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Definition - What does Warranty mean?

A warranty is a clause typically included in a sale contract and asserts that statements made in the contract are true and that goods or services purchased will meet expectations. If conditions are not met, it legally protects the buyer because the seller is obligated to reimburse or provide a certain repayment.

Divestopedia explains Warranty

A warranty is, in essence, an insurance policy for the buyer. It provides assurance to the buyer that specific conditions are in place and that certain steps will be taken if something were to go awry. Since warranties are guarantees of certain conditions and expectations, the selling party must fulfill these expectations and truthfully represent what they are selling. Typically, in any situation that a warranty exists, if the buyer has made the purchase and feels as though there was a breach in contract of the warranty, the seller is obligated to reimburse the buyer.

An example of this could be if a buyer purchases a firm and the warranty states that all existing machinery is in working condition, but upon purchase, the buyer discovers that it is not. The seller is then liable for this under the warranty clause.

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