The Warranty That’s Over Before It Starts
Now, that would be the kind of warranty you should give, but if you are on the receiving end, was that a little bit of a trick?
Let’s assume that Seller Sam gives a warranty about one of the kitchen appliances to Buyer Bill. The specific warranty about the chattels reads as follows:
The Seller represents and warrants that the chattels and fixtures as included in this Agreement of Purchase and Sale will be in good working order and free from all liens and encumbrances on completion.
The stove did not work properly when Bill moved into the house.
FACTS to consider:
Here are some relevant dates:
30 May: Bill views house
1 June: Agreement of Purchase and Sale
30 June: Sam moves out
31 July: deal closes
10 August: Bill moves in, determines stove is not working properly
You can well imagine what Sam is going to say: “….well, it was working just fine on 30 June….”.
Is there any liability? What can Bill do? How does Sam protect himself?
Is the stove covered by the warranty?
Yes, it was a chattel.
What was the warranty?
It was to be in good working order?
When was completion?
The transaction closed at 2:15 pm on 31 July.
Was it in good working order on completion?
Sam: it worked on 30 June
Bill: it didn’t work on 10 August
Interesting, but what about 2:15 pm on 31 July?
There is NO actual evidence.
So, what would you do if you were the Judge? On the balance of probabilities, who do you think is right? That test is a 50/50 proposition. But, the plaintiff is under a legal obligation to prove his case. If you are stuck on 50/50, Bill fails in his claim. You have to conclude 51/49 in Bill’s favour to award Judgment to him.
The trial Judge in a recent case (Robinson v. Hobbs-Lingard, 2015) went with Sam’s position. However, in the reasons for Judgment would have given the benefit of the whole day to Bill. But, it should be noted that this case is not binding on other Courts. So, another Judge could easily be a little stricter.
The expression “on completion” means precisely that, namely 2:15 pm on 31 July, the actual time of closing.
If the clause had read “on the date of completion”, that would have taken the warranty up to midnight, or rather 11:59:59 pm to be precise.
Lacking the expression “this warranty shall not merge, but shall survive the closing”, this particular warranty was over before it started. So, it was gone by 2:15 pm on 31 July. It expired at 2:14:59 pm. That was the reason for the decision in this case.
Not much of a warranty. Bill didn’t even get a chance to turn the knob on one of the burners, much less, try to cook a 25 lb. turkey.
Brian Madigan LL.B., Broker