A warranty is a promise the seller makes in the sale agreement that something about the business is true. If it turns out not to be true, the buyer can make a claim in accordance with the procedures for warranty claims set out in the agreement.
Technically, it is a contractual statement of fact about the target made by the seller in the share sale or asset sale agreement, breach of which sounds in damages on a contractual measure.
Warranties in an Australian deal typically run to several pages and cover ownership of the shares, accuracy of the accounts, tax, employees, intellectual property, material contracts, litigation, regulatory compliance, and environment. The buyer wants the list long and the language absolute. The seller wants it shorter, qualified by knowledge where possible, and qualified by materiality where not.
Warranties do not sit alone. They are read against the disclosure letter (which carves out what the seller has told the buyer), the liability cap (the most the seller can ever pay), the basket (the threshold claims must clear), the survival period (how long the buyer has to bring a claim), and the knowledge and materiality qualifiers sprinkled through the list. The headline warranty list is the easy part. The architecture around it is where the exposure actually lives.
What you as a seller should push back on: absolute warranties about matters outside your direct knowledge (third-party conduct, regulator behaviour, claims not yet on foot), broad operational warranties (employment, IP infringement, contract compliance) without a materiality qualifier, and an undefined or unlimited “Sellers’ Knowledge” pool that sweeps in the entire business rather than named individuals.