"

39 Warranties & Limitations on Warranties

Rachael Samberg

Desired result:

In most eResource agreements, you typically want the licensor’s warranties to affirm that:

  • The licensor has the legal authority to license the product to you;
  • The product they’re licensing to you does not infringe upon anyone else’s rights; and
  • The product conforms to federal and state accessibility laws by meeting certain accessibility benchmarks. [Note that we discuss accessibility warranties in more detail in a separate chapter.]

You may also want representations or warranties stating that:

  • The product is free from defects or works as intended, at least for a certain period of time after transfer. However, this is not usually needed as a separate representation because most jurisdictions impose this requirement as an implied warranty (i.e. the implied “warranty of merchantability”); and
  • The product meets some other standard essential to the reason for which you are investing in it. The features you desire obviously vary, but could be something relevant to specifications like, “has X amount of storage” or “performs at Y speed.”

It’s also a good idea to expressly reserve certain remedies (like indemnification against third party claims) if the vendor breaches those representations or warranties—meaning if the representations prove to be false. Addressing remedies can be done within the “Warranties” clause itself, or in a separate “Indemnification” clause (discussed in another chapter).

Note that if you don’t say anything in your contract about remedies for breach of warranties, this does not mean you have waived or excluded remedies. A court will determine appropriate remedies where a contract is silent. However, if you know that you desire indemnification for breach of a warranty, then negotiating to expressly provide it can be useful.

In all events, you should carefully consider attempts in the warranties clauses or elsewhere to limit your ability to recover or be compensated if the licensor’s product does not actually perform or conform as warranted.

What it means:

What is a warranty?

Warranties and representations are statements of fact or assurances that the declaring party asserts to be true, and on which the other party may rely. The promisor has assumed responsibility for the truth of the statement or assurance, and should the statement prove or become untrue, the promisor assumes liability for breach or damage. [1].

In e-Resource license agreements, warranties are largely divided into two categories:

  • Express warranties include statements of conformity to certain external standards that the parties negotiate or bargain for (e.g. product complies with WCAG 2.1 accessibility standards), but also can be any factual representation that a seller or licensor makes about the condition or functionality of the goods being licensed or sold.
  • Implied warranties, which are obligations of conformity imposed by operation of law (e.g. that the product works as intended or is merchantable for ordinary purposes). That is to say that the law “reads into” eResource contracts the existence of certain additional warranties. Typically, the implied warranties governing eResources license agreements might include:
    • A warranty that goods are merchantable is implied by law in a contract for their sale if the seller is a merchant dealing in goods of that kind.
    • A warranty that goods are fit for a particular purpose is implied by law in a contract for their sale if the seller, at the time the contract is made, has reason to know that the buyer requires the goods for a particular purpose and is relying on the seller’s skill and judgment to select or furnish goods suitable for that purpose.
    • A warranty that the seller has good title, and will convey it free of encumbrances, is deemed to be a part of all contracts for the sale of goods.

“Representations” vs. “warranties” vs. “statements”

Sometimes in an agreement, you might see the heading or term “representation” used rather than or in addition to “warranty.” It is worth noting that there is considerable (and not entirely helpful) debate, along with some disparity across jurisdictions, as to whether “representations” and “warranties” protect different aims, and thus whether only one or the other should be included or both must be recited as a phrase.

Traditionally, “warranties” were considered more appropriate for sales agreements, and “representations” better suited for service contracts. For reasons discussed more fully in his A Manual of Style for Contract Drafting, author Kenneth Adams recommends scrapping the phrase “represents and warrants” or “representations and warranties” altogether and using “states” or “statements” instead.[2] In part, he suggests this because merely calling something a representation or warranty does not necessarily make it so. For example, sometimes something that purports to be a warranty is really a future performance obligation rather than a statement of fact (e.g. “Licensor warrants that it will delete Licensee’s confidential information”). But “states” may not solve all the worries either: Something not flagged as a representation or warranty can actually still constitute one through interpretation (e.g. “Licensor states that it owns copyright in the Licensed Content”).

Do not despair if you are left with the catch-phrase “represents and warrants,” or any portion thereof. What matters more is preserving the rights and remedies you want if that statement proves to be false.

What it means to “breach” a warranty

If the goods do not conform to the express or implied warranties at the time of the transaction or within a reasonable time thereafter, then the representing or warranting party is said to have “breached” the warranty.

If a party to a contract breaches representations or warranties, this may give rise both to breach of contract claims and potentially also what are called “tort” claims—that is, claims for harm or breach of duty outside of contract for which a remedy is available. Here, it is important to keep in mind that the inclusion of representations or warranties does not inherently prescribe the types of remedies available to an aggrieved party when those statements turn out to be false. Typically, though, remedies for breach of warranty are contractual; whereas the remedy for misrepresentations (fraudulent or negligent assertions of fact) typically is a tort action.

