Section 14.1
Exclusion of Warranties, Privity,
and Duty to Notify
Section 14.2 Exclusion of Warranties,
Privity, and Duty to Notify
Section 14.1 Assessment
Reviewing What You Learned
1. What are the three ways an express
warranty can be made?
Understanding Business and Personal Law
The Importance of Warranties
Section 14.2 Exclusion of Warranties,
Privity, and Duty to Notify
Section 14.1 Assessment
Reviewing What You Learned
Answer
By a statement of fact or promise made by
the seller, by a description of the goods,
and by the use of a sample or model.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.2 Exclusion of Warranties,
Privity, and Duty to Notify
Section 14.1 Assessment
Reviewing What You Learned
2. What are the obligations of
merchants under the MagnusonMoss Warranty Act?
Understanding Business and Personal Law
The Importance of Warranties
Section 14.2 Exclusion of Warranties,
Privity, and Duty to Notify
Section 14.1 Assessment
Reviewing What You Learned
Answer
Merchants must label written warranties as
either “full” or “limited” for consumer
products costing more than $10.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.2 Exclusion of Warranties,
Privity, and Duty to Notify
Section 14.1 Assessment
Reviewing What You Learned
3. What is difference between a limited
warranty and a full warranty?
Understanding Business and Personal Law
The Importance of Warranties
Section 14.2 Exclusion of Warranties,
Privity, and Duty to Notify
Section 14.1 Assessment
Reviewing What You Learned
Answer
A limited warranty is one that does not
meet all of the requirements for a full
warranty.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.2 Exclusion of Warranties,
Privity, and Duty to Notify
Section 14.1 Assessment
Reviewing What You Learned
4. What is the difference between the
implied warranty of fitness for a
particular purpose and the implied
warranty of merchantability?
Understanding Business and Personal Law
The Importance of Warranties
Section 14.2 Exclusion of Warranties,
Privity, and Duty to Notify
Section 14.1 Assessment
Reviewing What You Learned
Answer
A warranty of fitness for a particular
purpose is created when the seller knows
about a particular purpose for which the
goods are needed.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.2 Exclusion of Warranties,
Privity, and Duty to Notify
Section 14.1 Assessment
Reviewing What You Learned
Answer
The seller advises the buyer in making a
purchase and the buyer relies on the
seller’s advice. This warranty exists
whether the seller is a merchant or a
private party.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.2 Exclusion of Warranties,
Privity, and Duty to Notify
Section 14.1 Assessment
Reviewing What You Learned
Answer
In contrast, sellers who regularly sell goods
of a particular kind imply a warranty of
merchantability in every sale, assuring that
their products are fit for the purpose for
which they are purchased.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.2 Exclusion of Warranties,
Privity, and Duty to Notify
Section 14.1 Assessment
Reviewing What You Learned
Answer
Private parties do not provide the warranty
of merchantability.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.2 Exclusion of Warranties,
Privity, and Duty to Notify
Section 14.1 Assessment
Reviewing What You Learned
5. What is the warranty of title?
Understanding Business and Personal Law
The Importance of Warranties
Section 14.2 Exclusion of Warranties,
Privity, and Duty to Notify
Section 14.1 Assessment
Reviewing What You Learned
Answer
Guarantees that the title being conveyed is
good, and the transfer is lawful.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.2
Exclusion of Warranties, Privity,
and Duty to Notify
Section 14.2 Exclusion of Warranties,
Privity, and Duty to Notify
Exclusion of Warranties
To exclude the warrant of
merchantability, merchantability
must be mentioned specifically.
The warranty of title may be not
excluded.
Implied warranties can also be
excluded by words such as “as is.”
Understanding Business and Personal Law
The Importance of Warranties
Section 14.2 Exclusion of Warranties,
Privity, and Duty to Notify
Exclusion of Warranties
Under the Magnuson-Moss Warranty
Act, any clause that excludes or limits
consequential damages for breach of
warranty must appear conspicuously
on the face of the warranty.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.2 Exclusion of Warranties,
Privity, and Duty to Notify
Exclusion of Warranties
Consequential damages are losses
that do not flow directly from an act
but only from some of the
consequences or results of the act.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.2 Exclusion of Warranties,
Privity, and Duty to Notify
Harriet loves to shop at the outlet
stores in Commerce. Her favorite
name brand store has an As Is rack.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.2 Exclusion of Warranties,
Privity, and Duty to Notify
After returning home from shopping
there one day, she discovered the skirt
she bought off the As Is rack has a
large tear. Can Harriet take the skirt
back? Why or why not?
Understanding Business and Personal Law
The Importance of Warranties
Section 14.2 Exclusion of Warranties,
Privity, and Duty to Notify
ANSWER
No. This is an example of an excluded
implied warranty.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.2 Exclusion of Warranties,
Privity, and Duty to Notify
Consumer Protection
The Magnuson-Moss Warranty Act
limits the exclusions of implied
warranties to consumers. Under this
law, if a seller makes a written express
warranty to a consumer, the implied
warranties cannot be disclaimed or
excluded.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.2 Exclusion of Warranties,
Privity, and Duty to Notify
Consumer Protection
Some states have gone further to
protect consumers by saying that
implied warranties cannot be excluded
when goods are sold.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.2 Exclusion of Warranties,
Privity, and Duty to Notify
Privity of Contract Not Required
People who contract directly with each
other are said to be in privity of
contract.
