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WHAT IS MEANT BY WARRANTY AND MISREPRESENTATION

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					                 WHAT IS MEANT BY WARRANTY AND MISREPRESENTATION

       In business and legal transactions, a warranty is an assurance by one party to
the other party that specific facts or conditions are true or will happen; the other party
is permitted to rely on that assurance and seek some type of remedy if it is not true or
followed.

       The two sources of risk that warranty covers are: the risk of malfunctioning of
the product (covered by the warranty of malfunctioning) and the risk of making a
wrong purchase decision regarding the product (covered by the warranty of
misinforming). A warranty of malfunctioning is an agreement offered by a seller (or a
producer) to a consumer to replace or repair a faulty item, or to partially or fully
reimburse the consumer in the event of a failure. In recent times the impact of the risk
of product malfunctioning and the warranty of malfunctioning have been well
understood and analysed by researchers and practitioners. Lately, due to the growing
volume of indirect commerce (e.g., online shopping), an increasing impact of the risk of
misinforming on business transactions has been observed. A better understanding of
the risk of misinforming and development of appropriate new tools and methods for
analysing the warranty of misinforming are needed.

       In real estate transactions, a general warranty deed is an agreement that the
buyer's title to a parcel of land will be defended. A limited warranty deed, on the other
hand, is a promise that the title will be defended against a limited set of claims which
is usually claims arising from incumberances executed by the grantor. Thus, a general
warranty deed binds the grantor to defend the title against all claims even those
arising from previous owners; whereas, a limited warranty deed typically only binds
the grantor to defend the title against claims arising from when the grantor held title
to the property. A limited warranty deed is the deed of choice for banks when selling
foreclosed properties.

A warranty may be express or implied, depending on the product.

       An implied warranty is one that arises from the nature of the transaction, and
the   inherent    understanding   by   the   buyer,   rather   than   from   the   express
representations of the seller.

       The warranty of merchantability is implied, unless expressly disclaimed by
name, or the sale is identified with the phrase "as is" or "with all faults." To be
"merchantable", the goods must reasonably conform to an ordinary buyer's
expectations, i.e., they are what they say they are. For example, a fruit that looks and
smells good but has hidden defects would violate the implied warranty of
merchantability if its quality does not meet the standards for such fruit "as passes
ordinarily in the trade". In Massachusetts consumer protection law, it is illegal to
disclaim this warranty on household goods sold to consumers etc.

      The warranty of fitness for a particular purpose is implied when a buyer relies
upon the seller to select the goods to fit a specific request. For example, this warranty
is violated when a buyer asks a mechanic to provide snow tires and receives tires that
are unsafe to use in snow. This implied warranty can also be expressly disclaimed by
name, thereby shifting the risk of unfitness back to the buyer.

      MISREPRESENTATION

      Misrepresentation is a concept in contract law referring to a false statement of
fact made by one party to another party, which has the effect of inducing that party
into the contract. For example, under certain circumstances, false statements or
promises made by a seller of goods regarding the quality or nature of the product that
the seller has may constitute misrepresentation. A finding of misrepresentation allows
for a remedy of rescission and sometimes damages depending on the type of
misrepresentation.

      According to Gordon v Selico (1986) 18 HLR 219 it is possible to make a
misrepresentation either by words or by conduct, although not everything said or done
is capable of constituting a misrepresentation. Generally, statements of opinion or
intention are not statements of fact in the context of misrepresentation. If one party
claims specialist knowledge on the topic discussed, then it is more likely for the courts
to hold a statement of opinion by that party as a statement of fact.

REPRESENTATION IS NOT A TERM

      As enacted by the Misrepresentation Act, the statement in question may
constitute a representation even if later incorporated into the contract as a term (i.e. a
warranty, condition or innominate term).

      An alternative approach, applied in parallel but in exclusivity to, is to find a
collateral contract by interpreting the representation as a promise accompanied by
some sort of consideration (see Heilbut, Symons & Co. v Buckleton [1913] A.C. 30
(H.L.)). The collateral contract will have the effect of adding the representation as a
term to the contract.

      If the representation is found to be a term then the normal remedies for breach
of contract apply.

				
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