Warranties

UCC 2-314

"A warranty of merchantability is implied in a contract for the sale of goods if the seller is a merchant of good of that kind"

U.C.C. § 2-403(2)-(3): "Entrusting" Any entrusting of possession of goods to a merchant who deals in goods of that kind gives him power to transfer all rights of the entruster to a buyer in ordinary course of business.

"Entrusting" includes any delivery and any acquiescence in retention of possession regardless of any condition expressed between the parties to the delivery or acquiescence and regardless of whether the procurement of the entrusting or the possessor's disposition of the goods have been such as to be larcenous under the criminal law.

The basic point of this implied warranty is that the goods sold must be

"fit for the ordinary purposes for which such goods are used." -While it technically addresses implied warranties, it makes it clear that the serving of food in a restaurant is a sale of goods so as to trigger the existence of the UCC's warranties. -Sellers typically try to comply with the "conspicuous" requirement by putting implied warranty disclaimer language in all capital letters of a different font size than other print in the contract and perhaps in colored or bold print

Test of "Conspicuousness"

"the test is whether attention can reasonably be expected to be called to it / whether a reasonable person would have noticed it"

UCC §2-316. Exclusion or Modification of Warranties (EXPLAINED)

(1) THIS MEANS: If there is language that would support there being an express warranty and there is also language that would negate that warranty, we try to give meaning to both and read them consistently. HOWEVER, if we cannot give meaning to both, THEN THE WARRANTY trumps. HOWEVER, this is subject to the warranty's possible exclusion by the parol evidence rule. (2) Conspicuous = written so that a reasonable person against whom it is to operate ought to have noticed it. *Unless you make a really affirmative and explicit effort to negate these implied warranties... they are there.* (3) (JURISDICTIONS split on how to interpret this subsection in accordance with subsection 2)

U.C.C. § 2-313: Express Warranties by Affirmation, Promise, Description, Sample Express warranties by the seller are created as follows:

1)Any *affirmation of fact or promise* made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise. 2)Any *description* of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description. 3)Any *sample or model* which is made part of the basis of the bargain creates an express warranty that the whole of the goods shall conform to the sample or model. 4)It is not necessary to the creation of an express warranty that the seller use formal words such as "warrant" or "guarantee" *or that he have a specific intention to make a warranty*, but an affirmation merely of the value of the goods or a statement purporting to be merely the seller's opinion or commendation of the goods does not create a warranty able people would not consider a part of the deal. (aka sales talk)

UCC § 2-313 Express Warranties by Affirmation, Promise, Description, Sample

1)Express warranties by the seller are created as follows: a)Any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise. b)Any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description. c)Any sample or model which is made part of the basis of the bargain creates an express warranty that the whole of the goods shall conform to the sample or model.

both types of implied warranties may be implicitly disclaimed by the language of the sale or the buyer's examination of the goods.

1)First, the seller may indicate to the buyer during the sale that there is no implied warranty, using plain language such as "as is" or "with all faults." -For instance, if Alex says to Ashton, "I'm selling you this cell phone as is," then both types of implied warranties are implicitly disclaimed. 2)Second, there is no implied warranty for any defects that a buyer examination would have revealed. The buyer may have examined the goods as fully as desired, or the buyer may have refused to examine the goods at all. -i.e., if Ashton examines the cell phone, or refuses to examine the cell phone, then both types of implied warranties are implicitly disclaimed for any defects that her examination should have, or would have, revealed.

U.C.C. § 2-312: Warranty of Title

1)Subject to subsection (2) there is in a contract for sale a warranty by the seller that a)the title conveyed shall be good, and its transfer rightful; and b)the goods shall be delivered free from any security interest or other lien or encumbrance of which the buyer at the time of contracting has no knowledge. 2)A warranty under subsection (1) will be excluded or modified only by specific language or by circumstances which give the buyer reason to know that the person selling does not claim title in himself or that he is purporting to sell only such right or title as he or a third person may have. 3)Unless otherwise agreed a seller who is a merchant regularly dealing in goods of the kind warrants that the goods shall be delivered free of the rightful claim of any third person by way of infringement or the like but a buyer who furnishes specifications to the seller must hold the seller harmless against any such claim which arises out of compliance with the specifications

Factors for considering whether or not it is an implied warranty Conditions that are not required by the implied warranty of merchantability, but which must be present if a buyer is to recover on the implied warranty of fitness for a particular purpose, include:

1)The seller must have known or had reason to know the buyer's particular purpose at the time of the contract. 2)The seller must have known or have reason to know that the buyer was relying on the seller's skill or judgment to furnish appropriate goods. 3)The buyer must, in fact, have relied upon the seller's skill or judgment in agreeing to the sale. ** The seller need not be a merchant for the implied warranty of fitness for a particular purpose to apply.