In the past, warranties extended only
to the actual buyer of a product.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.2 Exclusion of Warranties,
Privity, and Duty to Notify
Privity of Contract Not Required
The UCC has abolished the
requirement of privity of contract.
Instead it provides states with three
alternatives.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.2 Exclusion of Warranties,
Privity, and Duty to Notify
Privity of Contract Not Required
In all of the three alternatives, express
and implied warranties extend to
people who would reasonably be
expected to use, consume, or be
affected by the goods purchased by
the buyer.
Understanding Business and Personal Law
The Importance of Warranties
14.2 14.2 Exclusion of Warranties,
Section
Privity, and Duty to Notify
Comparing the Alternatives
Alternative A
Alternative B
Alternative C
gives sellers’
warranties to any
person injured by
a breach of
warranty who is
in the family or
household of the
buyer, including
guests
gives sellers’
warranties to any
person injured by
a breach of
warranty.
gives sellers’
warranties to any
person or
corporation
injured by a
breach of
warranty.
Understanding Business and Personal Law
The Importance of Warranties
14.2 14.2 Exclusion of Warranties,
Section
Privity, and Duty to Notify
Comparing the Alternatives
Alternative A
Alternative B
Sellers cannot
exclude this
provision.
Sellers cannot
exclude this
provision.
Warranties are
not extended to
corporations.
Warranties are
not extended to
corporations.
Understanding Business and Personal Law
Alternative C
Sellers may
exclude this
provision with
respect to injuries
to corporations
but not to
individuals.
The Importance of Warranties
Section 14.2 Exclusion of Warranties,
Privity, and Duty to Notify
UCC Alternatives to Privity
Most states have adopted one of the
three alternatives, but a few states
have written their own versions (OV).
Understanding Business and Personal Law
The Importance of Warranties
14.2 14.2 Exclusion of Warranties,
Section
Privity, and Duty to Notify
UCC Alternatives to Privity
A
AK, AZ, AR, CT, DC, FL, GA, ID, IL, IN, KY,
MD, MI, MS, MO, MT, NE, NV, NJ, NM, NC,
OH, OK, OR, PA, SC, TN, WA, WV, WI
B
AL, CO, DE, KS, SD, VT, WY
C
HI, IA, MN, ND, UT
OV
ME, MA, NH, NY, RI, TX, VA
NA
CA, LA
Understanding Business and Personal Law
The Importance of Warranties
Section 14.2 Exclusion of Warranties,
Privity, and Duty to Notify
Duty to Notify and Remedies
for Breach
To succeed in a claim for breach of
warranty, the buyer must satisfy his or
her duty to notify.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.2 Exclusion of Warranties,
Privity, and Duty to Notify
Duty to Notify and Remedies
for Breach
This duty requires that the buyer notify
the seller within a reasonable time
after the defect is discovered.
Failure to do so will prevent the buyer
from recovering.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.2 Exclusion of Warranties,
Privity, and Duty to Notify
Duty to Notify and Remedies
for Breach
Often, when sellers are notified that a
product is defective or that a warranty
has been breached, they will arrange
to correct the situation.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.2 Exclusion of Warranties,
Privity, and Duty to Notify
Duty to Notify and Remedies
for Breach
When the warranty of title is breached,
the buyer has a claim against the
seller for damages. This could be the
cost of clearing the title or the
purchase price of the goods.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.2 Exclusion of Warranties,
Privity, and Duty to Notify
Chunta bought a digital camera from
his friend Thomas for $50 only to find
out that it was stolen. What remedy
does Chunta have?
Understanding Business and Personal Law
The Importance of Warranties
Section 14.2 Exclusion of Warranties,
Privity, and Duty to Notify
ANSWER
Chunta has a claim against Thomas
for $50.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.2 Exclusion of Warranties,
Privity, and Duty to Notify
Section 14.2 Assessment
Reviewing What You Learned
1. To whom are warranties made
under the laws of your state?
Understanding Business and Personal Law
The Importance of Warranties
Section 14.2 Exclusion of Warranties,
Privity, and Duty to Notify
Section 14.2 Assessment
Reviewing What You Learned
Answer
Answers will vary by state.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.2 Exclusion of Warranties,
Privity, and Duty to Notify
Section 14.2 Assessment
Reviewing What You Learned
2. How may warranties be excluded
under the laws of your state?
Understanding Business and Personal Law
The Importance of Warranties
Section 14.2 Exclusion of Warranties,
Privity, and Duty to Notify
Section 14.2 Assessment
Reviewing What You Learned
Answer
Answers will vary by state.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.2 Exclusion of Warranties,
Privity, and Duty to Notify
Section 14.2 Assessment
Reviewing What You Learned
3. What is the buyer’s duty to notify
the seller of a defect?
Understanding Business and Personal Law
The Importance of Warranties
Section 14.2 Exclusion of Warranties,
Privity, and Duty to Notify
Section 14.2 Assessment
Reviewing What You Learned
Answer
The buyer must notify the seller within a
reasonable time after the defect is
discovered.
Understanding Business and Personal Law
The Importance of Warranties
End of Section 14.2
Exclusion of Warranties, Privity,
and Duty to Notify