WARRANTIES
What is warranty?
Warranty is a guarantee or
assurance about goods.
How to classify warranty?
Normally, a seller makes two types
of warranties: warranty of title and
warranties relating to performance
1. A warranty of title guarantees the
seller’s right to transfer goods to a
later buyer.
2. Warranties of performance are
designed to encourage honesty in
transactions because they assure the
buyer that the goods will conform to
certain standards of performance.
Warranties of performance are
divided into express and implied.
(1)Express warranties are the
guarantees which result from the
parties’ expectations, and they arise
from the specific words of the
parties and must become part of the
basis of their bargain.
(2)Implied warranties are imposed by
Article 2 of the UCC.
A. the warranty of merchantability
B. the warranty of fitness for a
particular purpose
I.
Warranties of title
The UCC protects the buyer’s
expectations as to good title by means
of the warranty of title. Title warrany
arises automatically in most sales
contracts.
(1) The seller warrants that she has good
and valid title and the right to
transfer the goods. If the seller’s title
proves defective, the buyer has a right
to recover damages from the seller.
1.
(2) The seller also warrants that she will
deliver the goods free from any
security interests or liens which the
buyer did not know about at the time
they contracted.
(3) A merchant also warrants to the buyer
that the goods do not violate or
infringe on a third person’s patents,
copyrights or trademarks.
II. Express warranties
1. T or F Statements
(1) An express warranty can be given only
by the seller. It is a part of “the basis of
the bargain” according to the UCC.
(2) Express warranties cannot be created
orally; they have to be written.
(Express warranties may be created
orally; they do not have to be written.)
(3) The seller is not required by law to
provide any express warranties.
2. Which of the following are express warranties?
(1) Borok, a car dealer, affirms the
manufacturer’s promise that the engine will
not need substantial repair during the first
50,000 miles.
(2) The car dealer, Borok, might say to a
prospective buyer, “This is a dandy car—one
you’ll enjoy for years.”
(3) Cardley, a furniture salesman, describes the
covering on a couch as being 100% nylon,
specially treated to be stain- and waterrepellant.
(4) Cardley, the furniture salesman, tells his
customers, “You won’t find a finer couch for
5. Compton, a dealer in leather goods,
shows an expensive leather suitcase to a
customer and agrees to ship the buyer
one “just like it”.
(2. This is not an express warranty. This is only
opinion. It is not based on fact. it is not
provable one way or the other.
4. This is not an express warranty. He may seem
to be making a factual comparison, but in
reality he’s just applying his own subjective
standards. Such claims are typically referred to
as “puffing. They are not binding on the seller.)
III. Implied warranties
1. T or F statements
(1) Implied warranties are created by the
seller.
(Implied warranties are not created by
the seller. Rather, they are imposed by
law.)
(2) Unlike express warranties, implied
warranties do not have to be specifically
stated by the manufacturer or seller.
2. Warranty of merchantability
A large number of lawsuits concerning the
warranty of merchantability have involved
food and drink. Therefore, the courts have
developed some special tests to determine
merchantability in such cases, such as
disputes arising from cases where a
mouse skeleton was found in a soda
bottle, or peach pits in fresh fruits pies.
These are the foreign-natural test and the
reasonable-expectations test.
(1) The foreign-natural test is applied
whenever consumers discover some substance
within food or drink that they feel should not
be there. The rules of this test are simple: If
the undesired substances is “foreign” to the
product, the product doesn’t pass the test;
however, if the substance is “natural”, even
though it might be be undesirable, the seller
cannot be held in breach.
(2) The reasonable-expectation test is the
court’s way of asking what a reasonable person
would expect to find in food or drink—even if
the substance is not foreign.
3. Implied warranty of fitness for a
particular purpose
(1) A “particular purpose” of the buyer
differs from the “ordinary purpose”
(merchantability). Goods can be
merchantable but unfit for a buyer’s
particular purpose.
(2) The product may be covered by a
warranty of fitness for a particular
purpose only if certain conditions are met:
First, the seller must be aware that the
buyer is contemplating that particular use
for the goods.
Second, the seller must be aware that the
buyer is relying on the seller’s expertise in
selecting the right goods for the purpose.
And finally, the buyer must not restrict the
seller’s range of choices by imposing
criteria that make the proper choice
difficult or impossible
case:
Helman buys a set of racing tires for his street
rod from dealer Rodman. The manufacturer’s
label attached to the tires reads: “Dry weather
use only-not suitable for use on wet pavement.”
Rodman, however, tells Helman to ignore the
label; the tires are “ideal” for use in rain.
Helman specifically wants a tire he can use in
both wet and dry conditions, but relies on
Rodman’s judgment. The first time Helman
drives on wet pavement, his car skids
uncontrollably and crashes. Which of the
following is most likely true, based on the
information presented?
a. Rodman has violated the warranty
of fitness for a particular purpose.
b. Rodman has violated the warranty
of merchantability, but not fitness
for a particular purpose.
c. Rodman has vilolated no warranties;
Rodman’s claim that the tires were
“ideal” was just an opinion.
4. Warranty disclaimer
----a clause in the sales contract whereby the
seller attempts to eliminate its liability. For
example, the seller may try to modify the
coverage of an implied warranty, or to limit its
duration.
(1) Express warranty disclaimers (UCC Section 2316(1))
How to make express warranty disclaimers?
A. in language that is specific, clear and
unambiguous
B in language that is called to a buyer’s
attention
(2) Implied warranty disclaimers (UCC
section 2-316 (2))
To exclude or modify the implied
warranty of merchantability, the seller
must:
A. use the word merchantability
B. make the disclaimer conspicuous if it is
in writing
To exclude or modify the implied
warranty of fitness for particular
purpose, the seller must:
A. use a writing
B. make the disclaimer conspicuous
(How to make a disclaimer conspicuous?
-(1) A reasonable person ought to have noticed it.
(2) Capital letters, larger type, contrasting type, and
contrasting colors usually satisfy this requirement. )
(3) The difference between merchantability
warranty disclaimer and fitness warranty
disclaimer
A. Unlike the fitness warranty disclaimer, a disclaimer of
the implied warranty of merchantability can be oral.
B. Disclaimers of the merchantability must always use
the word merchantability. No special words are
needed to disclaim the fitness warranty.
Example:
What can the following conspicuous
written statement disclaim, the
merchantability warranty or fitness
warranty?
“THERE ARE NO WARRANTIES WHICH
EXTEND BEYOND THE DESCRIPTION ON
THE FACE HEREOF”
----It will disclaim the implied warranty of
fitness.
(4) Other ways to disclaim implied
warranties (UCC section 2-316(3)(a).
A. The seller can also disclaim either implied
warranty by using such terms as with
all faults, as is, and as they stand.
These commercial terms of art ordinarily
refer to used goods, and so they may be
ineffective as disclaimers if (a) new
products are sold; (b) products of any
sorts are sold to an ordinary consumer.
B. The buyer’s refusal to inspect goods can
have the same practical effect as a
disclaimer.
C. An implied warranty can be excluded or
modified by course of dealing (the parties’
previous conduct), course of performance
(the parties’ previous conduct under the
same contract) or usage of trade (any
practice regularly observed in the trade).