Chapter 23
Sales and Lease
Warranties
© 2004 West Legal Studies in Business
A Division of Thomson Learning
1
Overview
A warranty is an assurance of fact upon which a
party may rely.





Warranty of Title.
Express Warranty.
Implied Warranty of Merchantability.
Implied Warranty of Fitness for a Particular Purpose.
Implied warranty arising from the course of dealing
or trade usage.
© 2004 West Legal Studies in Business
A Division of Thomson Learning
2
§1: Warranty of Title
Automatically arises in most commercial sales
transactions.
UCC-312 creates 3 warranties:
 Good Title.
 No Liens.
 No Infringements.
© 2004 West Legal Studies in Business
A Division of Thomson Learning
3
Warranty Title Disclaimer
Title warranty can generally be disclaimed only
with specific language in contract.
Circumstances may be obvious to clearly
indicate disclaimer of title, such as a sheriff’s
sale.
© 2004 West Legal Studies in Business
A Division of Thomson Learning
4
§2: Express Warranties
Can be oral or written-- don’t have to use the
words “warrant” or “guarantee.”
 Any Affirmation or Promise.
 Any Description.
 Any Sample or Model.
© 2004 West Legal Studies in Business
A Division of Thomson Learning
5
Express Warranties [2]
To create an express warranty, the affirmation of
fact must become the “basis of the bargain.”
And Buyer must rely on warranty when he enters
into contract.
Case 23.1: Genetti v Caterpillar Inc (1999).
© 2004 West Legal Studies in Business
A Division of Thomson Learning
6
Express Warranties [3]
Statements of Opinion and Value.
 Generally excludes “puffing” – “Best car in town”,
not an express warranty.
 However, expert opinion is not puffery.
© 2004 West Legal Studies in Business
A Division of Thomson Learning
7
§3: Implied Warranties
Warranty inferred at law based on the
circumstances or nature of the transaction.
Under the UCC, merchants warrant the goods
they sell are “merchantable”, i.e., fit for ordinary
purpose for which such goods are sold.
© 2004 West Legal Studies in Business
A Division of Thomson Learning
8
Implied Warranty of
Merchantability
Automatically arises from merchants.
Goods are of average, fair, or medium-grade.
Adequately packaged and labeled.
Conform to promises on label.
Have a consistent quality and quantity among the
commercial units.
Case 23.2: Webster v. Blue Ship Tea Room
(1964).
© 2004 West Legal Studies in Business
A Division of Thomson Learning
9
Implied Warranty of Fitness
for a Particular Purpose
Arises by any Seller who:
 Knows the particular purpose for which the goods are
being bought; and
 Knows the buyer is relying on seller’s skill and
judgment to select suitable goods.
© 2004 West Legal Studies in Business
A Division of Thomson Learning
10
Implied Warranty Arising
from Course of Dealing or
Trade Usage
Arises when both parties to a contract have
knowledge of a well-recognized trade custom.
Courts infer that both meant this custom to apply
to their transaction.
© 2004 West Legal Studies in Business
A Division of Thomson Learning
11
§4: Overlapping Warranties
Occurs when two or more warranties made in a
single transaction:
 If warranties are consistent, they are construed as
cumulative.
 If inconsistent:
• First: implied warrant of fitness for a particular purpose.
• Then: express.
© 2004 West Legal Studies in Business
A Division of Thomson Learning
12
§5: Warranties
and Third Parties
At common law only the Buyer could sue the
Seller because she is the one in privity of
contract with the Seller.
UCC 2-318 provides 3 alternatives from which
the states may choose.
© 2004 West Legal Studies in Business
A Division of Thomson Learning
13
§6: Warranty Disclaimers
Express Warranties can be disclaimed:
 If they were never made (evidentiary matter).
 If a clear written disclaimer in contract with specific,
unambiguous language and called to Buyer’s
attention (BOLD CAPS UNDERLINED).
© 2004 West Legal Studies in Business
A Division of Thomson Learning
14
Warranty Disclaimers [2]
Implied Warranties:
 Merchantability: “As Is,” “With All Faults.”
 Fitness for a Particular Purpose: must be in writing
and conspicuous.
 If Buyer has the right to fully inspect and either: does
so or refuses to do so, warranties are disclaimed as to
defects that could reasonably be found.
Case 23.3: International Turbine Services v.
Vasp Brazilian Airlines (2002).
© 2004 West Legal Studies in Business
A Division of Thomson Learning
15
§7: Statute of Limitations
Action for Breach of Warranty :
 Begins to toll at tender.
 Buyer must notify Seller within a reasonable
time.
 Buyer must sue within four years after cause of
action accrues.
If warranty is for future performance, action
accrues when performance happens and
breach is discovered.
© 2004 West Legal Studies in Business
A Division of Thomson Learning
16
§8: Magnuson-Moss
Warranty Act
FTC enforces; Attorney general or
consumer can bring action.
Modifies UCC for consumer sales.
Only applies when written warranties are
made by Seller (including a service
contract).
 If goods > $10 label “full” or “limited.”
 If goods > $15 Seller must make additional
disclosures.
© 2004 West Legal Studies in Business
A Division of Thomson Learning
17
Magnuson-Moss [2]
Full Warranty: Seller must repair or replace.
Limited Warranty must be conspicuous.
 If limit of time only must say, e.g., “full twelvemonth warranty.”
UCC Implied Warranties:
 May not be disclaimed, but can be limited, but must
correspond with time of express warranty.
© 2004 West Legal Studies in Business
A Division of Thomson Learning
18
§9: Warranties
Under the CISG
Art. 35: uses the word “conformity” instead of
warranty, but very similar to UCC.
© 2004 West Legal Studies in Business
A Division of Thomson Learning
19
Law on the Web
West’s Encyclopedia of American Law.
Grimes and Reese LLC on Warranties.
Legal Research Exercises on the Web.
© 2004 West Legal Studies in Business
A Division of Thomson Learning
20