force of their own opinion by continuing to play coy
with the requirement of reliance. It is worth repeating that even Williston appre-
ciated that a written warranty, expressly incorporated in the contract, is properly
subject to the construction approach to give effect to the parties’ intent as to the
scope and effect of the warranty. Reliance has no role to play here. This ambiva-
lent approach has created more confusion in subsequent Second Circuit federal court
decisions, where a truly sui generis test based upon the buyer’s source of knowledge
has been created.
In Galli v Metz,41 the Second Circuit Court of Appeals was faced with a case
concerning a stock purchase agreement containing a written warranty that the sell-
ers were not aware of any facts, in relation to the company’s properties, which might
give rise to a claim.42 Later on, one of the properties became the subject of litigation
and the buyers sued for breach of warranty. The district court rejected the breach
of warranty claim on the ground that the buyers discovered the truth prior to enter-
ing into the agreement.43 On appeal, the buyers argued that their knowledge was of
no significance since, under New York law post-CBS, reliance is not required in a
breach of warranty claim.44
The Second Circuit failed to evaluate what the parties’ may have intended by the
warranty, and whether it was intended to cover that particular claim, in light of the
text of the contract and context of the buyer’s knowledge at the time of contract for-
mation. Instead, the Galli court understood the CBS judgment to apply only where
the buyer had expressly reserved its rights, whereas in the absence of such a reser-
vation a buyer can be deemed to have “waived the breach”.45 While waiver is the
appropriate doctrine to evaluate post-contract discoveries, such as was the case in
CBS, it is inappropriate for pre-contractual discoveries, which was what the Second
Circuit was faced with in Galli (Kwestel, 2002: 575–76), because a waiver can only
occur after a contract is formed, and never before.46 However, the court went on to
use the language of waiver within the context of pre-contractual knowledge and sug-
gested a new set of inferences around the source of the buyer’s knowledge. Accord-
ing to the Galli court, if a third person discloses the problems to the buyer or if it is

40
CBS (n 2 [455]).
41
Galli v. Metz, 973 F.2d 145, 151 (2d Cir. 1992).
42
Ibid. [150].
43
Ibid.
44
Ibid. [150].
45
Ibid. [151].
46
See e.g. Coniber v. Center Point Transfer Station, Inc. 137 A.D.3d 1604, 1606 (N.Y. App. Div.) (stat-
ing the familiar definition of waiver as “the voluntary and intentional relinquishment of a contract right”).

13
Construing the Written Warranty 373

common knowledge, then the buyers “would have a strong argument” that they had
purchased the warranty “as insurance against any future claims.”47 If, on the other
hand, the sellers disclosed the problem to the buyers, then the sellers “would have
a strong argument” that the buyers had waived their rights by failing to expressly
reserve them as the CBS buyer had done.48 Since the trial court had not made any
finding regarding the source of the buyers’ knowledge, the case was remanded.49
Post-Galli, this odd rationale based on the buyer’s source of knowledge seems to be
accepted by New York courts,50 and even converted from “strong arguments” (set-
ting up presumptions perhaps) into a rule.51
It is somewhat difficult to follow the Second Circuit’s logic. Why cannot one argue,
for example, that the parties intended the warranty as a promise to indemnify precisely
because the seller explicitly disclosed the falsity to the buyer before entering into the
contract (Kwestel, 2002: 576–78). If both parties knew the falsity of the fact and yet
the buyer agreed to enter the contract with the false warranty, it could be argued that
the parties actually intended the warranty to act as a promise to indemnify – especially,
for example, if an acquisition agreement contains an indemnity clause to cover false
warranties, as is a prevalent practice in New York (Serfilippi, 2012). At the very least,
this is an exercise in contract construction which belies any hard rules. This approach
of the Second Circuit led Sydney Kwestel to conclude that the Galli judgment, and
its immediate progeny, Rogath v. Siebanmann,52 “injected confusion in the contract
approach.” (Kwestel, 2002: 559). The authors agree with this assessment and would
add that it seems unlikely that the Second Circuit would have developed this line of
reasoning if the CBS court had simply engaged in a full-throated contract construction
approach, as was fully justified because it did not involve a sale of goods.
In contrast, Delaware courts appear to follow a more readily recognizable con-
tract approach although the Delaware Supreme Court has yet to rule on the matter,
causing that court to remark, in passing, that the issue was as of yet unsettled in
Delaware. Interestingly, Valihura J. while referred to CBS as representing the “pre-
vailing perception” of a breach of warranty claim sounding in contract and noted
that on this debate about the role of reliance, “we have not yet resolved this interest-
ing question.53

47
Galli, (n 43 [151]).
48
Ibid.
49
Ibid.
50
Rogath v. Siebenmann, 129 F.3d 261, [265] (2d Cir.1997) (“a court must evaluate both the extent and
the source of the buyer’s knowledge about the truth of what the seller is warranting”); see also Promuto
v. Waste Mgmt., Inc., 44 F. Supp. 2d 628, 648 (S.D.N.Y. 1999); Gusmao v. GMT Grp., Inc., No., 2008
WL 2,980,039, [13]-[14] (S.D.N.Y 2008); Powers v. Stanley Black & Decker, Inc., 137 F. Supp. 3d 358,
[374]-[75] (S.D.N.Y. 2015).
51
Rogath (n 52, [266]) (holding that because the buyer did not expressly preserve his right to bring a
warranty claim, the only relevant factual inquiry was what the seller disclosed to the buyer, and other
sources of information were “immaterial”).
52
Ibid [261].
53
Eagle Force (n 1).