Here is an example to illustrate this distinction: A licensor warrants that its software complies with Web Content Accessibility Guidelines (WCAG) 2.1. After signing the agreement, the licensee discovers that the software is not compliant and that the licensor has therefore breached its warranty. But nothing in the warranty language as described above inherently endorses or restricts the form of recovery someone may pursue when the factual statement is actually false. If the licensee wants a specific remedy for breach of warranty (like Indemnification, treated in a separate chapter), they should endeavor to state so explicitly in the agreement.

And to establish breach of warranty, a licensee need not demonstrate that the licensor knew of (or was even negligent in making) the falsity of the assertion at the time it was made. The obligation of a warranty is absolute, and is imposed (subject to certain disclaimers) regardless of whether the warrantor knew or should have known of its falsity.[3]

In order to be eligible for recovery, though, the licensee must give notice to the licensor of the non-conformity within a reasonable period of time. The “reasonableness” of the time typically depends upon whether the licensor and the agreement were commercial or consumer: “The time of notification is to be determined by applying commercial standards to a merchant buyer. ‘A reasonable time’ for  notification from a retail consumer is to be judged by different standards.”[4]

Limitations on Warranties

The parties may disclaim certain implied warranties, and limit recovery of damages for breach of warranty, provided that: 1. they do so conspicuously, 2. the disclaimer is part of the written agreement, 3. doing so would not be “unconscionable,” and 4. doing so would not cause the warranty to “fail of its essential purpose” (that is, defy the purpose of having the warranty to begin with).[4]

An implied warranty of fitness for a particular purpose may be disclaimed in general terms like, “All implied warranties are disclaimed,” but efforts to disclaim implied warranties of merchantability (i.e. that the product is suitable for ordinary purposes) must expressly mention merchantability to be potentially effective.[5] This is to protect users and licensees against receiving goods that lack basic suitability or functionality, and that fail to function for the general purposes for which they were designed. Licensees have some further protection against disclaimers in that efforts to disclaim warranties are strictly interpreted against the seller or licensor.[6]

Unlike implied warranties, express written warranties may be limited but not disclaimed entirely. Suppose you have the contractual statement, “This product complies with WCAG 2.1 guidelines,” followed by another paragraph that states, “All warranties are hereby disclaimed.” In most cases, the express warranty governs over the disclaimer. This is to protect licensees and purchasers against “unexpected and unbargained language of disclaimer by denying effect to such language” when it would be inconsistent with the language or purpose of the warranty.[7]

Desired language:

From CDL’s model license:

Warranties:

Licensor warrants that it has all necessary legal and equitable rights, permissions, and clearances to license the Licensed Materials to the Licensee for the purposes outlined in this Agreement, and that use of the Licensed Materials by Authorized Users in accordance with the terms of this Agreement shall not infringe the copyright or other rights of any third party.

Licensor warrants that the physical object or medium which contains the Licensed Materials will be free from defects for a period of ninety (90) days from delivery.

Accessibility Requirements. Licensor warrants that the Licensed Materials comply with California and federal disabilities laws and regulations, and conform to the accessibility requirements of Web Accessibility Initiative, Web Content Accessibility Guidelines (WCAG) 2.1 at level AA.  Licensor agrees to promptly respond to and resolve any complaint regarding accessibility of Licensed Materials.

Limitations on Warranties:

Notwithstanding anything else in this Agreement, neither party shall be liable for any indirect, special, incidental, punitive or consequential damages, including but not limited to loss of data, business interruption, or loss of profits, that arises from the use of the Licensed Materials, or the inability to use the Licensed Materials.

Licensor makes no representation or warranty, and expressly disclaims any liability with respect to the content of any Licensed Materials, including but not limited to errors or omissions contained therein, libel, infringement of rights of publicity, privacy, trademark rights, moral rights, or the disclosure of confidential information.

Except for the express warranties stated elsewhere in this Agreement, Licensor disclaims any and all other warranties, conditions, or representations (express, implied, oral or written), relating to the Licensed Materials or any part thereof, including, without limitation, any and all implied warranties of quality, performance, merchantability, or fitness for a particular purpose.

Tricks and traps:

Most of the licensor pushback you’ll receive regarding warranties will center on (1) which warranties or representations are disclaimed, and (2) limiting damages for breach of warranty. We address both below.

