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.