13
374 M. Kumar, N. Pant

Delaware

While New York was trying to untangle the warranty from tort elements, Delaware
courts were a little slower. In the Delaware warranty landscape, district courts had
found that reliance needed to be proved in a breach of warranty claim, and the CBS
decision of the NY court was inapplicable and contrary to the “majority rule”.54
The traditional rule in Delaware was that the “plaintiff must have known about the
warranty and have relied upon it.”55 However, in Vigortone AG Products, Inc. v. PM
AG Products, Inc.,56 Circuit Judge Posner cast the proper law as one negating any
requirement of reliance because the warranty is “a kind of insurance”, and included
within his references Judge Hand’s opinion in Metropolitan Coal.57 Faced with con-
trary state court judgments, Judge Posner observed that none were from the Dela-
ware Supreme Court:58
The fons et origo of Delaware’s unorthodox position is an old case called
Loper v. Lingo, 97 A. 585, 586 (Del.Super.1916), decided at a time when
breach of warranty was considered a tort, not, as in the modern cases, a breach
of contract. The repetition of Loper in later cases, none by Delaware’s highest
court, has been, we suggest with all due respect, unthinking. We greatly doubt
that Delaware’s highest court would follow Loper today.
And soon after, Delaware state courts started recasting the warranty as a crea-
ture of contract, to the immense benefit of the jurisprudence regarding the writ-
ten warranty, which has been decisively set apart from any reliance requirement.
In Gloucester Holding Corp. v. U.S. Tape & Sticky Products where the contract
also provided that the sellers would indemnify the buyers if there was a breach of
warranty, the court merely observed that “[r]eliance is not an element of claim for
indemnification.”59 Apart from that, in Interim Healthcare, Inc. v. Spherion Corp.,60
within the context of a buyer’s pre-contractual due diligence, where the seller argued
that the due diligence should have uncovered the falsity of the warranty, the Dela-
ware Superior Court stated simply that the “[t]o the extent [the seller] warranted a
fact or circumstance to be true in the Agreement, plaintiffs were entitled to rely upon

54
The Middleby Corp. v. Hussman Corp., 1992 WL 220,922, at *6; see also Kelly v. McKesson HBOC,
Inc., 2002 WL 88,939, at *8–9 (Del. Super. 2002).
55
Bleacher v. Bristol-Myers Co., 163 A.2d 526, 528 (Del. Super. 1960) (citing Loper v. Lingo, 97
A. 585 (Del. Super. 1916)). Although, it should be noted that the Loper case is not a case addressing
whether reliance is a necessary element in an express, incorporated warranty. The Delaware Superior
Court merely noted that “…it is a general rule of law that if the buyer relies on his own judgment and
observation, and deals on the strength and basis of his own opinion, there is no warranty.” Loper, 97 A.
585 at 586.
56
316 F.3d 641, 649 (7th Cir. 2002).
57
Ibid. [648].
58
Ibid. [649].
59
Gloucester Holding Corp. v. U.S. Tape & Sticky Products, 832 A.2d 116, 127 (Del. Ch. 2003).
60
884 A.2d 513 (Del. Super. 2005).

13
Construing the Written Warranty 375

the accuracy of the representation irregardless [sic] of what their due diligence may
have or should have revealed.’61
In Cobalt Operating, LLC v. James Crystal Enterprises, LLC,62 a dispute arose
out of the sale of a radio station. Prior to entering into the agreement, the seller had
repeatedly affirmed to the buyer that its annual cash flow would be approximately $5
million, based upon which the purchase price was calculated.63 The agreement also
contained a representation and warranty to the effect that all of the seller’s financial
statements previously provided “fairly and accurately reflected” the financial health
of the radio station.64 Although, the buyer’s accountant discovered that there were
some discrepancies in the radio station’s billing practices pre-closing, and concluded
that its internal controls were weak, due to the seller’s active suppression of neces-
sary information and deceit, the accountant was unable to reach an adverse conclu-
sion, and the deal closed.65 When the fraud came to light, the buyer sued the seller
for breach of warranty, among other grounds.
The seller argued that the buyer’s breach of warranty claim failed due to fail-
ure to prove justifiable reliance, either on the basis that it had discovered the billing
discrepancies, or that the due diligence should have uncovered the falsity.66 Vice
Chancellor Strine was unimpressed by the defense, stating that justifiable reliance
does not need to be proved where there was an “express and unqualified representa-
tion” in the Agreement itself.67 He further remarked that such representations and
warranties have great significance as a “risk allocation function”, obviating the need
for proof of justifiable reliance.68 Lastly, evaluating the contract as a whole, he noted
that there was a “pro-sandbagging” clause69—clauses that do not preclude the buyer
from bringing a breach of warranty claim despite having knowledge of the falsity are
referred to as “pro-sandbagging” clauses, while those that do preclude such a claim
are “anti-sandbagging” clauses. Vice Chancellor Strine concluded that the presence
of such a “pro-sandbagging clause” bolstered the conclusion that the parties’ intent
was that the buyer’s knowledge should play no role in the bargain. In his words,
“Having contractually promised Cobalt that it could rely on certain representations,
Crystal is in no position to contend that Cobalt was unreasonable in relying on Crys-
tal’s own binding words.”70

61
Ibid. [548].
62
Cobalt Operating, LLC v. James Crystal Enters., LLC, 2007 WL 2,142,926 (Del. Ch. 2007).
63
Ibid. [6]-[7].
64
Ibid. [8].
65
Ibid. [8], [16]-[17].
66
Ibid. [27] – [28].
67
Ibid. (distinguishing Homan v. Turoczy, 2005 WL 2,000,756 (Del. Ch. 2005), where the question of
justifiable reliance was considered in a claim to recover under fraud or equitable fraud).
68
Ibid [28].
69
Ibid. (“No inspection or investigation made by or on behalf of [Cobalt] or [Cobalt’s] failure to make
any inspection or investigation shall affect [Crystal’s] representations, warranties, and covenants hereun-
der or be deemed to constitute a waiver of any of those representations, warranties, or covenants.”).
70
Cobalt (n 64, [28]).

