Ch. 23

1) Merchantability

"reasonably fit for the ordinary purposes for which such goods are used" -the quality must be comparable to quality -goods must also be adequately packaged and labeled ex: a bar of soap is not unmerchantable merely b/c a user could slip & fall by stepping on it

Overlapping Warranties

-2+ warranties made in a single transaction *ex: car engine is warranted to be free from defects for 36k miles of 36 months, whichever is first

Statutes of limitations

-a breach of contract must be commended w/in 4 years after the breach occurs -the non breaching party must usually notify the breaching party w/in a reasonable time after discovering the breach or be barred from pursuing any remedy

1) Express Warranties

-can oral or written in contract -disclaimer must be in language that is clear and conspicuous, and called to the buyer's attention -this allows the seller or lessor to avoid false allegations were made & that oral warranties were made -seller cannot modify any warranties/disclaimers during the bargaining process w/o consent of the buyer

arbitration often required

-owner must take defect problem to dealer/manufacturer -if they don't solve the problem, don't take it to court, take it to the arbitration program specified in the manufacturer's warranty

Merchantable Food

-serving of food or drink to be consumed on or off the premises is also treated as a sale of goods & subject to the implied warranty of merchantability -courts generally determine whether food is fit to eat on the basis of consumer expectations

Discloures

-the Mag-Moss-Act requires the warrantor to make certain disclosures fully and conspicuously in a single doc. in readily understood language -seller must clarify that the buyer has legal rights & explain limitations on warranty relief

Applies only to consumer transactions

-under Mag-Moss-Act, no seller is required to gv a written warranty for consumer goods sold. -If they do choose to express a written warranty (item must cost more than $25) it must be full or limited: -full warranty=free repair or replacement of any defective part -limited warranty=buyer's recourse is limited, such as replacement of an item (must be stated that it is limited)

1) Good title

-valid title to the goods sold and that the transfer of the title is rightful ex: a thief has no title to stolen goods

Statements that create express warranties

1) Affirmation- declaration that something is true, of fact or promise that the seller or lessor makes to the buyer or lessee about the goods 2) Description-content of the goods sold conforms to the description 3) Sample or model- goods conform to any sample or model of the goods shown to the buyer or lessee (ex: tv commercial)

The courts usually apply the following rule to interpret which warranty is most important:

1) Express warranties displace inconsistent implied warranties, except implied warranties of fitness for a particular purpose 2) Samples take precedence over inconsistent general descriptions 3) Exact or technical specifications displace inconsistent samples or general descriptions

Types of Warranties

1) express warranties 2) implied warranties

3 types of title warranties

1) good title 2) no liens 3) no infringements can automatically arise in sales and ease contracts

3 types of implied warranties

1) merchantability 2) fitness for a particular purpose 3) prior dealings or trade custom

Consistent warranties

=when express and implied warranties are construed as cumulative/consistent with each other

Basis of the bargain - create express warranty

a seller or lessor does not have to use formal words such as warrant or guarantee -it is only necessary that a reasonable buyer or lessee would regard the representation as being part of the basis of the bargain

disclaimer of the implied warranty of merchantability

a seller or lessor must mention the word merchantability -the disclaimer need not be written -if it is written, it must be conspicuous

Knowledge & reliance requirements

a seller or lessor need not have actually knowledge of the buyer's or lessee's particular purpose -however, the buyer must have relied on the skill or judgement of the seller or lessor in selecting or furnishing suitable goods

3) No infringements

a warranty of title that arises automatically when the seller or lessor is a merchant -a seller warrants that the goods delivered are free from any copyright, trademark, or patent claims by a third party.

2) Fitness for a particular purpose

arises in the sale or lease of goods when a seller or lessor (merchant or non merchant) knows: 1) particular purpose for which a buyer or lessee will use the goods 2) that the buyer or lessee is relying on the skill judgment of the seller or lessor to select suitable goods

Warranty disclaimers & unconscionability

court deals with the idea of "take-it-or-leave-it" bargaining positions

Express warranty

created by seller or lessor by making representations concerning the quality, condition, description, or performance potential of the goods

Implied Warranties

derived by law by inference from the nature of the transaction or the relative situations or circumstances of the parties

Magnuson-Moss Warranty Act

designed to prevent deception in warranties by making them easier to understand

2) Implied Warranties

disclaimed by an expression such as "as is" or "with all faults" -both parties must be able to clearly understand from the language use if there are implied warranties

Buyer's or lessee's examination or refusal to inspect

ex: janna buys a table, refuses to inspect it, comes home and table falls with candle & sets house on fire. Result, its her fault not the lessor's.

Particular versus ordinary purpose

goods can be merchantable but unfit for a particular purpose

Notice required in sales contracts (p440)

if the buyer is subsequently sued by a 3rd party holding C, TM, or patent rights in the goods, then no infringements warranty is breached -buyer must notify the seller of the litigation w/in a reasonable time to enable the seller to decide whether to defend the lawsuit, the seller then decides whether to defend the buyer and bear all expenses in the action

seller has had opportunity to remedy defect

if the seller fails to fix the defect (4 attempts the buyer is entitled to a new car, replacement of defective parts, return of pmt

reasonable reliance

no reasonable buyer would rely on statements like "will never break" "last a lifetime" ex: fumigant company advertised that they destroy fungal disease in tobacco crops, but instead the fumigant developed a black shank disease

Statements of opinion and value

only statements of fact create express warranties -opinion=not an express warranty

Lemon Laws

purchasers of defective automobiles

2) No Liens

sellers warrant that the goods they are selling are free of any liens -- that is, any encumbrance on the goods or other property to satisfy a debt or protect a claim for payment of a debt ex: buyer of a boat stops making pmt, the seller can reposess the boat and buyer can get his money back

Disclaimer of the implied warranty of fitness

the disclaimer must be in writing (or record) & must be conspicuous ex: "there are no warranties that extend beyond the description on the face hereof"

Notice in lease contracts

the lessor who agrees to pay all expenses can demand that the lessee turn over the control of the litigation. Unless its for personal, family or household purposes

3) Prior dealings or trade custom

when both parties to a sales or lease contract have knowledge of a well-recognized trade custom, the courts will infer that both parties intended for that custom to apply to their contract -if a dealer fails to lubricate a car, the dealer can be held liable to a buyer for damages resulting from the breach of an implied warranty

Conspicuous term or clause

when it is written or displayed in such a way that a reasonable person would notice it ex: larger font size, different color, capital letters

Conflicting warranties

when warranties are inconsistent