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Warranty Service Agreement

A Warranty Service Agreement details how defects, repairs, and replacements are handled during a product’s warranty period. This playbook emphasizes negotiating fair remedies, service levels, and liability limitations that align with operational realities.

Warranties & Representations

Why This Matters: Overly broad or long-running warranties can lead to significant remedial costs and unexpected claims that strain resources.

Negotiation strategy

If you're the Customer:

Negotiate for specific, limited warranties that align with industry standards. Ensure liability caps are in place to protect against excessive claims.

If you're the Manufacturer:

Offer warranties that reflect the quality and compliance of your products, but limit the duration and scope to avoid undue liability.

Essential elements

1

Warranty Period

Duration of warranty coverage.
2

Liability Cap

Maximum financial exposure.
3

Exclusions

Damages not covered by warranty.

Action framework

ACCEPT

Propose edits if the warranty scope is too broad or lacks clear limitations.

EDIT

Reject clauses that impose unlimited liability or unreasonable terms.

ADD

Add language to specify warranty duration and liability limits.

PRO TIP

Always align warranty terms with industry standards to ensure fairness and compliance.

Example clauses

FAVORABLE

Preferred Warranty Clause

"The warranty period shall be twelve (12) months from the date of delivery. Liability for breach of warranty shall be capped at 20% of the contract value, excluding indirect and consequential damages."
NEUTRAL

Standard Warranty Clause

"The warranty period shall be six (6) months, with liability capped at 10% of the contract value."
UNFAVORABLE

Unlimited Warranty Clause

"The warranty shall be indefinite, with no cap on liability."

Fallbacks

High-Risk Projects

In high-risk projects, warranties should be more stringent, with detailed performance metrics and higher liability caps to account for potential issues.

Consumer Goods

For consumer goods, warranties should focus on product quality and safety, with clear instructions for returns and repairs.

Technology Services

In technology services, warranties should address uptime and data security, with specific remedies for service interruptions.
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