13
376 M. Kumar, N. Pant

Vice Chancellor Strine’s holding is very interesting as one can take away sev-
eral key points regarding his approach — (1) an express, incorporated warranty sim-
ply cannot be defeated by arguments of reliance; (2) such a warranty is a crucial
aspect of the parties’ bargain, explicitly allocating the risk associated with falsity
upon the warrantor; and (3) such a warranty is interpreted using a contract construc-
tion approach, within the context of the entire contract. This is a more full-bodied
embrace of the warranty-as-contract than the CBS decision. It is unsurprising then,
that to some, Delaware became an established “pro-sandbagging” jurisdiction.71
This reputation seemed settled until 2018, however, when the Supreme Court of
Delaware’s Eagle Force judgment included a footnote that stated the issue about the
role of reliance in a warranty claim was unsettled in the state.72 It is interesting to
note that no reference is made to the Delaware lower courts’ decision and instead the
only reference is made to CBS as an example of the “prevailing perception” of the
warranty sounding in contract.73 Could this mean that the Delaware Supreme Court
would follow CBS, and will it adopt or ignore its troublesome progeny with their
test based upon the source of knowledge? (Cleary, 2019: 844–45; Kimball, 2021:
578–79). The authors are of the opinion that this would be a legally unsound out-
come. Instead, the Court should solidify the written warranty as a creature of con-
tract, subject to the general principles of contract construction – an approach sug-
gested by Williston over a century ago. This should be a relatively simple exercise,
especially in cases which do not concern sales of goods and, thus, do not invite the
application of Article 2 of the UCC and its troublesome language.
At this point, it is worthwhile to turn one’s eye across the Atlantic to the UK,
which provides an interesting comparison with a jurisdiction that has been more
successful in recasting the warranty as a pure creature of contract through the twen-
tieth century. There are some interesting insights for jurisdictions in the US. For
example, in the UK, the language of inducement and reliance seems not to invite a
tort-like analysis where reliance is a necessary element of the plaintiff’s burden of
proof, but rather is a consideration for determining whether there was a contractual
intent to warrant. This simply re-emphasizes the observation that there is nothing
inherent in the warranty that makes it a creature of contract or tort. There are also
some cautionary lessons, especially within the context of the current debates in the
UK High Court of ascribing too much importance to the words “represents” and
“warrants” in contracts.

71
NASDI Holdings v. N. Am. Leasing, No. 10540-VCL, slip. op. at 57 (Del. Ch. Oct. 23, 2015). (“Dela-
ware is what is affectionately known as a ‘sandbagging’ state.” (Vice Chancellor Laster)).
72
Eagle Force (n 1).
73
Ibid.

13
Construing the Written Warranty 377

The Development of the Warranty in the UK

The Warranty as a Collateral Contract

In the early twentieth century, shortly after Williston had drafted the Uniform Sales
Act, in the UK the House of Lords forcibly severed the warranty’s connection with
tort law. In Heilbut, Symons & Co. v. Buckleton,74 the House of Lords held that an
unincorporated warranty, i.e., a warranty that is not written down in the contract, is
actually a collateral contract to the main contract, thus requiring proof of an intent
to enter into legal relations.75 In Heilbut, the plaintiff, Mr. Buckleton, bought some
shares of a rubber company that the defendant was incorporating after asking the
defendant’s manager if the defendant was bringing out a rubber company, to which
the manager responded in the affirmative.76 Unfortunately, a large number of the
rubber trees, which constituted the foundation of the rubber company’s business,
were damaged and the share prices plummeted down to a negligible value.77 The
plaintiff sued for breach of an alleged warranty that the company was in the business
of producing rubber.78
Despite concluding that the manager’s response to the plaintiff’s question was a
statement of fact (that the company was a rubber company) that induced the plaintiff
to buy the shares, the House of Lords held that the evidence did not demonstrate that
the parties had entered into a collateral contract of warranty – a contract for which
the consideration is the act of entering into another contract.79 By thus characteriz-
ing the warranty as a collateral contract, the House of Lords now imposed upon the
warranty a requirement of intent to enter into a contract. Therefore, the standard by
which a party’s statements would be adjudged thereafter would no longer be as to
whether a fact was communicated which was of such a nature that a reasonable per-
son would have been induced into the contract, undoubtedly the situation Mr. Buck-
leton found himself in. Instead, now the question was whether the party making the
warranty intended for it to be a contractual obligation.
The House of Lords reached this conclusion by relying upon the early cases of
Cross v. Gardner and Medina v. Stoughton, which did not mention any requirement
of an intent to enter into a contract or an intent to provide a warranty.80 This was
a departure from the historical approach, and has been described as a “gloss” of
intent, derived from an incorrect reading of Pasley v. Freeman (Atiyah, 1971: 349).

74
[1913] A.C. 30.
75
Ibid. [36–37] (Lord Haldane); Ibid. [44] (Lord Atkinson); Ibid. [47] (Lord Moulton).
76
Ibid.
77
Ibid [33].
78
Ibid [31].
79
Ibid [36–37] (even though the defendant’s manager’s statement was one of fact, and it induced the
plaintiff to buy the shares, there was no collateral contract) (Viscount Haldane); Id. [44] (the statement
was an “assurance” as opposed to the collateral contract of warranty) (Lord Atkinson); Id. [48] (the state-
ment of fact induced the plaintiff to buy shares but there was no evidence of any “animus contrahendi
other than as regards the main contracts”) (Lord Moulton).
80
See discussion supra notes 12–18.

