WARRANTIES
Contents:
Warranties of title
Express warranties
Implied warranties
Overlapping warranties
Third-party beneficiaries of
warranties
Warranties of disclaimers
Magnuson-moss warranties act
Lemon law
Warranties of title
Case I: A buys a used TV set from B
for case. A month later, could C
repossess the set from A, if C can
prove that B is in default, having
missed five payments? How can A
deal with such situation?
Yes. C has a valid security interest in
the set. If A here has no actual
knowledge of the security interest,
he can recover from the seller B for
breach of warranty as the seller B
should warrant that the goods are
Case II
A buys a machine from B, a
manufacturer of such machines, for
use in his factory. Could C sue A for
damages if C claims that he has a
patent on the machine and that it
cannot be used without his
permission? How can A deal with
such situation?
Yes. C can sue A for patent
infringement. A should inform B of
this suit and demand that B take
over the defense.
Express warranties
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.
Which of the following are express warranties? And why?
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 “puffery. They are
not binding on the seller.
Implied warranties
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. Warranty of merchantability and
warranty of fitness for a particular
purpose are two types of implies
warranties.
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.
Implied warranty of fitness for a particular
purpose
A “particular purpose” of the buyer differs
from the “ordinary purpose”
(merchantability). Goods can be
merchantable but unfit for a buyer’s
particular purpose.
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.
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.
Express warranty disclaimers (UCC Section 2-316(1))
How to make express warranty disclaimers?
(1) in language that is specific, clear and
unambiguous
(2) in language that is called to a buyer’s
attention
Implied warranty disclaimers (UCC section
2-316 (2))
To exclude or modify the implied
warranty of merchantability, the seller
must:
(1) use the word merchantability
(2) make the disclaimer conspicuous if it is
in writing
To exclude or modify the implied
warranty of fitness for particular
purpose, the seller must:
(1) use a writing
(2) 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. )
The difference of merchantability warranty
disclaimer and fitness warranty disclaimer
(1) Unlike the fitness warranty disclaimer, a
disclaimer of the implied warranty of
merchantability can be oral.
(2) 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.
Other ways to disclaim implied warranties (UCC
section 2-316(3)(a).
(1) 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.
(2) The buyer’s refusal to inspect goods can have
the same practical effect as a disclaimer.
(3) 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).