Conditions and Warranties: Why Not Have Both?

Business Law Question & answers - Page 4 of 16 - Educate

Conditions and warranties are often viewed independently, as in “one or the other”, but why not both?

Consider a situation where a building is to be purchased and the Buyer is concerned about the septic system servicing the building.

Often, either a Condition or a Warranty will be included in the Agreement.

“This Offer is conditional upon the Buyer determining, at the Buyer’s own expense, that:

(1) all sewage systems serving the property are wholly within the setback requirements of the said property and have received all required Certificates of Installation and Approval pursuant to the Environmental Protection Act;

(2) all sewage systems serving the property have been constructed in accordance with the said Certificates of Installation and Approval;

(3) all sewage systems serving the property have received all required use permits under the said Act or any other legislation; and further, that on inspection, the septic bed is in good working order.

The Buyer shall be allowed to retain at the Buyer’s own expense, a professional in the septic business to make an examination of the septic system.

Seller agrees to allow access to the property for the purposes of a septic inspection and agrees to allow the Buyer to request information as outlined above from the appropriate authorities having jurisdiction.

Unless the Buyer gives notice in writing delivered to the Seller personally or in accordance with any other provisions for the delivery of notice in this Agreement of Purchase and Sale or any Schedule thereto not later than _____ p.m. on the _____ day of __________, 20_____, that these conditions have been fulfilled, this Offer shall become null and void and the deposit shall be returned to the Buyer in full without deduction. These conditions are included for the benefit of the Buyer and may be waived at the Buyer’s sole option by notice in writing to the Seller as aforesaid within the time period stated herein.”

The purpose of the Condition is to permit the Buyer to have a free look, to be able to carefully examine the septic system and conduct his due diligence inspection with experts.

Once the Buyer has all the appropriate information in hand, he then makes a decision whether or not to proceed with the transaction.

However, that really shouldn’t be the end of it. In proceeding further, te Buyer may still want to have a warranty in writing basically about the same matters that were in issue with the Condition.

Consider the following Warranty:

“The Seller represents and warrants, to the best of the Seller’s knowledge and belief, that:

(1) all sewage systems serving the property are wholly within the setback requirements of the said property, and have received all required Certificates of Installation and Approval pursuant to the Environmental Protection Act;

(2) all sewage systems serving the property have been constructed in accordance with the said Certificates of Installation and Approval;

(3) all sewage systems serving the property have received all required Use permits under the said Act or any other legislation; and further, all sewage systems serving the property have been maintained in good working order during the Seller’s occupancy and will be in good working order on closing.

Further, the Seller agrees to provide any and all documentation relating to the sewage system, within the Seller’s possession, or which may be made available to the Seller by the appropriate authorities, and given to the Buyer prior to the last date set for examining title. The Parties agree that these representations and warranties shall survive and not merge on completion of this transaction, but apply only to the state of the property existing at the completion of this transaction.

The Seller represents and warrants, to the best of the Seller’s knowledge and belief, that, during the Seller’s occupancy of the building, the sewage system has been and will be in good working order on closing.

The Parties agree that these representations and warranties shall survive and not merge on completion of this transaction, but apply only to the state of the property existing at the completion of this transaction.”

That Warranty was provided “to the best of the Seller’s knowledge and belief”. Consider using a much stronger Warranty which does not contain this limitation. It’s much stronger and acts as a contractual guarantee:

 Consider the following Warranty (guarantee):

“The Seller represents and warrants, that:

(1) all sewage systems serving the property are wholly within the setback requirements of the said property, and have received all required Certificates of Installation and Approval pursuant to the Environmental Protection Act;

(2) all sewage systems serving the property have been constructed in accordance with the said Certificates of Installation and Approval;

(3) all sewage systems serving the property have received all required Use permits under the said Act or any other legislation; and further, all sewage systems serving the property have been maintained in good working order during the Seller’s occupancy and will be in good working order on closing.

Further, the Seller agrees to provide any and all documentation relating to the sewage system, within the Seller’s possession, or which may be made available to the Seller by the appropriate authorities, and given to the Buyer prior to the last date set for examining title. The Parties agree that these representations and warranties shall survive and not merge on completion of this transaction, but apply only to the state of the property existing at the completion of this transaction.

The Seller represents and warrants, to the best of the Seller’s knowledge and belief, that, during the Seller’s occupancy of the building, the sewage system has been and will be in good working order on closing.

The Parties agree that these representations and warranties shall survive and not merge on completion of this transaction, but apply only to the state of the property existing at the completion of this transaction.”

Consider using both Conditions and Warranties for exactly the same issue.

Brian Madigan LL.B., Broker

www.OntarioRealEstateSource.com

Leave a Reply

Your email address will not be published.