13
378 M. Kumar, N. Pant

The court also summarily rejected the well-regarded treatise of Benjamin on Sale,
which had been relied upon by the lower English court in De Lassalle v. Guildford.81
It may come as no surprise then that the decision has been criticized by scholars
who observed that the Heilbut judgment’s reading of Lord Holt’s historical judg-
ments was inaccurate as “[i]t has often been pointed out that Lord Holt never said
anything of the kind…” (Atiyah, 1971: 348). Even Williston expressed surprise at
such disregard to a venerable text, and suggested that it was perhaps not adequately
brought to the attention of the House of Lords (Williston, 1913: 101).
However, the House of Lords was commendably forthright in its motivation for
making a clean break between the warranty and tort law. As per Lord Moulton’s
impassioned exhortation, it was imperative to ensure that a claim for innocent mis-
representation would not render the speaker liable for damages, by simply recasting
the representation as a warranty: “[i]t is, my Lords, of the greatest importance, in
my opinion, that this House should maintain in its full integrity the principle that a
person is not liable in damages for an innocent misrepresentation, no matter in what
way or under what form the attack is made.”82 Therefore, the new intent to warrant
seems to have been a jurisprudential innovation spurred by a practical necessity.
Somewhat more intriguingly, Lord Moulton did not spurn the role of factors such
as whether the buyer was ignorant of a fact that the seller asserted, or whether it
could be assumed that the fact was of such a nature that the buyer could have been
expected to exercise his own judgment – factors discussed solely within the frame-
work of ‘reliance’ in the US. Instead, Lord Moulton held such factors could be valu-
able in deciding whether a warranty was intended, when looking at the totality of
the evidence.83
With the highest court of the land having spoken, English jurisprudence seems to
have largely toed the line, without the kind of agonized discussions about the war-
ranty’s tortious roots that were taking place in the US. For instance, in the English
jurisprudence, the scholars while discussing when a statement of fact is a term of
the contract, i.e. a warranty, describe it rather splendidly as an act of “contractual
cartography” (Furmston, 2017: 177–83), and similarly discuss terms of contracts as
warranties, within the context of statements of fact (Beatson et. al. 2016: 141–46).
Further, in a line of subsequent decisions by the UK Court of Appeal, a lower court
than the House of Lords, provided some very interesting judgments that demonstrate
the role inducement could play in a contractual analysis.
In Oscar Chess Ltd. v. Williams,84 the seller sold his car to a car dealership. As it
turned out, the car registration book had the wrong model details due to no wrong-
doing by the seller but some prior owner.85 The dealership-buyer brought a claim
against the seller for breach of warranty. The UK Court of Appeal held that the
seller had not provided any warranty as to the model of the car. In his opinion, Lord

81
[1901] 2 KB 215.
82
Heilbut, [1913] A.C. [51] (Lord Moulton).
83
Heilbut, [1913] A.C. [50–51] (Lord Moulton).
84
[1957] 1 W.L.R. 370.
85
Ibid. [374].

13
Construing the Written Warranty 379

Denning started by noting that a warranty “…denote[s] a binding promise,” and that
when warranting a fact, the speaker is saying “I guarantee it” or “I give you my word
on it.”86 He also stated that this has been the “meaning it has borne in English law
for 300 years from the leading case of Chandelor v. Lopus onwards.”87 Therefore,
he reasoned that in order to ascertain whether a warranty had in fact been made,
the final analysis was one that required an evaluation of the totality of the circum-
stances to determine the parties’ intention, as adjudged by the objective standard of
what an intelligent bystander would have understood the parties’ words and conduct
to communicate.88 Such intention could be more readily inferred where the seller
made a statement of fact of which the buyer was ignorant “intending that the buyer
should act on it.”89 Finding that there was no evidence to suggest that the seller had
intended to give a warranty as to the model of the car, Lord Denning was of the
opinion that an intelligent bystander would have understood the seller as simply pro-
viding a statement as to his belief of the model of the car, and the registration book
to demonstrate why he reached that conclusion.90 In his concurring opinion, Lord
Hodson went further to explicitly note that the buyer was a specialist and “might
be expected also to have an opinion and to exercise his judgment,”91 just as had
been suggested as a relevant factor to consider by Lord Moulton in Heilbut. Thus, in
Oscar Chess, whether or not the buyer had specialized knowledge, such that it could
be held to not have justifiably relied (even though it in fact so relied) upon the state-
ment, was a relevant criterion to ascertain whether or not the seller intended to make
the fact a binding promise, i.e. a warranty.
While there are criticisms of Oscar Chess (Daly, 1957: 411–12, Furmston, 2017:
181), the UK Court of Appeal continued in this vein with their unanimous decision
in Dick Bentley Productions Ltd. v. Harold Smith (Motors) Ltd.92 Here, the facts
mirrored Oscar Chess – the seller was the expert dealer and the buyer a non-expert
customer who was told, based upon the speedometer, that the mileage on a used
car was 20,000. In fact, it appears that the odometer had been tampered with by a
previous owner and that the actual mileage was closer to 100,000. The seller was at
no fault. However, here Lord Denning concluded here that an intelligent bystander
would have understood the seller to have intended to make a warranty as to the mile-
age. As he explained:
Looking at the cases once more, as we have done so often, it seems to me
that if a representation is made in the course of dealings for a contract for the

86
Ibid. [374].
87
Ibid. He was perhaps being overly enthusiastic in his statement that the warranty denoted a “binding
promise” for that length of time, however, at the time of the Oscar Chess decision, in the mid-twentieth
century, it was certainly fair to characterize a warranty in England as one that was commonly understood
to mean a contractual promise.
88
Ibid. [375] (citing Lord Moulton’s opinion in Heilbut).
89
Ibid.
90
Ibid. [376].
91
Ibid. [378].
92
[1965] 1 W.L.R. 623.

