Business Laws Warranties

Implied Warranties

The following are warranties that are implied by law and apply only to sales by persons considered under the law to be merchants as to the goods being sold. They do not apply to non-merchants or casual sales.

Caveat Emptor

Let the buyer beware. The state of the law as to sale of goods prior to the adoption of the Uniform Commercial Code in whole or in part by all 50 states. Warranties may be expressly made or implied by law.

Implied Warranty of Merchantability

Unless properly disclaimed, a seller who is a merchant as to the goods sold passes an implied warranty merchantability. This warranty is implied by law. (1) This warranty guarantees that the goods are fit for the ordinary purpose for which they are sold. (2) The goods must be adequately contained, packaged and labeled. This means, for example, that the implied warranty of merchantability warrants that the milk carton will serve as a proper container for the milk. (3) The goods must be of an even kind, quality, and quantity within each unit. (4) The goods must conform to any promise or affirmation of fact made on the container or label. (5) The quality of the goods must pass without objection in the trade. (6) Fungible goods must meet a fair average or middle range of quality.

Magnuson-Moss Warranty Act

A federal statute, passed in 1975, which contains certain requirements for warranties of consumer goods. The act does not require warranties but it specifies requirements for warranties that are offered. Administered by the FTC.

Express Warranties

A warranty that is created when a seller makes an affirmation that the goods he is selling meet certain standards of quality, description, performance or condition. Can be written, oral or implied by the conduct of the seller. Can be formed by accident as the seller does not have to possess the intent to create an express warranty. An express Warranty is created when a seller indicated that the goods will conform to : (1) All affirmations of fact or promises made about the goods. (2) Any descriptions of goods. Example: Idaho potatoes, Virginia hams. (3) Any model or sample of the goods. Statements of opinions usually do not form an express warranty and are considered as sales "Puffery. Also statements as to the value of the goods usually do not create a warranty.

Implied Warranty of Fitness for a Particular Purpose

A warranty which arises when the seller warrants that the goods will meet the buyer's expressed needs. (1) The seller has a reason to know the particular purpose for which the buyer is purchasing the goods. (2) The seller makes a statement that the goods will serve the buyer's purpose. (3) The buyer relies on the seller's skill and judgment and purchases the goods.

Damages for Breach of Warranty

Compensatory damages, which are measured by the difference between the value of the goods as warranted and the actual value at the time of sale. Damages are available for personal injuries if caused by the breach of warranty.

Warranty Disclaimers

Express warranties may be disclaimed, but the warranty disclaimer must be capable of being construed as consistent with the original warranty. (1) "As is" disclaimer. Expressions such as "as is", "without all faults", or any other language that makes it clear to the buyer that there are no implied warranties. (2) Disclaimer of the implied warranty of merchantability. If the "as is" language is not used, a disclaimer of the implied warranty of merchantability must be specifically mention the word merchantability. These disclaimers can be written or oral. (3) Disclaimer of the implied warranty of fitness fora particular purpose. If the "as is" language is not used, a disclaimer of the warranty of fitness can contain general language and does not have to specifically mention the word fitness. This disclaimer would have to be in writing.