Montgomery Ward & Co., facing court action from the Federal Trade Commission, yesterday agreed to repair or replace, free of charge, some 200,000 woodburning heaters and Franklin fireplaces sold with improper installation instructions that could lead to home fires.

According to an FTC complaint, Wards gave customers false and confusing information that may have led some of them to install the wood stoves at unsafe distances from combustable walls.

As part of its agreement with the FTC, which still must be approved by the commission, Wards will place full-page notices in its October 1979 catalog and spring and summer 1980 catalogs offering to relocate certain heaters to recommended minimum clearance distances from combustable walls. In addition, Wards will also offer to install heat shields between certain Franklin stoves and combustable walls.

Consumers will also have the option of refusing the move or the shields, and have the stove removed, receiving a refund of the full purchase price. Wards said it would make "reasonable repairs" necessitated by the removal. That option, however, will not be mentioned in the catalog ads.

The catalog ads are necessary, the FTC said, because the company says it has no records of who purchased the stoves in question.

Although Wards claims there have been no reported incidents involving the stoves, the company agreed to state in its ad that "failure to move the heater .. . could cause a fire."

FTC official Richard Kelly said that the commission had no records of fires it could attribute to the Wards stoves, "but there have been fires caused by wood stoves located too close to combustion sources."

FTC alleged that one of the models in question, for example, Ward's instructions said the heater could be placed safely 18 inches from a combustable wall, while actual building and fire codes call for at least a 36-inch space between the two.