13
380 M. Kumar, N. Pant

very purpose of inducing the other party to act upon it, and actually inducing
him to act upon it, by entering into the contract, that is prima facie ground for
inferring that it was intended as a warranty. It is not necessary to speak of it
as being collateral. Suffice it that it was intended to be acted upon and was in
fact acted on. But the maker of the representation can rebut this inference if
he can show that it really was an innocent misrepresentation, in that he was in
fact innocent of fault in making it, and that it would not be reasonable in the
circumstances for him to be bound by it.93
The crucial difference then, between this case and Oscar Chess, was that here
the seller was an expert who made the statement of fact who knew, or should have
known, that the buyer, as a reasonable layperson, would rely upon its statement.
In other words, in Dick Bentley the buyer justifiably relied upon seller’s statement.
In Oscar Chess, however, the buyer was the expert and was acting unreasonably
in relying upon a layperson’s statement without verification.94 (Peel, 2012: para.
9–049).
Significantly, in this line of cases, the inquiry into the reasonableness of the buy-
er’s action does not yield a tort-related conclusion, it informs an inquiry into the
objective intention of the parties. Prioritizing the objective manifestation of intent, if
a buyer could have reasonably understood the seller as having the intent to warrant,
then the seller has to show that the buyer actually knew that the seller did not have
such intent. As written in the introductory paragraphs of a venerable English treatise
on the law of contracts:
Considerable uncertainty would result if A, after inducing B reasonably
to believe that he (A) had agreed to certain terms, could then escape liabil-
ity merely by showing that he had no ‘real intention’ to enter into that agree-
ment…[but] A is not bound merely because ‘a reasonable man would believe
that he was assenting to the terms proposed by the other party’. In particular,
there will be no contract if (in spite of the objective appearance of agreement)
B actually knows that A in fact has no intention to contract with him (Peel,
2012: para 1–002).
This is also the approach of the Restatement (Second) of Contracts,95 and the
dominant approach in the common law. (Perillo, 2000) And so, the uncommunicated
subjective intent of a party is subordinated to the objective manifestations of intent,
as is so vividly demonstrated in the law school favorite, Lucy v. Zehmer.96
What these UK cases demonstrate, briefly, is that it is perfectly consonant with
a purely contractual approach to consider the parties’ conduct, including the buy-
er’s reliance (or lack thereof), within the totality of the circumstances in order to

93
Ibid. [627–28] (emphasis supplied).
94
Edwin Peel, Treitel on the Law of Contract para. 9–049 (1st South Asian ed. 2012).
95
Restatement (Second) of Contracts, § 201; see also generally, §§ 18–23 and §§ 200, 202–204.
96
196 Va. 493, 503 (Va., 1954).

13
Construing the Written Warranty 381

ascertain, using an objective approach, whether the seller intended to make a war-
ranty.97 And so, in the UK, if a person makes a statement of fact, it would not con-
stitute a warranty if the speaker expressly asks the other party to conduct their own
investigation, or the other party is reasonably expected to conduct their own investi-
gation (Peel, 2012: para 9–047). Therefore, if US courts wished to break away from
the reliance requirement in non-sales (of goods) transactions, they could re-purpose
the reliance element from a standalone pleading requirement, rooted in tort law, into
one possible relevant criterion in the totality of circumstances to ascertain the par-
ties’ contractual intent.

The Buyer’s Knowledge in a Contract Construction Approach

Following from the above discussion regarding the general approach of UK courts to
unincorporated warranties, it is evident that in the UK, courts view the question of
whether a statement of fact that is incorporated in a written agreement is a warranty
or a mere representation is one of contract construction. (Peel, 2012: para 9–046) As
such, the courts apply the same framework to written contracts which contain “pro-
sandbagging” or “anti-sandbagging” clauses.
In Eurocopy Plc v. Teesdale,98 the plaintiff entered into a share purchase agree-
ment with the defendants, whereby they purchased the defendants’ company. The
warranties stated that the defendants had “fairly disclosed” all “material facts or
circumstances in relation to the assets, liabilities, obligations, business or financial
condition of the Company.”99 The contract also had a “pro-sandbagging” clause,
protecting the plaintiff from any knowledge that it may have regarding the com-
pany and preserving its right to enforce the contractual warranties.100 The plaintiff
alleged that the defendants had breached their warranty with respect to the service
and maintenance contracts on certain machinery.101 The defendants countered that
the plaintiff had actual knowledge of the facts before they entered into the contract,
and thus these particular facts were not “material”, the plaintiff was precluded from
bringing an action for breach of warranty, and the plaintiff had not suffered any loss
caused by the non-disclosure.102 The plaintiff brought a motion to strike out these
parts of the defense.103
The UK Court of Appeal was persuaded that there could be various interpreta-
tions of the contract, that deserved to be argued, and not struck out, including that
the “clauses are no more than representations which cannot be enforced without

97
The artifice of the collateral contract has also been used to avoid the strict application of the parol evi-
dence rule, which may otherwise prevent the consideration of extrinsic evidence, even if in writing, when
a contract has subsequently been reduced to writing. For an excellent discussion of the UK jurisprudence
in this regard, see K.W. Wedderburn, Collateral Contracts, 17(1) Cambridge L. J. 58 (1959).
98
[1992] WL 895,057.
99
Ibid. [1].
100
Ibid. [2].
101
Ibid. [3].
102
Ibid. [2–4].
103
Ibid. [1].

