There are certain obligations which ensure the performance of the contract and also provide remedy for possible future problems.
Warranty clauses ensure that the performance of the contacting party, at the time of the conclusion of the contract, fulfills all statutory (implied) and contractual (express) quality obligations. Warranties are primarily governed by the Hungarian Civil Code, and there are various types, such as the warranty of title or the warranty of merchantability. If a warranty is breached, the non-breaching party may claim damages, repair, replacement, price reduction or if there is a material breach of the contract, they may even rescind the contract.
Guarantee clauses, on the other hand, are usually voluntarily provided by the seller or the manufacturer beyond the mandatory statutory warranty provisions. They are additional commitments which may offer extended coverage, repair services, or other benefits to the buyer. While warranty is a legal requirement, guarantee is usually a contractual commitment and is subject to the terms agreed upon by the parties.
An indemnity clause contains the promise to indemnify , i.e. to compensate the other party in full if a particular (triggering) event happens and the other party incurs loss or damage as a result. This is sometimes called to ‘make good a loss’. It means to compensate all of the loss, not just part of it. Indemnity clauses are typical in insurance contracts, since they are undertakings by insurance service providers to protect policyholders against future damage, loss, injury, or other harmful events in return for a fee called a premium. The amount paid under this obligation can be called ‘indemnification‘.
Sample Warranty clauses:
Seller warrants that it is the legal owner of the real property and has full right, title, and authority to sell and transfer the same to Buyer. Seller further warrants that the real property is free and clear of all liens, encumbrances, and litigation.
Seller hereby warrants that the goods delivered under this Agreement are merchantable and fit for the ordinary purpose for which such goods are used in the trade.
Seller warrants that the products delivered under this Agreement shall conform to the specifications and quality standards set forth in Schedule A.
Sample Guarantee clauses:
This guarantee shall not apply to defects or non-conformities arising from misuse, neglect, improper storage, or any modifications made to the goods without Seller’s prior written consent.
In the event that the goods are found to be defective or non-conforming within the warranty period, Buyer shall promptly notify Seller in writing, specifying the nature of the defect. Seller shall, at its expense, promptly replace or repair the defective goods, or, at Seller’s option, refund the purchase price for such goods.
Sample Indemnity Clause
Party A shall have no obligation to indemnify Party B for claims arising out of or related to:
(a) Party B’s negligence or willful misconduct.
(b) Unauthorized modifications or use of the goods/services by Party B.
(c) Any third-party intellectual property claims arising from Party B’s specifications.