The Pitfalls of Warranting to a Technical Specification

Buyers of products, especially of complex equipment, want to ensure that what they are buying meets a minimum standard of performance. This standard of performance is often called a technical specification ("spec") or other similar term. If a seller warrants that a product will perform in accordance with a spec, then the buyer may have recourse against the seller if the product does not meet the performance requirement. It is best for the seller to not warrant to a spec, but if the buyer demands it, the seller should think carefully about whether it can meet the requirements it is warranting to.

BREADTH OF THE SPEC

The way that the spec is written is often negotiated and is important for both the buyer and the seller. For example, let's say that a buyer wants to purchase a vehicle from the seller-manufacturer. The buyer wants the spec to read that the vehicle will be painted with a specific type of paint, whereas the seller would prefer that the spec simply say "green paint." If the paint isn't the specific type listed in the spec, then the buyer may be able to claim that the vehicle doesn't meet the spec. In this situation, the seller is better off with a general requirement that is easy to meet in a variety of circumstances.

In another scenario, sometimes more detail is better for the seller because it limits the scope of the spec. For example, let's say that the buyer of the same vehicle wants the vehicle to be able to travel at 60 miles per hour for 200 miles. Is that 200 miles of flat terrain or through mountains or desert (which will consume more fuel)? If the seller warrants simply that the vehicle will "travel at 60 miles per hour for 200 miles," the buyer may bring the vehicle into environments or operate the vehicle in unforeseen ways (e.g., stop-and-go traffic) that will reduce its fuel economy, and the vehicle therefore wouldn't meet the spec. Here, the seller would be well-served by limiting the application of the "60 miles per hour for 200 miles" requirement to "60 miles per hour continuously on 200 miles of a flat paved road." A seller can never control the infinite number of ways that a buyer might use a product, so the seller should make every attempt to limit the number of scenarios where the spec must be met.

TIME LIMITS

Another often overlooked issue for buyers and sellers is the time period that a product must meet a spec. Many manufacturers offer warranties on their products for a defined period of time, and they limit those warranties to certain things like "manufacturing defects." The matter becomes more complicated, however, when we talk about specs that require a certain level of performance. A product may be free of manufacturing defects, but it may fail to meet the performance requirements of a spec (let's ignore the question for now of whether a failure to meet a performance requirement constitutes a manufacturing defect).

For example, let's assume that the vehicle from above is sold to the buyer and there is no question that it meets the requirements of the spec. However, several years later the vehicle can no longer travel 200 miles without refueling, so the buyer returns to the seller and says that the vehicle doesn't meet the spec. How could the seller respond? That depends on what the contract says, but hopefully the seller limited the application of the spec to the time of delivery and not to any point after that, e.g., "Seller warrants that at the time of delivery, the vehicle will be capable of traveling 60 miles per hour continuously on 200 miles of a flat paved road," or something to that effect. The point is that the seller is limiting the time period of its warranty. Whether a buyer would accept this kind of limitation is another question.

CONCLUSION

The two issues discussed above – breadth and time limits – are just two of the many talking points on warranties. The buyer and seller should consider how a warranty to a spec interacts with other warranties in the contract and with the contract as a whole to ensure that both parties are on the same page regarding what they are getting. Sellers should be particularly wary of warranting a certain level of performance – you never know how the buyer will use the product.