What are contractual guarantees? – Lexology


“Guarantees” in the context of contracts refer to a particular type of contractual term. Since courts may have different ways of enforcing contracts or awarding damages, there has been a historical development of three “levels” of contract duration, each with its own remedies.

There are two basic remedies for breach of contract. The first concerns damages; the second is the right to withdraw from the contract. Whether or not a right to terminate exists depends entirely on the seriousness of the breach and the classification of the breached clause.

A guarantee is considered the bottom of the scale in contractual terms. This does not mean that warranties are irrelevant, just that breach of a warranty only gives rise to damages, monetary compensation, rather than a right to terminate the contract or sue for a claim. specific enforcement (a court order that a party performs its contractual obligations).

Guarantees can be specified in contracts or contractual terms can be inferred by a court as guarantees.

What does this have to do with buying a property?

Most land sales contracts will contain clauses in which the buyer or seller will “guarantee” certain conditions differently. For example, the terms and conditions of the ACT Law Society provide in clause 7 various things that the seller will guarantee. By making these warranty terms, a party’s only remedy for a breach of these terms will be for damages, not a right to terminate the contract.

Various laws often include implied warranties in contracts for the sale of land, which means that if these conditions are not written into the contract, they will still be considered guarantees under the contract. An example is the warranty implied in civil law (property) 2006 (ACT):

264 Implied guarantees

(1) The guarantees (the implied warranties) of this article are considered to be part of a contract for the sale of housing.

(2) The seller of a unit guarantees that on the date of the contract:

(a) to the knowledge of the seller, there are no hidden or apparent unfunded defects in the common property or the assets of the owners’ company, other than the following:

(i) defects resulting from normal wear and tear;

(ii) defects disclosed in the contract; and

When buying or selling a property, make sure you are aware of all warranties involved and that you understand the consequences of breach of these warranties or their breach by the other party to the contract. .

The most important thing to remember is that the breach of a warranty does not usually give rise to the right to terminate the contract or to have a specific enforcement order in court.

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