Misrepresentation, Non-Disclosure and Breach ... - Law Commission

Creating a warranty
Express warranties
2.54 Most warranties are created expressly by the parties. There is no single form of
words that confers warranty status on a term. “An express warranty may be in
any form of words from which the intention to warrant is to be inferred.” 52 The use
of the word “warranty” has been said to be indicative but by no means decisive. 53
As Lord Justice Rix put it in HIH Casualty and General Insurance Ltd v New
Hampshire Insurance Co, 54
It is a question of construction, and the presence or absence of the
word “warranty” or “warranted” is not conclusive. One test is whether
it is a term which goes to the root of the transaction; a second,
whether it is descriptive or bears materially on the risk of loss; a third,
whether damages would be an unsatisfactory or inadequate remedy.
The case concerned film finance insurance, in which the original insured had
undertaken to make six films. This was held to be a warranty, even though the
word warranty was not used, because it was a fundamental term with a direct
bearing on the risk.
2.55 Because of the draconian effect of a warranty, the courts will sometimes interpret
it strictly so as to avoid giving it effect. They may accept that it is a warranty but
hold that it does not apply, or has not been broken. Thus they may hold that:
(1) The warranty applies only to past or present facts, and not to the
future. 55 For example, in Hussain v Brown, the insured had signed a
proposal form to say that their premises were fitted with an intruder
alarm. 56 This was said to be the basis of the contract. The statement was
true at the time of the contract, though the firm later failed to pay the
charges and the alarm service was suspended. The Court of Appeal held
that the statement on the proposal form related only to present facts and
did not make any promises about the future. Any continuing warranty
would be a “draconian term” and “if underwriters want such protection
then it is up to them to stipulate for it in clear terms”. 57
52 Marine Insurance Act 1906, s 35(1).
53 Barnard v Faber [1893] 1 QB 340.
54 [2001] 2 Lloyd’s Rep 161; [2001] EWCA Civ 735.
55 Woolfall & Rimmer v Moyle [1942] 1 KB 66; Kennedy v Smith 1976 SLT 110; Hair v
Prudential Assurance Co Ltd [1983] 2 Lloyd’s Rep 667.
56
[1996] 1 Lloyd’s Rep 627.
57 Above at 630 by Saville LJ.
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