Before I begin this post, I should say that I have not done much legal research on this topic. Therefore, it should not be considered legal advice as much as it is an observation about common practice.
One of our students asked if there was a difference between a “warranty” and a “guarantee.”
In practice, these words are used pretty much interchangeably. They are meant to convey that a buyer of a product will have some recourse if something goes wrong.
Perhaps the biggest difference that I’ve observed in practice (and it is a small difference) is that “guarantees” sometimes use buyer satisfaction as the criterion to determine whether or not a remedy is due to the buyer. As in “satisfaction guaranteed or your money back.”
In contrast, for a remedy to be due to the buyer under a warranty, there usually is other objective criteria such as durability for a certain period of time or conformance to specifications. There are also specific warranties that may apply under the law.
While I’ve seen some (non-expert) people post that warranties are time-bound and guarantees are not, I feel that this is untrue. Most sellers do not extend their guarantees open-endedly. For example, Next Level Purchasing offers a money-back guarantee for 30 days to those individuals who enroll in the SPSM Certification Program. I’ve also seen “lifetime warranties” offered.
I believe both to be legally enforceable. You don’t need the word “warranty” or “guarantee” in a clause of a contract for that clause to become a legal obligation. But it always does help to specify in the warranty or guarantee to indicate what remedy the buyer will have in the event the warranty or guarantee is exercised by the buyer.
Which term do I prefer to use in contracts? Warranty.
Simple. Because the Uniform Commercial Code – which is the body of law that governs sales/purchase transactions for goods between parties in the USA – uses the term warranty.
Being consistent with the terminology of the law is never a bad thing. It could make a court case easier to win, if it ever came to that.
So that’s my take on warranty vs. guarantee.
For more contract-related educational material, check out our online class “Supply Management Contract Writing.”
To Your Career,
Charles Dominick, SPSM
President & Chief Procurement Officer
Next Level Purchasing, Inc.
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