13
382 M. Kumar, N. Pant

reliance and not promises to be enforced per se.”104 The court reasoned that, upon
a fair construction of the contract, it could also be found that the specific facts were
not material and, therefore, also not covered by the language of the “pro-sandbag-
ging” clause.105 And finally, the court held that even if there was a breach of war-
ranty, an objective assessment of the loss caused may result in a valuer taking the
buyer’s knowledge into account at the time of agreeing to the price of shares, as a
relevant factor in ascertaining the fair market value of the shares.106
The fact that the Eurocopy court left open the possibility that a buyer’s knowl-
edge of facts may be relevant to defeat breach of warranty claims, even in the face
of a “pro-sandbagging” clause, created some ripples of alarm, with some drafters
suggesting that the UK should be treated as a possible “anti-sandbagging” jurisdic-
tion. (Ferera et. al, 2007, Willcocks et. al, 2021, Horne, et. al, 2019) However, the
authors suggest that this is to misunderstand the rationale behind the court’s judg-
ment, which was to point out the possibilities that construing the contractual lan-
guage as a whole, could yield, and then leave it to be argued at trial. The knowledge
of the buyer does not have to be cast as an absolute defense, reminiscent of the tort
claim of misrepresentation; it is also relevant to determining the proper meaning to
be assigned to the contract. This was the reason that the court held that the “pro-
sandbagging” clause does not “plainly and obviously” prevent the defendants from
arguing the relevance of the plaintiff’s knowledge.107
In Infiniteland Ltd. v. Artisan Contracting Ltd., the UK Court of Appeal has also
upheld the enforcement of certain “anti-sandbagging” clauses, which provide that
if a party’s due diligence uncovers the falsity of certain facts and closes the deal,
then it cannot claim breach of warranty in relation to those facts.108 Here, the dis-
cussion does not throw any light on the question of whether the buyer’s knowledge
affects the construction of the warranty. Instead, such a clause deals with the ques-
tion of waiver, simply delineating in what circumstances waiver will operate. An
“anti-sandbagging” clause that states that the warranty provided does not cover facts
within the buyer’s knowledge acquired before entering into the contract, would be
one that could be used to construe the language of the warranty itself.
However, it seems that, in Infiniteland, at the lower court an argument was raised
that the plaintiff’s knowledge was an “overriding answer” to the breach of warranty
claim, to which the judge simply responded, “I do not agree with this particular
answer.”109 The arguments in front of the lower court rested upon nineteenth century
cases, with Park J. taking special note of Lord Chief Justice Tindal’s observation
that a person who buys a blind horse, knowing it to be blind, cannot sue on a war-
ranty of soundness.110 However, held the judge, there was contradictory authority

104
Ibid. [2–3] (citing the lower court judge’s opinion) (emphasis supplied).
105
Ibid. [3] (Lord Nourse).
106
Ibid. [4] (Lord Nourse); ibid [5] (Lord Lloyd).
107
Ibid. [4–5].
108
Infiniteland Ltd. v. Artisan Contracting Ltd., [2005] EWCA Civ 758.
109
Infiniteland Ltd. v. Artisan Contracting Ltd., [2004] EWHC 955 (Ch) [113].
110
Margetson v. Wright, (1831) 7 Bing. [603] – [605].

13
Construing the Written Warranty 383

and such an observation was not appropriate in the context of a twenty-first cen-
tury deal involving many companies, with sophisticated parties and solicitors engag-
ing in a rigorous negotiation before entering into the contract.111 Of course, Samuel
Williston had a simple answer to this argument – the inability to argue that patent
blindness was covered by a warranty of soundness was a result of contract construc-
tion, whereby the parties’ would not be held to have intended a patent defect to be
covered within the language of the warranty. Unfortunately, this aspect of the lower
court decision was simply not engaged with at the appellate level.
These cases demonstrate that the UK Court of Appeals’ focus remains upon the
terms of the contract in order to ascertain the parties’ intention, as opposed to the
nature of the warranty and claims based upon them. Therefore, the most that one
should conclude from Eurocopy, and to some extent Infiniteland, is that the war-
rantee’s actual knowledge may be relevant to interpret the contract terms and set
up defenses, like waiver, and not as an indication of reliance being an element in a
breach of warranty claim.
However, there is a growing trend in the lower courts of the UK to ascribe tech-
nical meanings to the words “represents” and “warrants” as used in contracts. The
UK High Court has attempted to cast these words as communicating legally techni-
cal meanings that work as a matter of principle. This rather rigid approach seems
to undercut the contract construction approach and is deserving of some attention
here as some US commentators have been observing this trend as potentially use-
ful in domestic debates. (West, 2016, West, 2014: 1058 fn. 47, Serfilippi) While
there is nothing inherently incorrect in drafters using the words in specific ways as
long as they consistently and clearly state their intention in doing so in their con-
tracts,112 there is a danger if courts start viewing these words as having such techni-
cal meaning by their very nature, as it eschews any meaningful exercise to ascertain
the parties’ intention. A brief primer of these developments and the authors’ critique
follows.

