Primary Blocks


This guide explains the different parts that make up the blocks dealing with warranties.



A warranty is a legally binding assurance provided by one party (usually the seller or service provider) to another party (the buyer or client) regarding the quality, functionality, or performance of a product or service.

It serves as a guarantee that the product or service will meet certain agreed-upon standards, and outlines the remedies available if these standards are not met. Warranties in tech contracts help build trust between the parties and protect them against potential risks and liabilities.

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How to draft warranties in contracts


Type of warranty

The types of warranties to include in a tech contract depend on the nature of the agreement. Here are some examples of warranties commonly found in tech-related commercial contracts:


  1. Services Warranties: These promises generally outline how the service provider must perform the services. For instance, the parties might agree to adhere to industry standards or use terms interpreted by case law, such as performing services in a timely, professional, and skillful manner. More specific service warranties can also be included, like requiring that all personnel have at least five years of relevant experience in providing the services.

  2. Product Warranties: These warranties typically address requirements related to the products or product deliverables, including quality, condition, functionality, quantity, or performance. For example, a hardware manufacturer might warrant that the components used in a computer will not fail prematurely due to manufacturing defects.

  3. Software Warranties: These warranties differ depending on whether software is licensed or developed for a customer. For licensed software, typical warranties include those related to viruses, ownership, and non-infringement. For custom-developed software, warranties might specify that the software will conform to the agreed-upon specifications and not include certain types of open-source code.

  4. SaaS Warranties: In contracts for Software as a Service (SaaS), warranties should cover the SaaS’s performance according to the documentation, non-infringement of third-party intellectual property rights, and freedom from viruses. For example, a SaaS provider might guarantee that their application will work seamlessly with a specific operating system or web browser.

  5. Data Protection Warranties: These warranties typically reference the obligations created under data privacy and data security provisions. For instance, a cloud service provider may warrant that their data centers adhere to data protection regulations.

When drafting tech contracts, it’s important not to group all warranties under a single section. Different remedies and liability caps may be appropriate for breaches of different warranties. By separating warranties, you can tailor the remedies and liability limitations to suit each warranty type, providing a more balanced and effective contract.

Availible remedy


In the event of a warranty breach, the appropriate course of action and remedies can be specified in the contract. For instance, if a product warranty is breached, the possible solutions might include:

  1. Replacing the faulty product; or
  2. Repairing the defective product.

To illustrate, let’s consider a tech company that sells smartphones. If a customer discovers a manufacturing defect within the warranty period, the company may either replace the device with a new one or repair the existing unit to address the issue.

However, there might be multiple remedies at hand, which can sometimes lead to disputes. Therefore, it’s crucial to clearly specify in the contract which party has the authority to choose the appropriate remedy.

Additionally, the contract should outline the responsibilities for various costs associated with the warranty breach. For example, in the case of a tech product warranty, the contract should state whether the customer or manufacturer is responsible for shipping costs to return the faulty product.

Lastly, if it’s not feasible to implement the chosen remedy, the customer is typically entitled to a refund. Using the smartphone example, if the company is unable to repair or replace the defective device, the customer will receive a refund for the original purchase price.


In the context of a Software as a Service (SaaS) offering, warranties may cover various aspects, such as service uptime, data security, or software performance. Suppose a SaaS company provides a cloud-based project management tool with a warranty for 99.9% uptime.

For example, a customer experiences a downtime of 0.5% over a month, breaching the 99.9% uptime warranty. Based on the contract, potential remedies may include:

  1. Providing service credits to the customer’s account for the affected period; or
  2. Offering a partial refund of the subscription fees for the month in question.

The contract should clearly indicate which party has the authority to choose the appropriate remedy in case of multiple options. Moreover, it should outline the responsibilities for costs associated with addressing the breach, if any.

If the SaaS provider cannot deliver the chosen remedy (e.g., they cannot issue service credits or provide a refund), the customer may be entitled to terminate the contract without penalty or receive a full or partial refund of the subscription fees for the affected period.

By specifying the responsibilities and remedies related to potential warranty breaches in a SaaS contract, both parties can minimize potential disputes and ensure a smoother resolution process.

Warranty period and notification

Warranty periods can vary depending on the nature of the products or services involved. For example, warranties related to physical products may have longer validity periods compared to those for software. In the tech industry, a hardware product like a laptop might have a one-year warranty, while a software product or service could have a warranty period of 90 days.

