Chapter 23

UCC 2-312 creates 3 warranties

1.Good Title. 2.No Liens. 3.No Infringements

Statue of limitation for UCC

4 years.

Implied Warranty of Fitness for a Particular Purpose

Arises by any merchant or nonmerchant seller who: Knows the particular purpose for which the goods are being bought; and Knows the buyer is relying on seller's skill and judgment to select suitable goods.

Implied Warranty from Prior Dealings or Trade Customs

Arises when both parties to a contract have knowledge of a well-recognized trade custom. Courts infer that both meant this custom to apply to their transaction.

Warranties of title

Automatically arises in most commercial sales transactions

If breach and buyer is sued by 3rd party:

Buyer must notify seller of the litigation. If seller states that seller will defend litigation, buyer must let seller litigate the case. Otherwise, buyer barred from a remedy against seller.

Express warranties elements

Can be oral or written. Can be found in seller's advertisement, brochure or promotional materials as well as contract language.

Implied warranty of merchantability

Every merchant who deals in goods sold or leased automatically gives an implied warranty of merchantability.

Merchantable foods

Food or drink to be consumed on or off premises are goods subject to the implied warranty of merchantability. Food that is fit to eat on the basis of consumer expectations.

Implied warranty of merchantability elements

Goods must be fit for ordinary purpose for which goods are used. Goods must be average, fair or medium quality. Goods must be adequately packaged and labeled, and must conform to promise made on label. Merchant's knowledge of defect not required.

If inconsistent overlapping warranties, apply in following order:

Implied warranty of fitness for a particular purpose. Expressed warranties. Implied warranty of merchantability.

Implied warranties

Inferred at law based on the circumstances or nature of the transaction. Under UCC, merchants warrant the goods they sell are "merchantable", i.e., fit for ordinary purpose for which such goods are sold.

Implied Warranties can be disclaimed:Merchantability

Language such as "As Is," "With All Faults." Disclaimer must mention "Merchantability". Need not be in writing. Must be conspicuous if in writing

UCC implied warranties

May not be disclaimed, but can be limited, but must correspond with time of express warranty. Requires document of all warranties in "readily understood language."

No infringement warranty

Merchant-seller warrants that goods are free from any copyright, trademark, or patent claims of a 3rd party.

Magnuson-Moss Warranty Act

Modifies UCC for consumer sales. Seller not required to give a written warranty. Only applies when written warranties are made by Seller: If goods > $25 label "full" or "limited."

Express Warranties can be disclaimed.

Must be clear written disclaimer in contract with specific, unambiguous language and called to Buyer's attention. Either by different color or type size. Buyer must be made aware of warranty disclaimers or modifications at the time the contract is formed.

Limited warranty

Must be conspicuous. If limit of time only must say, e.g., "full twelve-month warranty.

Overlapping warranties

Occurs when two or more warranties made in a single transaction.

No liens Warranty

Protects buyer who unknowingly purchases goods that are subject to a creditor's security interest (encumbered).

Express warranties

Seller can create an expressed warranty by making representations concerning quality, condition, description or performance.

Full warranty

Seller must repair or replace

Good title warranty

Seller warrants it has good and valid title to goods sold and the transfer of title is rightful.

Buyer's right to fully inspect and either does so or refuses to do so

Warranties are disclaimed as to defects that could reasonably be found.

Warranty of title disclaimer

Warranty of title can generally be disclaimed only with specific language in contract. Seller may assert "she/he is transferring only such rights, title and interest has she/he may have in the goods

Courts will test warranty disclaimers

applying unconscionability standard.

Express warranties are not required to use words such

as "warranty" or "guarantee. Only necessary that a reasonable buyer would regard representation as basis of the bargain.

If creditor repossesses the goods

buyer can recover damages from seller. Buyer can have no actual knowledge of the security interest.

Buyer/Lessee can sue to

can sue to recover damages if seller/lessor breaches warranty. Rescission (cancel) of contract may be a remedy

Statements of fact

create expressed warranties. Not statements of opinion or value.

Warranty

is an assurance or guarantee of fact upon which a party may rely: 1.Warranty of Title. 2.Express Warranty. 3.Implied Warranty of Merchantability. 4.Implied Warranty of Fitness for a Particular Purpose. 5.Implied Warranty from Prior Dealings or Trade Custom.

Fitness for a particular purpose: Disclaimed

must be in writing and conspicuous.

If warranties are consistent

they are construed as cumulative.