Construing the Express Warranty Incorporated in a Written Agreement

The twentieth century has calcified the contract nature of a warranty in the UK. The
urgency of creating distinctions between innocent misrepresentations and warran-
ties has also abated to a degree with the enactment of the UK Misrepresentation
Act, 1967, which confers discretion upon courts to grant damages to the victim of
an innocent misrepresentation if “it would be equitable to do so”.113 However, even
after the Misrepresentation Act, maintaining the dividing line between the innocent
misrepresentation and the warranty remains significant, because the act only allows

111
Infiniteland (n 110, [115]).
112
For debates on drafting practices, see Kenneth A. Adams, Eliminating the Phrase Represents and
Warrants from Contracts, 16 Tenn. J. Bus. L. 203 (2015); see also, Tina Stark, Nonbinding Opinion:
Another View on Reps and Warranties, Business Law Today, Volume 15, Issue 3 (January/February
2006), https://​papers.​ssrn.​com/​sol3/​papers.​cfm?​abstr​act_​id=​18863​57.
113
UK Misrepresentation Act 1967, § 2(2).

13
384 M. Kumar, N. Pant

damages for some types of innocent misrepresentation,114 and provides for a differ-
ent measure of damages than the contract-measure that a breach of warranty claim
would provide (Peel, 2012: paras. 9–059 – 9–060, para 9–071; Furmston, 2017:
378–80). Therefore, the distinction maintains its legal salience and to exclude any
possible liability for innocent misrepresentation under the Misrepresentation Act,
UK commentators suggest that drafters should excise the language of “represents”
and only include language of warranty, i.e., “warrants”, in their contracts (Ferera
et. al., 2007; Adams, 2007). However, this legal framework has raised the question
as to whether a party’s warranty contains within itself a representation. This is an
intriguing inversion of the usual debate that has prevailed thus far, i.e. whether the
representation also amounts to a warranty. As noted by Atiyah, the question asked
by courts was, at least in the twentieth century, “whether the representation is a war-
ranty.” (Atiyah, 1971:348). Interestingly, the question in this line of cases is whether
the warranty is also a representation. So far, the UK High Court, which is a court of
first instance, has been the most active in reviewing this issue. The competing posi-
tions are best represented by the cases of Invertec Ltd. v. De Mol Holding BV115 and
Sycamore Bidco Ltd. v. Breslin,116 with the latter exemplifying the prevailing judi-
cial sentiment, as clarified by Idemitsu Kosan Co. Ltd. v. Sumitomo Corp.117
Invertec involved a dispute based on a share purchase agreement which contained
warranties, making no mention of any representations. However, the plaintiff alleged
various fraudulent misrepresentations by the defendants, which it argued formed the
basis for the contractual warranties.118 Arnold J. held that the representations were
contained within the warranties because the information contained was supplied by
the defendant to the plaintiff during the negotiations over a significant period of time
and the plaintiff entered into the contract based upon the drafts that contained those
statements, albeit stated as warranties.119 In this situation, the judge opined: “I can-
not see any reason in principle why Invertec cannot claim that it was induced to
enter into agreement by the representations made by those warranties so as to found
a misrepresentation claim if they were false, particularly if they were fraudulently
made.”120
This position makes some intuitive sense as the subject matter of warranties con-
tain facts, which are made to induce the plaintiff into the contract (that is the entire
reason for negotiating these terms), and upon which the plaintiff actually relies by
entering into the agreement. If such a warranty turns out to be false then, other than
a claim for breach of warranty, all the elements of a misrepresentation claim are also
present (even if innocent misrepresentation). However, another judge of the High
Court later forcefully disagreed.

114
UK Misrepresentation Act 1967, § 2(2) giving the court discretion to award damages for innocent
misrepresentation if it would be equitable to do so.
115
[2009] EWHC 2471 (Ch).
116
[2012] EWHC 3443 (Ch).
117
[2016] EWHC 1909 (Comm).
118
Invertec, [2009] EWHC 2471 [1].
119
Ibid. [363].
120
Ibid. (emphasis supplied).

13
Construing the Written Warranty 385

The case of Sycamore Bidco Ltd. v. Breslin involved similar facts with a share
purchase agreement listing warranties and making no mention of representations,
and the plaintiff alleging misrepresentation claims on the basis that the warranties
contained within themselves representations as well.121 Mann J. disagreed with the
plaintiff, noting that there was no mention of representations in the contract, and
that this absence seemed significant given the sophistication of the parties and their
counsel, and within the context of the contract as a whole.122 But the judge went
on to state that he had reservations about the very notion of finding representations
within contractual warranties, which is what Arnold J. had done in Invertec, stating:
123

The difference between the result in that case and in this is because, with
respect, I disagree with the views of Arnold J. For, I think that there is no
satisfactory answer to be given by those claiming representations to have been
made to the question which has to be asked: Why have the warranty provisions
being inserted in the contract? The answer is to be found in the clause 5 in
each case—they are there because they are warranted. There is nothing more
to make them into representations. I do not think it affects the position that in
the present case, as in Arnold J’s, the parties (and in particular the warrantors)
knew what was coming because drafts have been exchanged and the terms of
the contract negotiated. What the warrantors knew to be coming, or more pre-
cisely knew they were going to be providing, were expressed to be warranties,
not representations.
Thus, if the parties’ contract contains warranties, then the correct interpretation
should be that, irrespective of the parties’ negotiating history, all that was discussed
and negotiated were promises and not any representations. This was reaffirmed by
the High Court in Idemitsu Kosan Co. Ltd. v. Sumitomo Corp., where it was held
that in such a case the seller “is not making a statement to his buyer…[h]e is making
a promise.”124 And the subject of the negotiations are promises. The Idemitsu Kosan
judgment has been followed by subsequent cases in the UK High Court.125
However, can one truly short-circuit a careful scrutiny of the contractual provi-
sions by focusing upon the verbs used when introducing certain facts? One may
recall that, ever since the Heilbut judgment, the question in the UK has been about
whether the speaker had the requisite “intent to warrant”. The UK High Court, in the
twenty-first century, appears to have extended this logic to ask whether the speaker
had an “intent to represent”. This is an important point, because the High Court
judgments do not suggest that this is a question of ascertaining whether the parties

