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Public Works and Government Services Canada

4.70.5.1. Warranty

  1. In a contract for the sale of goods, any affirmation of fact or any promise by the supplier relating to the goods is an express warranty. The warranty provisions in the general conditions do not negate or limit in any way the operation of other relevant warranties that are, as a general rule, implied or imposed by law.
  2. Examples of relevant warranties that are implied by law are:
    1. the fitness of the goods for the purpose intended; or
    2. the merchantable quality of the goods.
  3. These warranties are implied in most contracts for the sale of goods through the International Sale of Goods Contracts Convention Act, a version of which exists in all Canadian provinces and territories except Quebec. In Quebec, the warranty under the Civil Code is a warranty of ownership and of quality, which includes latent defects.
  4. The contracting officer may negotiate an increase to the warranty time period in a contract, subject to client department agreement to the proposed time period and related cost. This change in warranty time period should be addressed in the contract approval document.
  5. Any requests for lessening Canada's full rights at law, a disclaimer, limitation of the contractor's liability, or decrease of the warranty time period, must be reviewed by Legal Services, be acceptable to the client department, and form part of the contract approval document.
  6. It may be necessary to consider obtaining a broader warranty than that contemplated by the warranty provision appearing in the SACC Manual general conditions to cover "symptomatic defects" or "epidemic failures."
  7. These are cases where the same or similar defects have developed in several identical items of finished work, or components, and it is reasonable to assume that the same defects will be found in the total quantity of such items, which have already been delivered, or will be delivered.
  8. Where this type of warranty is requested by the client department, or considered desirable by PWGSC, the contracting officer, in consultation with the client department, must determine the extent and nature of the warranty required, and request Legal Services to prepare a suitable provision to cover the requirement. In the case of negotiated firm price contracts, the contracting officer must obtain the client department's agreement to the estimated cost of this warranty.
  9. The general conditions provide that contractors must carry out warranty work at their own expense. The following interpretations apply:
    1. in the case of firm price contracts awarded as a result of a competitive solicitation, where the procurement process precludes any adjustment to the price quoted, costs incurred as a consequence of warranty consideration must be the responsibility of the contractor;
    2. in the case of negotiated firm price contracts, where contingency for warranty work becomes a factor for consideration during the price negotiations, the amount included in the firm price must be kept to reasonable levels, and must be specifically approved. Supporting details must be part of the cost summary presented in the contract approval document;
    3. in the case of negotiated firm price contracts governed by the Defence Production Act, the contractor must certify that the price is based on costs computed in accordance with Contract Cost Principles 1031-2, which do not permit any increase in reserves for guaranteed work. Therefore, costs for work and/or expenses in order to provide for product correction/adjustment/replacement under warranty requirements, are not to be included in the contract price since provision for these expenses has already been included in the certified price;
    4. in cost reimbursable contracts, the contractor is not allowed to charge any contingency for warranty as an element of cost. If the contractor is required to make good under the warranty provisions, the contracting officer may allow recovery of the reasonable cost incurred for direct labour and direct material only. There is to be no allowance for overhead or profit;
    5. if the contracting officer is of the opinion that reasonable warranty costs may be allowed, then an appropriate clause approved by Legal Services must be inserted in the contract to authorize such costs. The contract should contain a line item providing for the allowance of costs, with or without a maximum estimated expenditure.