UCC §2-316. Exclusion or Modification of Warranties (i.e., Disclaiming Warranties)

1)Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit warranty shall be construed wherever reasonable as consistent with each other; but subject to the provisions of this Article on parol or extrinsic evidence (Section 2-202) negation or limitation is inoperative to the extent that such construction is unreasonable. 2)Subject to subsection (3), to exclude or modify the implied warranty of merchantability or any part of it the language must mention merchantability and in case of a writing must be conspicuous, and to exclude or modify any implied warranty of fitness the exclusion must be by a writing and conspicuous. Language to exclude all implied warranties of fitness is sufficient if it states, for example, that "There are no warranties which extend beyond the description on the face hereof." 3)Notwithstanding subsection (2) a)unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like "as is", "with all faults" or other language which in common understanding calls the buyer's attention to the exclusion of warranties and makes plain that there is no implied warranty; and b)when the buyer before entering into the contract has examined the goods or the sample or model as fully as he desired or has refused to examine the goods there is no implied warranty with regard to defects which an examination ought in the circumstances to have revealed to him.

§ 2-314 Implied Warranty: Merchantability....

1)[A] warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind. Under this section the serving for value of food or drink to be consumed either on the premises or elsewhere is a sale. 2)Goods to be merchantable must be at least such as a)pass without objection in the trade under the contract description; and b)in the case of fungible goods, are of fair average quality within the description; and... c)run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved; and d)are adequately contained, packaged, and labeled as the agreement may require; and e)conform to the promises or affirmations of fact made on the container or label if any

"Replacement parts are readily available"

= not a warranty because it does not relate to the printer itself

"Frequency of repair very low"

= not a warranty because it is too difficult to prove or disprove

"Plaintiff company will make a profit after getting this printer"

= not a warranty because it relates to the market and not the printer. The buyer should be able to form its own opinion about this statement. Not within the special knowledge of the seller.

The implied warranty of title comes in every sale unless . . . (see Moore v. Pro Team Corvette Sales)

A warranty of title may be excluded by specific language giving the purchaser reason to know that the vendor is selling only what title he possesses. (The buyer is taking a chance.)

express warranty

An express warranty may only be explicitly rather than implicitly disclaimed, by the seller's clear and reasonable words or conduct. i.e., Alex could limit his express warranty that his cell phone has a battery life of 15 hours, by saying, "I can only guarantee a battery life of 15 hours for the first three months of use."

Implied Warranty of Fitness for a Particular Purpose

An implied warranty of fitness for a particular purpose may be disclaimed by the seller's written language. i.e., Alex could negate his implied warranty of fitness for a particular purpose by adding a written term to the sales contract that says, "This cell phone does not have a camera."

Implied Warranty of Merchantability

An implied warranty of merchantability may be explicitly disclaimed by the seller's explicit language, which may be spoken or written but must include the word "merchantability." Under UCC § 2-316 (3) there are other terms that work to disclaim it. i.e., Alex could negate his implied warranty of merchantability by saying, "This cell phone is not merchantable because it is unable to make phone calls."

A description need not be by words. Technical specifications, blueprints and the like can afford more exact description than mere language and if made part of the basis of the bargain goods must conform with them.

Past deliveries may set the description of quality, either expressly or impliedly by course of dealing

Warranties of Quality (A seller's affirmation of fact or promise, description of the goods, or a sample or model can all create an express warranty of quality to the buyer.)

Seller warrants and covenants that it will act in good faith and use its reasonable best efforts to cause all products to meet the product specifications. If the plaintiffs can prove that their sales dropped because the product was nonconforming (breached the warranty of quality), then they may recover lost primary profits.

Are special words necessary

Special words are not necessary - express warranties may arise without using words like "warranty" or "guarantee" - and they do not have to be in a formal document.

Under § 2-312, the seller automatically warrants that the buyer gets good title along with the goods, and that they are not subject to a security interest or any other lien or encumbrance.