121
Sycamore Bidco, [2012] EWHC 3443 at [1], [201]-[202].
122
Ibid. [202], [203(i)]-[203(iv)], [210].
123
Ibid. [209] (emphasis supplied).
124
[2016] EWHC 1909 [14].
125
See e.g. SK Shipping Europe Plc v. Capital VLCC 3 Corp., [2020] EWHC 3448 (Comm); Ivy Tech-
nology v. Martin, [2020] EWHC 94 (Comm); Wiggin Osborn Fullerlove v. Bond,; Arani v. Cordic Group
Ltd., [2021] EWHC 829, [168]-[169] (Comm).

13
386 M. Kumar, N. Pant

intended to exclude tortious liability, which would require an evaluation of whether

the exclusion was drafted “in clear and unmistakable terms on the face of the con-
tract”126 (Beatson et. al: 351), and would invoke an analysis of reasonableness under
Sect. 3 of the Misrepresentation Act.127 Instead, the judgments clearly indicate that
the High Court views the language of warranty as not containing any representation
at all. While this approach reaffirms the warranty as contractual in nature, it artifi-
cially divorces the representation from the warranty and accords too much impor-
tance to specific words. One cannot help but ponder whether all parties and counsel
are truly so certain about the distinction between representations and warranties that
their intent shines forth through the legal precision of their language. Perhaps this
could be assumed for sophisticated parties and their counsel, which would explain
why Mann J. felt compelled to make specific note of the sophisticated nature of
the parties and their counsel, indicating that the draftsman of the agreement must
have utilized their knowledge of the distinction between representations and warran-
ties,128 but certainly such a neat approach threatens to forego a careful scrutiny of
the parties’ contract to glean their intent.
It is also far from clear that the UK Court of Appeals, a higher court, would fol-
low this line of reasoning given its decision in Eurovideo Bildprogramm GMBH v.
Pulse Entertainment Ltd.129 There, the plaintiff had given the defendant an exclu-
sive right to broadcast certain videos, and with it represented and warranted that
the “[plaintiff] has the exclusive first exploitation right in the licensed territory.”130
The defendant had, it turned out, already provided distribution rights to other parties
and was in breach of the agreement.131 However, the contract measure of damages
seemed to be nominal, prompting the plaintiff to sue for misrepresentation in order
to get a higher sum under the tort measure of damages.132 The defendant had tried to
argue that where any facts are intended to become a term of the contract, they could
not amount to a representation of fact but only a warranty, but the Court of Appeals
simply said that this argument “went too far” and that pre-contractual statements
during negotiations or even in a draft contract could certainly amount to a represen-
tation.133 The Court of Appeals went further though and held that “there was a also a
misrepresentation of fact involved inherently in the language of ‘first exploitation’,”
on the grounds that even a warranty of “first exploitation” would include within it a
statement of fact that there was no other party who currently had a grant of distribu-
tion rights.134 This was, according to the court, “an example of how…contractual
language can exist both as a term and as a representation.”135 Thus, the Court of

126
HIH Casualty and General Insurance Ltd. v. Chase Manhattan Bank, [2003] UKHL 6 [16].
127
Section 3(1) of Misrepresentation Act.
128
Sycamore Bidco, [2012] EWHC 3443 at [203(i)], [210].
129
[2002] EWCA Civ 1235.
130
Ibid. [2]-[3], [5].
131
Ibid. [12].
132
Ibid. [13].
133
Ibid. [18]-[19]. See also, Leofelis SA v. Lonsdale Sports Ltd., [2008] EWCA Civ 640 at [141].
134
Ibid. [23] (emphasis supplied).
135
Ibid.

13
Construing the Written Warranty 387

Appeals clearly espoused a rigorous construction approach, including careful analy-

sis of any factual implications within written warranties, which appears to undercut
the Sycamore and Idemitsu line of judgments. This aspect of the Eurovideo judg-
ment has not been considered in the lower court judgments. For instance, in Ide-
mitsu, Baker J. only partly engaged with the Eurovideo judgment, by focusing on
only the holding that negotiations could amount to representations, where there is
correspondence exchanged during negotiations.136 Hence, this contemporary devel-
opment must be viewed with some caution.

Conclusion

The authors have attempted to demonstrate that the current US debates regarding
the role of reliance in a breach of warranty claim are entirely misplaced when the
warranty is expressly incorporated into a written agreement. The written warranty
has traditionally been viewed as a creature of contract, which attracts a contract
construction approach. Thus, the approach to the issue of “sandbagging” should be
concerned with ascertaining the parties’ intent, which is gleaned from the text of
the contract, and the parties’ knowledge and conduct leading up to the formation
of the contract.137 This could also be achieved relatively simply within the context
of transactions that do not involve a sale of goods since courts, like the Delaware
Supreme Court, do not have to engage with the confusion engendered by Article 2
of the UCC.138 However, establishing that the written warranty sounds in contract
does not automatically resolve all difficulties. Instead, the rugged terrain of con-
tract construction requires careful navigation lest one oversimplifies the difference
between representations and warranties, exalting technical drafting with specific
contract words for the warranty – ironically reminiscent of the long-dead, technical
pleading requirements of “warrantizando vendidit.”

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