Professional Documents
Culture Documents
Warranty Provisions It Broke Are You Covered
Warranty Provisions It Broke Are You Covered
diligently, in a workmanlike manner or in should keep in mind a few key points. First, be
compliance with applicable laws and permits. alert to the ramifications of any warranty period
Owners would be well advised to think about that expires within a given time after delivery of
how they can specifically describe the required the component. If a component is purchased as a
standards for the particular services provided. reserve spare, such a limitation may cause the
warranty to expire before the part is even put into
A Warranty “Breach” operation. Second, be just as alert to a warranty
period that expires within a given calendar time
On paper, a warranty is considered to be (for example, days or years) after a component’s
“breached” when a component (or service) fails “first use”. The warranty life may be more
to comply with the warranted qualities. So, when appropriately measured by operating hours than
a component (despite proper operation) suddenly by mere “clock” hours (which would include
breaks, the question is whether the failure was hours when the component is not in use). Finally,
caused by a defect in workmanship, materials or a warranty period should never be stated in
design (assuming these are the warranted “months.” Because our Gregorian forefathers
qualities). In a case like this, it may not be too chose calendar months to have 28, 30 or 31 days,
hard for a forensic analysis to reveal that a defect a warranty period stated merely in months can
did indeed cause the failure. lead to disputes over when coverage actually
ends. This kind of discrepancy is unnecessary
Of course, the facts are not always that simple. and can be avoided by using “calendar days” as
For example, a component may not suddenly the warranty period measuring basis.
break. Instead, it may suffer from excessive
deterioration or premature wear and tear. The Whew, It’s Covered; Now What?
question then becomes: if a component is
supposed to be able to operate non-stop for a Assuming that a component’s failure falls under
given duration, but wears out much sooner, is a warranty’s defect coverage and within the
that a defect? Or perhaps a component begins to applicable warranty period, the critical issue then
malfunction, so that it still operates but not “as becomes how the supplier must respond. It is
advertised.” Is that a defect? Issues like these can here that warranties often come up short in
quickly surface if a warranty is unclear on the protecting owner interests. For example, some
twin subjects of long-term performance and warranties fail to provide details as to:
functionality requirements.
How quickly the supplier must respond
Time Flies Owner control over the schedule for
performing warranty work
Time is a key part of every warranty. After all, a Supplier’s obligations for transporting
practical limit always exists to a supplier’s parts to or from repair facilities
willingness to take the risk of covering its Supplier’s obligations for transporting
products. The length of a given warranty is new replacement parts to the site
usually a matter of commercial negotiation that Supplier’s obligations for “in and out
may be guided by the maxim “there is a price for costs” and related labor
everything.”
Further, many warranties often describe the
Whether coverage lasts for days or years, owners supplier’s obligations in vague terms of
Www.mercerthompson.com Page 2
W a r r a n t y P r o v i s i o n s
Www.mercerthompson.com Page 3
W a r r a n t y P r o v i s i o n s
moment of imprudent operation voids the Likewise, if a component fails and the stated
warranties in its entirety? One would hope not, remedy is “repair or replacement”, such a clause
but why leave this issue open for argument? A may mean that a clearly necessary redesign is not
better approach would be to specify that a failure an obligation. Finally, if negligent supplier
directly and solely caused by operator error behavior breaches a service warranty and if the
(however that is defined) will not be covered by remedy is “re-performance,” then an exclusive
the warranty. remedies clause might be seen as disallowing
recovery of property damage that result from the
If you have ever read a warranty in its entirety, supplier’s negligence.
you will undoubtedly be familiar with the
legalese that often appears in ALLCAPS. This The legal bottom line of exclusive warranties and
essentially says that the warranties are remedies clauses is that the warranty provisions
“exclusive” and “in lieu of all other warranties, will almost certainly be considered to contain
whether implied or express.” This so-called “all that there is” regarding both the promised
“exclusive warranties” language is driven by quality and functionality of the components, and
state laws that can, in the absence of the the obligations of the supplier if that promise is
language, apply certain implied warranties (for not met. As a result, owners must ensure that
example, warranty of “fitness for purpose”) to their warranty coverage and rights are as broad
the components. The language is also driven by and as clear as possible.
laws that could cause any representations made
prior to the sale to be seen as express warranties
that must hold true after the sale. Essentially, About the author: Richard “Chip” Thompson
exclusive warranties language can mean that, no is the co-founder of Mercer Thompson LLC, a
matter what the owner was told and no matter boutique law firm specializing in representing
how the owner thinks a component should companies in the electric power industry. Since
operate, the coverage stated in the warranty 1995, Mr. Thompson has represented electric
provisions is the only coverage the owner will power companies in their development,
have. Seldom will one find a sophisticated acquisition and sale, and ownership and
supplier who is willing to offer a contract operation of energy projects on a worldwide
without this language. basis (including in Europe, South America,
Asia, Africa and the Middle East). Mr.
In addition to an “exclusive warranties” Thompson’s experience includes projects
provision, many warranties will also include an deriving electric energy from coal, gas, solar,
“exclusive remedies” provision. The idea is wind and biomass energy sources, as well as
subtle but important: This provision would make long-range transmission projects and gas
the obligations of the supplier as written in the pipeline projects.
warranty provisions the only obligations the
supplier faces if a component fails to comply
with the warranty. Ramifications of this
provision can often be alarming. For example, an
exclusive remedies clause may mean that the
repair of collateral damage caused by a failed
(yet warranted) component will not be the
supplier’s responsibility, unless expressly stated.
Www.mercerthompson.com Page 4