In my last article, I discussed the basics of a contract, which consists of an offer, acceptance and consideration. In this piece, I will examine some other important components found in a contract.
Modifications
A modification is any change in whole or part to the terms of the contract. Many agreements explain how alterations can be made. If you sign a contract, and it explains that you have to make changes in writing, the other party doesn’t have to honor your modification request via a phone call.
Unless otherwise noted, modifications can be made at any time, but all parties must agree to them. Additionally, consideration is needed for a change, but in a sales contract, it’s not required.
Waivers
A waiver or a release is an agreement to voluntarily relinquish the right to take legal action. Waivers need to be part of a legally enforceable contract. They are useful when there is the potential for risks. For example, a seller may insist that its buyer waives its right to fees for delivering goods late. A company may ask its customer to forgo his right to pursue legal action if he is harmed on its premises; thus, waivers can limit the amount of claims filed against a party.
Warranties
A warranty is a promise that something is true. An assurance that a product will do what it’s intended to do. Warranties can be expressed or implied. There are several implied warranties, such as, the Warranty of Merchantability, the Warranty of Fitness for Particular Purpose, the Warranty of Free and Clear Title, and the Warranty Against Infringement.
Warranties can be disclaimed when the seller informs the buyer that he will not be responsible for any promises made about the good. The Warranties of Merchantability, Fitness for a Particular Purpose, and Infringement can be disclaimed by using words like, “as is”. The Warranty of Free and Clear Title can be disclaimed when the buyer has reason to know by the seller’s specific language or actions that the seller doesn’t have good title, and he’s only conveying as much as he has.
Warranties should be part of the contractual agreement, not in a separate document. In most cases, the disclaimer must be in crystal clear writing, and conspicuously located in the contract.
Conclusion
Modifications, waivers and warranties are some important elements often found in a contract.