This means that the goods are free and clear, subject to no legal claim, may be used without infringing the intellectual property of another, etc. This does not mean that the seller gives good title with the goods. Rather, he is making a warranty of good title, which he breaches if the title is not good. In other words, if the seller sells the buyer stolen goods, the buyer generally does not own the goods; rather, the seller owes the buyer damages for breach of the warranty of title. -There is an exception when the goods were entrusted

Concerning affirmations of value or a seller's opinion or commendation under subsection (2), the basic question remains the same

WHAT statements of the seller have in the circumstances and in objective judgment become part of the basis of the bargain? ALL statements of the seller do so unless good reason is shown to the contrary (presumption).

Can warranties be based on advertising

Warranties can also be based on advertising. However, some language used by the seller may not result in an express warranty but rather will be treated as "puffing" if it is merely a slight exaggeration or an expression of the seller's opinion or some other language that reason

U.C.C. § 2-315: Implied Warranty: Fitness for Particular Purpose

Where the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller's skill or judgment to select or furnish suitable goods, there is unless excluded or modified under the next section an implied warranty that the goods shall be fit for such purpose.

UCC §2-315 Implied Warranty: Fitness for Particular Purpose

Where the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller's skill or judgment to select or furnish suitable goods, there is...an implied warranty that the goods shall be fit for such purpose.

In general, the presumption is that any sample or model just as any affirmation of fact is intended to

become a basis of the bargain. Section 2-313(c) includes both a sample actually drawn from the bulk of goods which is the subject matter of the sale, and a "model" which is offered for inspection when the subject matter is not at hand and which has not been drawn from the bulk of the goods.

Any written disclaimer must be conspicuous, which means

it cannot be in fine print

"high quality"

not a warranty

Webster v. Blue Ship Tea: fish chowder case

reasonable-expectation test is used for the implied warranty of merchantability. Courts will always consider the reasonable, foreseeable expectations of the merchant in these cases. [reasonable-expectation test = MAJORITY RULE]

A clause generally disclaiming "all warranties, express or implied" cannot reduce the

seller's obligation with respect to such description and therefore cannot be given literal effect under Section 2-316.

Express warranties create

strict liability so that you are liable even if there was something out of your control or something you couldn't have known.

Express warranties are created by the conduct of

the seller That conduct, if it is "part of the basis of the bargain," includes statements ("affirmations") of fact or promises relating to the goods, descriptions of the goods, or the use of a sample or model of the goods.

"Printer has been tested and is ready to be marketed"

warranty

"Printer will not cause fires"

warranty

"Service calls will only be necessary every 6,000-8,000 copies"

warranty

The precise time when words of description or affirmation are made or samples are shown is not material. The sole question is

whether the language or samples or models are fairly to be regarded as part of the contract.

U.C.C. § 2-316(1): Disclaiming Express Warranties.

§ 2-316(1) is drafted in such a way as to make the disclaimer of express warranty virtually impossible If the factfinder determines that a seller's statement or conduct creates an express warranty, words purportedly disclaiming the warranty are basically "inoperative," as they are inherently inconsistent. The best way for a seller to avoid liability on an express warranty is not to make it in the first place. -The warranty will not be disclaimed because, to be effective, a disclaimer must be part of the offer and acceptance process or must be agreed to by the buyer as a modification.

DISCLAIMING WARRANTIES

→ A warranty for the sale of goods may be negated or limited by the seller's disclaimer. There are two types of disclaimers: explicit disclaimers (harder) and implicit disclaimers (easier). (Ashton wants a phone with a camera illustration)

Warranties of Title (type of implied warranty) UCC § 2-312

→ a guarantee by a seller to a buyer that the seller has the right to transfer ownership and no one else has rights to the property.

The Implied Warranty of Merchantability in sales by "merchants."

→ automatically comes with the sale of goods if the seller is a professional (a merchant) with respect to the kind of good being sold who has not excluded or modified the implied warranty of merchantability. It is part of the sale unless it is effectively disclaimed or limited

Limited Warranties

→ i.e., promises to repair or replace parts for some period ("five years or 50,000 miles") - are, by their very nature, intended to replace or exclude express or implied warranties.

The Implied Warranty of Fitness for the Particular Purpose

→ the implied warranty of fitness for the particular purpose does not come automatically with every sale. The fitness warranty relates to a "particular" purpose that the buyer has communicated to the seller, and the seller, under the circumstances, should realize the buyer is relying on the seller to provide goods that will satisfy that communicated purpose. There are special disclaimer rules that apply.