Disclaiming a warranty

Although express written warranties may be limited but not disclaimed entirely, best practices would be to reserve or exclude the express warranty from the language of disclaimer. Using the above example of “WCAG 2.1 compliance”: If you have gone to the trouble of getting a warranty that a product complies with WCAG 2.1 guidelines, then you should change any proposed language to the effect that “All warranties are hereby disclaimed” to something like “Except as to express warranties, all warranties are hereby disclaimed,” or “Except as to warranties of accessibility, all warranties are hereby disclaimed.” This makes it very clear that the parties intended the reference to WCAG 2.1 guidelines to be a warranty, and to survive any efforts to disclaim it as such.

Limiting damages for breach of warranty

Sometimes, rather than or in addition to disclaiming a warranty entirely, a licensor may limit damages on recovery for breach of warranty.[5] For instance, some licensors may seek to cap your recovery for their warranty breach to the dollar value of the contract.

Capping the seller’s warranty breach exposure at the licensing price you have paid under the agreement is more likely to be acceptable to you if that cap also applies to any contractual breach by you (the licensee) of any term of the provision. That is to say, if both parties’ recovery for breach of warranty or any other provision of the agreement is mutually capped at the dollar value you have paid under the agreement, then it could be more protective and fair for you to accept the licensor’s proposition.

However, keep in mind that if you do mutually cap each party’s recovery for breach of warranty or anything else, that limit also applies to what you can recover from the seller. Suppose you are sued by a user for, say, materials that do not comply with accessibility laws, even though the licensor warranted that the materials are compliant. If you cap your recovery to a certain dollar value (or disclaim all consequential damages), you may not be able to recover from the licensor the costs or judgment values entered against you for non-compliant content. This is why it can be a good idea to impose a mutual liability cap except as to express warranties. This way, if the licensor makes a factual representation that turns out to be false, you are not restricted in how much you could recover from the licensor for breach of that representation that was so important to your bargain.

Absent any express cap, the normal measure of damages for breach of warranty is the difference between the value of the goods accepted and the value that they would have had if they had been as warranted, plus incidental and consequential damages.[6]

Special note on warranties of non-infringement

If a warranty of non-infringement as to copyright is important to your use of the materials, then you should expressly include such a provision because a general warranty of “non-infringement” may not always be interpreted by the courts to extend to copyright. There is debate in certain jurisdictions as to whether the Uniform Commercial Code applies to license agreements (see our chapter addressing this), but it is prudent to note its potential operation on this point. Although the UCC imposes in all sales contracts a warranty against infringement, the drafters intended this warranty to apply to patent or trademark infringement and “did not consider the question whether the warranty protection extends also to copyright infringement.”[7] So the best (safest) practice is: If you want a warranty of non-infringement as to copyright, add that “copyright” language in.

Importance and risk:

Warranties are an essential benefit of your bargain. You are investing hundreds, thousands, or potentially even hundreds of thousands of dollars to license content or materials for your users. Ensuring that the content and materials functions as intended, or conform to certain standards (such as accessibility guidelines) is critical. Courts will generally and generously construe efforts to restrict the disclaimer of warranties against the seller or licensor, but it is better to eliminate ambiguity about what you’re willing to disclaim through attention to detail in the agreement.

Most importantly, courts give parties freedom to contract around damages and liability. So, if you want to preserve your ability to recover for the licensor’s breach of warranties, you should be alert about what types of damages or remedies you are willing to let licensors eliminate or cap. If the licensor wants to cap their own liability for breach of warranty, then it is beneficial to seek a correlating cap on your (the licensee’s) liability for breach of other provisions.


  1. 1 Corbin on Contracts § 1.14
  2. Kenneth A. Adams, A Manual of Style for Contract Drafting (4th ed. 2017).
  3. 4 Witkin Sum. Cal. Law Sales § 55.
  4. U.C.C. §2-607, Official Comment 4 (Am. L. Inst. & Unif. L. Comm'n 2023); 89 A.L.R.5th. 319.
  5. U.C.C. § 2-719 (Am. L. Inst. & Unif. L. Comm'n 2023).
  6. U.C.C. § 2-714 Am. L. Inst. & Unif. L. Comm'n 2023); Commercial Law & Practice Guide (Craig H. Averch, et al., eds. 2023).
  7. U.C.C. § 2-312, Official Comment 3 (Am. L. Inst. & Unif. L. Comm'n 2023); Witkin Sum. Cal. Law Sales § 69.

License

Icon for the Creative Commons Attribution-NonCommercial 4.0 International License

E-Resource Licensing Explained Copyright © 2024 by Sandra Enimil, Rachael Samberg, Samantha Teremi, Katie Zimmerman, Erik Limpitlaw is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License, except where otherwise noted.