Contract Glossary
Breach of Warranty
Definition
A breach of warranty occurs when a promise or guarantee made in a contract turns out to be false or unfulfilled. Unlike a breach of contract (failing to do something), a breach of warranty means a representation about the state of things, quality, condition, ownership, or compliance, was wrong. The other party can claim damages for the gap between what was promised and what was delivered.
In Practice
A software vendor's contract warrants that the platform 'processes transactions in compliance with PCI-DSS security standards.' Six months in, an audit reveals the platform doesn't meet PCI-DSS requirements and never did. That's a breach of warranty, the vendor promised a state of affairs (compliance) that wasn't true. You can claim damages for the cost of remediation, the audit, and any fines from your payment processor.
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