Legal Definitions - promissory warranty

A promissory warranty is a specific type of contractual promise where one party guarantees that a certain fact will be true or a particular action will be performed at some point in the future. Unlike a statement about a current condition or past event, a promissory warranty creates an obligation for the promising party to ensure a future state or performance. If this future promise is not fulfilled, it constitutes a breach of contract, which can lead to legal remedies for the non-breaching party, such as damages or, in some cases, the termination of the contract.

Here are some examples illustrating promissory warranties:

• Example 1: Commercial Property Insurance

  A manufacturing company purchases a property insurance policy. The policy includes a clause stating that the company "warrants that it will install a new, state-of-the-art fire suppression system within 90 days of the policy's effective date." This is a promissory warranty because the company is promising a future action (installing the system) that is crucial to the insurer's assessment of risk. If a fire occurs after 90 days and the system has not been installed, the insurer might argue that the company breached the promissory warranty, potentially affecting coverage for the claim.

• Example 2: Software Development Agreement

  A client hires a software development firm to create a custom application. The contract includes a clause where the firm "warrants that all third-party libraries and components used in the application will be open-source and free from any licensing fees for the lifetime of the product." This is a promissory warranty because the firm is making a promise about the future nature of the components they will use. If, after delivery, it's discovered that a key component requires a proprietary license, the firm has breached this promissory warranty, even if the application functions correctly.

• Example 3: Sale of a Business

  When selling a small consulting firm, the seller includes a clause in the sale agreement stating that they "warrant that they will not solicit any of the firm's existing clients for a period of three years following the closing date." This is a promissory warranty because it's a promise about the seller's future conduct (not soliciting clients). If the seller contacts and attempts to win business from former clients within that three-year period, they would be in breach of this promissory warranty, potentially causing financial harm to the buyer.