Why Warranty Chattels and Fixtures?

Standard in most Agreements of Purchase and Sale is the following provision:

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 Parties agree that this representation and warranty shall survive and not merge on completion of this transaction, but apply only to the state of the property at completion of this transaction.

My question is why?

If you are acting for the Seller I recommend that you strike out the above provision if it is in the offer you are assisting the Seller with and include the following:

The Buyer acknowledges that there is no express or implied warranty by the Seller on the chattels and fixtures included in this Agreement of Purchase and Sale.

If you are acting for the Buyer of course you would ask for this BUT even if you get it – it is your responsibility to explain to the Buyer when and how this can be relied upon.

You need to explain that this is a promise that the items listed will work on the day of closing not one day longer. If they in fact do not work on the closing day (i.e. the first day you try the washer it does not work) of course the Buyer should feel they can tell their agent about it. The agent should be the first person to get involved. If between the agents there is no satisfaction of course the next step should be for the Buyer to inform their solicitor. The solicitor should then write to the Seller’s solicitor and request reimbursement for repairs or a payment representing a fair price for that used item. More times than not the solicitor will write back and say it was working on the day of closing, go fish.

Your/my clients need to be prepared for this result. If it is a small item it is best to have the buyer acknowledge this item was not a factor in the purchase price and move on. If it is a large costly item, the Buyer should be informed that they can bring a small claims court action for an amount up to $25,000. The warranty set out above will be the basis of such a claim.

Another alternative would be to include a holdback. Holdbacks were commonly used in the past. I assume they are not standard any longer because of the extra work involved to administer the holdback. Also the holdback is only the solution if it is very carefully drafted to allow for no need for further agreement to be required.

The content of this article is intended to provide a general guide to the subject matter. The information does not constitute legal advice and a solicitor and client relationship is not created.