For example, a computer manufacturing company offers a one-year warranty on their laptops, covering any defects in materials or workmanship. In contrast, the company’s software division provides a 90-day warranty for their software products, ensuring that the software functions according to its specifications.

The starting point for the warranty period is also important and can differ based on the agreement between the parties. It could begin from the delivery date, acceptance date, or when the product is fully commissioned. The chosen starting point should be clearly stipulated in the contract to avoid any disputes.

For example, a company purchases a custom-built server from a tech provider. The warranty period might start from the delivery date, which is when the server arrives at the company’s location. Alternatively, the warranty period could begin on the acceptance date, which is when the server has been installed and tested to ensure it meets the company’s requirements.

Contracts may also include notification requirements for customers to report defects within the warranty period. This allows the provider to address the issue promptly and avoid disputes regarding the timing of the defect identification.

For example, a customer purchases a software subscription with a three-month warranty. The contract states that the customer must notify the software provider of any defects or performance issues within the warranty period. If the customer encounters a problem in the second month but fails to report it until the fourth month, the provider may not be obligated to provide a remedy, as the issue was not reported within the warranty period.


Certain circumstances may warrant exclusions from the warranty coverage to protect the provider from unjustified claims. For example, a software provider may offer a warranty stating that the software will perform as described in the documentation, but they may want to exclude instances where the customer has made unauthorized modifications to the software.

For example, a company purchases customer relationship management (CRM) software with a warranty that guarantees the software’s performance according to its documentation. However, the company decides to modify the CRM software’s source code to add custom features, which subsequently results in performance issues.

In such cases, the software provider should include a warranty exclusion clause in the contract to protect themselves from claims related to unauthorized modifications. The exclusion clause might specify that the warranty does not cover any performance issues arising from customer-made alterations to the software.

Typically, the exclusion clause should be worded in a way that only disqualifies warranty claims to the extent that the software was affected by the customer’s modifications. This ensures that the warranty still applies to other aspects of the software that were not impacted by the customer’s changes.

Suppose the same company experiences an issue with the CRM software’s core functionality unrelated to their custom modifications. In this case, the warranty exclusion clause should be crafted in a manner that still allows the company to seek remedies for the core functionality issue, as it was not a result of their unauthorized alterations.

Important considerations

Reasons for

Reasons for including warranties in tech contracts:

  1. Customer confidence: Warranties offer assurance to customers that the product or service will perform as expected, building trust in the provider’s offerings. For example, a software company may offer a warranty that their application will be free of critical bugs, instilling confidence in customers that the software is reliable.

  2. Clear expectations: Warranties help set clear expectations between parties regarding product or service performance, minimizing potential disputes. A SaaS provider may offer a warranty on a specific uptime percentage, ensuring that customers know the expected level of service availability.

  3. Defined remedies: Warranties outline the remedies available in case of breaches, which helps streamline the resolution process. For instance, a hardware manufacturer may offer a warranty that covers product replacement or repair in case of defects, making it clear to customers how issues will be resolved.

  4. Competitive advantage: Offering warranties can provide a competitive edge, as it demonstrates the provider’s commitment to quality and customer satisfaction. For example, a tech company that offers extended warranties or more comprehensive coverage than its competitors may attract more customers due to perceived reliability.

Reasons against

Reasons against including warranties in tech contracts:

  1. Increased liability: Including warranties in contracts can expose providers to increased legal and financial liability if they fail to meet the warranty terms. For example, a software company that offers a warranty against data breaches may be held liable for damages if a security incident occurs.

  2. Complexity: Crafting warranties that accurately reflect the provider’s capabilities and limitations can be a complex task, especially in fast-paced, evolving tech industries. For example, creating a warranty for an AI-driven software solution may be challenging due to the dynamic nature of AI algorithms and their potential for unpredictable behavior.

  3. Potential disputes: Warranties may lead to disputes if the parties have different interpretations of the terms or if a breach occurs. For instance, a customer may argue that a software bug falls within the scope of a warranty, while the provider may claim that it is excluded, leading to disagreements and potential legal battles.

  4. Cost implications: Providing warranties often comes with increased costs, such as expenses related to replacing or repairing defective products, offering refunds, or handling legal matters. These costs may impact the provider’s bottom line, especially for small businesses or startups with limited resources.

