Author:Jeffrey Lehman, Shirelle Phelps

An assurance, promise, or guaranty by one party that a particular statement of fact is true and may be relied upon by the other party.

Warranties are used in a variety of commercial situations. In many instances a business may voluntarily make a warranty. In other situations the law implies a warranty where no express warranty was made. Most warranties are made with respect to real estate, insurance, and sales and leases of goods and services.

Real Estate

When land, houses, apartments, and other forms of real estate are sold or leased, the real estate usually comes with at least one warranty. In a sale of realty, the seller usually includes a warranty regarding the title to the property. In some cases the title may have a cloud on it. This means that some party other than the seller has a claim to the property. Such claims may be made by a bank, a JUDGMENT DEBTOR, a construction company, or any other party that has obtained a lien against the property. If the seller thinks that the title is clouded, the seller may offer a quitclaim deed. This type of deed contains no promises as to the title and releases the seller from any liability to the buyer if a lien holder later makes a claim to the property.

In other real estate transactions, the seller may warrant that the title is clear. In this situation the seller gives the buyer a general warranty deed. This kind of deed warrants that the title is clear and that the seller will be liable for any defects in the title that existed at the time of the sale.

Other types of warranties related to real estate titles include special warranty deeds and covenants of further assurances. A special warranty deed warrants only that no party made a claim to the property during the seller's ownership. Under a special warranty deed, the seller is not liable for any defects in the title attributable to her predecessors. A seller may add to a deed a COVENANT of further assurances, which promises that the seller will take any steps necessary to satisfy any claims to the property.

Sellers and buyers of real estate may negotiate warranties regarding the title to the property. They also may negotiate additional warranties regarding the property, such as warranties on plumbing or electricity or any other matter of special concern.

If the seller of real estate is the same party who constructed a building on the property, a

warranty of habitability may be automatically included in a sale of the property. A warranty of habitability in the context...

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