Chapter 22
Sales and Lease Warranties
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.
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§1: Warranty of Title
Automatically arises in most commercial
sales transactions.
UCC-312 creates 3 warranties:
Good Title.
No Liens.
No Infringements.
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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.
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§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.
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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.
Statements of Opinion and Value.
Generally excludes “puffing” – “Best car in
town”, not an express warranty.
However, expert opinion is not puffery.
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§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.
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Implied Warranty of
Merchantability
Automatically arises from merchants.
Goods are of average, fair, or mediumgrade.
Adequately packaged and labeled.
Conform to promises on label.
Have a consistent quality and quantity
among the commercial units.
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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.
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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.
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§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.
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§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.
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§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).
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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.
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§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.
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§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 additional
disclosures.
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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
twelve-month warranty.”
UCC Implied Warranties:
May not be disclaimed, but can be limited, but
must correspond with time of express warranty.
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§9: Warranties
Under the CISG
Art. 35: uses the word “conformity”
instead of warranty, but very similar to
UCC.
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Case 22.1: Genetti v. Caterpillar
(Express Warranties)
FACTS:
Genetti bought a new GMC truck and trailer for
$97,043 from Omaha Truck Center, Inc.
The truck was equipped with a model 3116
medium-duty diesel engine manufactured by
Caterpillar, Inc.
GMC and Caterpillar expressly warranted the
truck for three years or 150,000 miles.
Over the next seven months, the truck broke down
four times. Each time, Genetti lost the use of the
truck, time and money, including a fourth repair bill
of $12,000.
Genetti sued GMC and Caterpillar for breach of 19
Case 22.1: Genetti v. Caterpillar
(Express Warranties)
HELD: FOR GENETTI.
The court entered separate judgments against
GMC and Caterpillar in favor of Genetti on the
express warranty claim.
The manufacturers had argued that plaintiff could
not recover for a breach of express warranty
simply by asserting “engine failure.”
Looking at the evidence, a jury using common
sense and experience could reasonably arrive at
the conclusion that the * * * breakdown[s] [were]
caused by a defect in the engine and should have
been covered by the warranty.”
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Case 22.2: Felley v. Singleton
(Express Warranties)
FACTS:
Felley bought a used car from Singleton who told
Felley the car had no brake and the car was in
good mechanical condition.
Almost immediately, Felley had to replace the
clutch, and the car developed serious brake
problems within a month.
A technician at Car X Muffler later said that the
problems probably existed when Felley bought the
car.
Felley sued Singleton and ground of breach of
express warranty and the court ruled for Felley.
Singleton appealed.
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Case 22.2: Felley v. Singleton
(Express Warranties)
HELD: AFFIRMED. FOR FELLEY.
Singleton asserted he is not an automobile dealer
or mechanic with specialized knowledge of the
brake and clutch systems of the car and therefore
their statements were merely expressions of
opinion.
The court responded that “affirmations of fact
made during a bargaining process regarding the
sale of goods are presumed to be part of the basis
of the bargain unless clear affirmative proof to the
contrary is shown.”
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Case 22.3: Borden v. Advent
(Disclaimer of Implied Warranty)
FACTS:
Borden sold Aquablak (an ingredient in
water-based inks) to Advent Ink Co.
On the front of the invoice, was the phrase “SEE
REVERSE SIDE.” On the back was a list of
nineteen conditions, starting with a disclaimer of
warranties.
The Aquablak caused problems for one of
Advent’s customers causing Advent to loose the
account and go out of business. Advent did not
pay for the Aquablak.
Borden sued and Advent counterclaimed Aquablak
had not complied with implied warranties.
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Case 22.3: Borden v. Advent
(Disclaimer of Implied Warranty)
HELD: FOR BORDEN.
The Court ruled the disclaimer was inconspicuous
but affirmed for Borden on other grounds.
“[T]he print on the reverse side of the invoice is no
larger than one-sixteenth inch in height. All of the
type appears to be bold-faced.”
A disclaimer on the Aquablak label was also
inconspicuous because “the heading
‘DISCLAIMER’ and the disclaimer itself are printed
in capitals, [but] so too are the preceding lines of
text, and they are printed in larger sizes of type.”
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