World Commerce and Contracting Principles

World Commerce and Contracting provides the following principles relating to warranties-

  1. The contract should specify any Express Warranties for the applicable products, software, or services that are reasonable in light of the characteristics of the products, software, or services and that form the basis for the transaction.
  2. Express Warranties should not be in the form of a promise that the product or service will be free of all defects (which does not reflect reality) but rather should focus on the specific remedies to be provided by the supplier in case of defects or non-conformity with the specifications that are provided.
  3. Express Warranties should define a reasonable time frame for the customer to notify the supplier of a defect or non-conformity.
  4. The Express Warranty period should be calculated either from the delivery to the customer of the product, software, or services (according to the agreed delivery terms); from the acceptance of the product, software, or services as agreed in the contract; or from first usage of a product or software.
  5. The duration of the Warranty period will generally be shorter for software than for tangible products (equipment or hardware), as software versions have a shorter lifetime, and software suppliers typically request their customers to implement the newest software versions The parties need to specify when the customer must begin to pay for maintenance and support plans, if purchased. The timing will depend, in part, on whether the supplier requires a maintenance/support plan to be effect before it provides software updates and new releases.
  6.  The parties should agree on whether the supplier is entitled to full payment for products, software, or services found to be defective or nonconforming upon delivery or installation, as the case may be. Regardless of whether full payment is made, the supplier has an obligation to correct any deficiencies on a timely basis. If they cannot be corrected, the customer would be entitled to a refund of any applicable payments made.

Example clause

1.          WARRANTIES

1.1           Services warranties:

(a)         The Developer warrants that:

(i)           They will render the Services with promptness, efficiency and diligence and in a workmanlike and cost-effective manner following the practices and high professional standards used in well-managed operations performing services similar to the Services;

(ii)         They will use adequate numbers of qualified individuals with suitable training, education, experience and skill to perform the Services;

(iii)        The Work Product will be their own original work, without incorporation of text, images, software, or other assets created by third parties, except to the extent that consents in writing is provided.; and

(iv)        The Services will comply with all applicable laws.

(b)         If there is a breach under Section 1.1, the Developer must:

(i)           at their own expense, promptly re-perform the Services in question.

(c)          Section 1.1(b), in conjunction with the Client s right to terminate this Agreement where applicable, states the Client s sole remedy and the Developer s entire liability for breach of the warranty under Section 1.1.

(d)         If the Client wants to claim under Section 1.1, the Client must notify the Developer in writing within [] days from the date that the Service was provided. Failure to provide notification in accordance with this Section (d) invalidates a claim under Section 1.1.


1.2          Software warranties:

(a)         The Developer warrants that:

(i)           the Software will materially perform in conformity with the Documentation;

(ii)         the Software will materially perform in conformity with the Specifications;

(iii)        it will use reasonable efforts so that no viruses are coded or introduced into the Software;

(iv)        it will not insert into any of the Software any code which would have the effect of disabling or otherwise shutting down all or any portion of the Software;

(v)         the Software does not and will not include software subject to any legal requirement that would restrict right to distribute or otherwise provide the Software, or any modification thereof for a fee, with or without source code or source code rights;

(vi)        the Software will be free of any claim of infringement, misappropriation, unfair competition, or violation of any third party intellectual property right; and

(vii)      the Software will be its own original work, without incorporation of text, images, software, or other assets created by third parties, except as consented to in writing.

(b)         The Developer may change the Documentation in their sole discretion, provided the functionality of the Software will not be materially decreased.

(c)          If there is a breach under Section 1.2, the Developer must, at the discretion of the Client:

(i)           remedy the Software in accordance with the Schedule - Support and Maintenance, and if the remedy fails or is not possible, refund all amounts paid for the Software; or

(ii)         replace the Software with software of substantially similar functionality and if the remedy fails or is not possible, refund all amounts paid for the Software.

(d)         Sub-Section 1.2(c), in conjunction with the Client s right to terminate this Agreement where applicable, states the Client s sole remedy and the Developer s entire liability for breach of the warranty under Section 1.2.

(e)         The Developer is not obliged to remedy any Software to the extent that the defect arises from or in connection with:

(i)           modification or alteration of the Software by any person other than themselves;

(ii)         a breach of the Agreement; or

(iii)        the Software is used in a manner or for a purpose not reasonably contemplated by the Agreement or not authorized.


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