warranty liability

Warranty liability for certain failed components in a converted vehicle or engine may transfer from the original equipment manufacturer to the conversion manufacturer.

It is usual to seek to limit warranty liability to the amount of the purchase consideration and sometimes, especially in very large transactions possibly with a high property content, a much smaller sum is negotiated.

On March 30, 2009 President Barack Obama issued a US Government guarantee of Chrysler's warranty liabilities, and publicly stated the U.S. Government will back the warranties on Chrysler vehicles if the company were to go out of business.

In theory it is possible to obtain insurance against warranty liability (e.g. Directors and officers) but in practice the insurers are normally so demanding in the kind of confirmations they require and so restrictive as to what they will insure (eg not taxation) that this is rarely practicable or worthwhile.