Sales warranties are guarantees that sellers make to people who purchase goods from them. The sales warranty rules apply only to the sale of “goods,” that is, tangible items. Sales warranties do not apply to sales of services or property. Although most people think of warranties as explicitly stated promises, which the law calls “express warranties,” there are also a collection of “implied warranties” which the law assumes are part of all agreements.
A seller who breaches a sales warranty is considered to be in breach of the sales contract. This is the case even if no formal sales contract is present, such as in an ordinary “over the counter” sale of merchandise at a retail store. If a sales warranty is breached, the buyer can sue the seller for monetary damages or, occasionally, injunctive relief.
Determining whether a sales warranty is breached is primarily an inquiry into whether the sales contract contained a warranty against the problem the buyer now complains of. This inquiry has two parts:
- Determining what warranties apply to the relevant sales contract.
- Determining whether warranties that apply to the relevant sales contract have been successfully disclaimed.
What warranties apply to the sales contract?
The most important question in determining whether a sales warranty was breached is to determine what warranties apply to the sales contract. Determining whether the seller gave a warranty (often referred to as “warranting”) against a particular defect involves asking three questions:
- Did the seller make an express warranty? An express warranty is made when the seller states a fact or makes a promise. If the fact or promise is part of the “basis of the bargain,” then the statement is an express warranty. Under the Uniform Commercial Code (“UCC”), the statement is considered part of the basis of the bargain if the statement was made prior to the buyer’s decision to purchase the good. If the statement can at such a time that the buyer COULD have relied on the statement in deciding to buy the good, the statement is part of the basis of the bargain. UCC Section 2-313. The buyer does NOT need to establish that he actually relied on the statement. All express warranties irrevocably become a part of the sales contract. UCC Section 2-316.
- Is the seller of the goods a merchant? A merchant is a seller who regularly deals in the kind of goods involved in the transaction. To be a merchant, a seller does NOT need to deal primarily in the goods that are sold, only regularly. For example, a movie theater is a merchant of carbonated beverages, even though the primarily business of the theater is selling movie viewings. More implied warranties are assumed to be a part of the contract when a seller is a merchant than when the seller is not a merchant.
- What implied warranties are assumed to be a part of the agreement? The law assumes that certain warranties are present in all agreements. Which warranties are considered a part of the agreement depends on whether the seller is a merchant or not.
Non-Merchant Seller Implied Warranties
Although non-merchant sellers are held liable on express warranties to the same degree as merchant sellers, fewer warranties are implied in the sales agreement if the seller is not a merchant. Two implied warranties apply to non-merchant sellers:
- Good Title: All sellers warrant that they have the ability to transfer a valid title to the good in question. Under UCC Section 2-312 this warranty includes a warranty that there are no liens, encumbrances, or superior claims to title of the goods that the buyer is not already aware of.
- Fitness for a Particular Purpose: Under UCC Section 2-315, the warranty of fitness for a particular purpose is implied in a sales agreement if three facts are present. These facts are: (1) that the sellers has reason to know of the particular purpose the goods will be used for, (2) the seller has reason to know the buyer is relying on the seller’s judgment to select appropriate goods, AND (3) the buyer does rely on the seller’s skill or judgment.
Merchant Seller Implied Warranties
If the seller of goods is a merchant, a greater number of implied warranties apply. The following warranties are implied in agreements when the seller is a merchant:
- All implied warranties that apply to non-merchant sellers. The rules for merchant sellers are the same as the rules for non-merchant sellers.
- Warranty Against Infringement: A merchant warrants that the goods being sold do not have any trademark, copyright, patent, or similar claims against them. This is the case for the sale of any goods, though the rules are more complicated if the buyer provides the specifications for the goods and these specifications give rise to a violation.
- Warranty of Merchantability: The implied warranty of merchantability is a warranty that the goods are “merchantable.” Goods are considered merchantable if they meet at least minimum quality standards. A seller is liable for breach of the warranty even if he did not know and could not discover the defect leading to the breach.
The promise that goods are merchantable is best understood as a series of requirements. Under UCC Section 2-314, no good is merchantable if it:
- Does not meet the description in the contract or, in the relevant trade, could not pass as the good described in the contract.
- Is not of at least fair or average quality unless the contract states a lower standard.
- Is not fit for the ordinary purposes for which the good is used.
- Is not adequately packaged or labeled.
- Does not conform to the description or promises made on the products package or label.
Disclaimer of warranties
Sellers can disclaim, that is, exclude from the sales contract, many of the warranties of sale. A buyer cannot sue for breach of a successfully disclaimed warranty. A warranty will only be determined to have been disclaimed if two considerations are satisfied:
- The warranty is a type of warranty that can be disclaimed.
- The seller took sufficient steps to disclaim against the warranty.
Can the warranty be disclaimed?
Most warranties can be disclaimed, though some warranties are tougher to disclaim than others. Under UCC Section 2-316, a seller is specifically prohibited from disclaiming any express warranties made by the seller. Additionally, warranties of title can only be disclaimed by specific language which gives the buyer notice that the seller is disclaiming any title warranties. In a few limited situations, where the disclaimer is inherent in the very nature of the type of sale (such as sheriff sales), a disclaimer of title will be determined to have been specifically given “by the circumstances.”
Did the seller disclaim the warranty?
Except as described above, a seller can disclaim any and all warranties either through specific language or general practices. Specific disclaimers are methods of disclaimer which the UCC explicitly describes as sufficient to disclaim certain warranties. These rules are as follows:
- Warranty of Merchantability: The warranty of merchantability can only be specifically disclaimed if merchantability is mentioned. A general disclaimer of all warranties or all warranties that can be disclaimed does not disclaim the warranty of merchantability. If the sales agreement is written, a disclaimer of merchantability must be conspicuous.
- Warranty of Fitness for a Particular Purpose: The warranty of fitness for a particular purpose can only be specifically disclaimed in writing. To disclaim, the writing must be conspicuous. The written statement does NOT need to specifically mention the warranty to disclaim it, for example, a statement that “no warranties beyond the item’s description are given” is sufficient to disclaim the warranty of fitness for a particular purpose. UCC Section 2-316.
The UCC also provides several ways to disclaim implied warranties which are less certain. For these methods, the facts and circumstances will determine whether the method is sufficient. These methods are:
- General Language: Language such as “as is” may be sufficient to disclaim warranties of merchantability and fitness for a particular purpose. Whether the language is sufficient will depend on whether, under the circumstances, the language makes clear to the buyer that no warranties are present.
- Course of dealing, performance, or usage.
- Inspection/Refusal to Inspect: Inspection by the buyer or the buyer refusing to inspect is considered to serve as a disclaimer of any defects that would be revealed by a reasonable inspection conducted under the same circumstances and conditions.
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