An untruthful affirmative warranty makes an insurance contract void at its inception. If a promissory warranty becomes true, the insurer may cancel coverage at such time as the warranty becomes untrue. For example, if an insured warrants that property to be covered by a fire insurance policy will never be used for the mixing of explosives, the insurer may cancel the policy if the insured decides to start mixing explosives on the property. Warranty provisions should contain language indicating whether they are affirmative or promissory. Many states have created laws that protect insureds from cancellations due to misrepresented warranties.
Courts tend to favor insureds by classifying indefinite warranties as affirmative.
Many state legislatures have created laws providing that no misrepresented warranty should cancel an insurance contract if the misrepresentation was not fraudulent and did not increase the risks covered by the policy. Every contract for the sale or lease of goods contains a warranty that the seller or lessor actually owns the property. Courts hold that this warranty is implied if it is not included in the contract, and a seller or lessor cannot disclaim it. The two basic types of sales warranties are express warranties and implied warranties. Express warranties are specific promises made by the seller and include oral representations, written representations, descriptions of the goods or services, representations in samples and models, and prior quality of the goods or services.