Warranties in Technology Contracts – Defining Reliability & Risk

In technology contracts, the first question every buyer asks is simple — what if the product fails or the service breaks down? That’s where warranties come in. They’re not just comfort words; they’re legally binding promises defining what the vendor guarantees and how the buyer can seek remedies if those guarantees fall short. 1️⃣ Warranty of Functionality Every software, hardware, or cloud service must work as described. The vendor warrants that the deliverable will perform in line with the technical specifications and documentation. If the product malfunctions, the vendor must repair or replace it at no extra cost. 💡 Buy-side Tip: Tie this warranty to a defined acceptance test period and clear performance benchmarks. 2️⃣ Intellectual Property (IP) Warranty Vendors must own or have licenses to all software components used. They warrant that customer use won’t infringe any third-party rights. If an infringement claim arises, the vendor bears the responsibility and must defend and indemnify the buyer. 💡 Practical View: Always link this clause to an IP indemnity for stronger protection. 3️⃣ Professional Services Warranty In consulting and implementation agreements, the vendor warrants that services will be performed in a professional and workmanlike manner. Resources should be qualified and trained for the task. 🚀 Negotiation Point: Buyers prefer to tie this warranty to SLA performance metrics. 4️⃣ Data Protection & Compliance Warranty Under GDPR, DPDP, and CCPA, vendors must implement proper data security controls. They warrant compliance with privacy laws and agree to notify the buyer of any data breach. 🔐 Tip: Always attach a Data Processing Addendum (DPA) to document these obligations. 5️⃣ Virus-Free & Security Warranty The vendor guarantees the software is free from malware and harmful code. All systems should undergo security scanning before deployment. ⚙️ Buyer Protection: Add an immediate remedy – repair or refund if security compromise is found. 6️⃣ Disclaimer of Warranties To limit risk, vendors include disclaimers like: “No implied warranties beyond those expressly stated.” “No warranty of merchantability or fitness for a particular purpose.” “Service provided ‘as is’ after warranty period.” ⚖️ Balanced Middle Ground: Allow reasonable disclaimers but insist that core functional and IP warranties remain non-disclaimable. 7️⃣ Remedies for Breach of Warranty If a warranty is breached, buyers may demand one of the following: Repair or replace the defective product. Modify software to remove infringement risk. Refund license fees proportionally. Terminate the agreement if breach persists. 🧾 Drafting Tip: Make these remedies exclusive but realistic — avoid vague “best efforts” language. 8️⃣ Duration of Warranty & Liability Limit A typical warranty period is 12 months post-acceptance. Vendors often cap liability at the contract value or fees paid in the past 12 months. Buyers should seek exceptions for data breach and IP infringement. 9️⃣ Practical Takeaways Tie warranties to the Statement of Work or SLA. Align remedies with termination rights. Ensure warranties survive termination for at least 90 days. Demand proof of vendor insurance coverage. Avoid excessive disclaimers that nullify protections. 🔟 Conclusion In technology contracts, warranties build trust and clarity between parties. They protect buyers from defective delivery and hold vendors accountable for quality and compliance. A well-drafted warranty clause is not just legal formality — it’s the cornerstone of business continuity and client confidence. This article is written by Aparna Tech Contracts, specialists in drafting and negotiating technology and procurement agreements for global clients. 📧 Reach us at info@aparnatechcontracts.com | aparnatechcontracts.com