Business Law Chapter 21: "Warranties"

caveat emptor

let the buyer beware Now, the UCC helps protect buyers

Limited warranty

the warrantor limits scope of warranty in some way

Creation of an Express Warranty

1. All affirmations of fact or promise made about the goods 2. Any description of the goods 3. Any model or sample of the goods

Statement of opinion (puffing)

A commendation of goods, made by a seller or lessor, that does not create an express warranty. Affirmation of the value of the goods is not an express warranty

Magnuson-Moss Warranty Act

A federal statute that regulates written warranties on consumer products. if express warranty stated, must either be full or limited

Warranty

A seller's or lessor's express or implied assurance to a buyer or lessee that the goods sold or leased meet certain quality standards.

Warranty disclaimers

A statement that negates express and implied warranties. "As is" disclaimer Disclaimer of implied warranty and merchantability, (oral or written) and of implied warranty of fitness for a particular purpose (writing)

consumer expectation test

A test to determine merchantability based on what the average consumer would expect to find in food products.

Express warranty

A warranty created when a seller or lessor makes an affirmation that the goods he or she is selling or leasing meet certain standards of quality, description, performance, or condition. Can be made by mistake, or made to entice

Warranty of no security interests

A warranty in which sellers of goods warrant that the goods they sell are delivered free from any third-party security interests, liens, or encumbrances that are unknown to the buyer.

Implied warranty of fitness for human consumption

A warranty that applies to food or drink consumed on or off the premises of restaurants, grocery stores, fast food outlets, and vending machines. 1. Foreign substance test 2. Consumer expectation test

Implied Warranty of Merchantability

A warranty that goods being sold or leased are reasonably fit for the ordinary purpose for which they are sold or leased, are properly packaged and labeled, and are of fair quality. The warranty automatically arises in every sale or lease of goods made by a merchant who deals in goods of the kind sold or leased. implied by law IF THE SELLER OR LESSOR IS A MERCHANT 1. Goods must be fit for ordinary purpose for which they are used (chair must be stable for a "Normal person" 2. The goods must be adequately contained, packaged, and labeled 3. The goods must be of an even kind, quality, and quantity 4. The goods must conform to any promise or affirmation on label 5. The goods must pass without objection in the trade 6. Fungible goods must meet fair average or middle range of quality

Warranty against infringements

An automatic warranty provided by a seller or lessor who is a merchant who regularly deals in goods of the kind sold or leased that warrants that the goods are delivered free of any third-party patent, trademark, or copyright claim.

damages recoverable for breach of warranty

Compensatory damages

compensatory damages (warranted)

Damages that are generally equal to the difference between the value of the goods as warranted and the actual value of the goods accepted at the time and place of acceptance.

Case 21.2: Geshke v Crocs Implied Warranty of Merchantability, Federal Case

Facts: Geshke's crocs got caught in side of a moving escalator and she suffered injuries; her mother sued Crocs arguing the design presented heightened risk to people riding escalators and that the manufacturer failed to warn of this risk; District court in favor of Crocs; Geshke appealed Issue: Did Crocs breach the warranty of the safety of its footwear and fail to warn of such danger? Language: Massachusetts law gives rise to a duty to warn only where there is some reason to suppose a warning is needed; the plaintiff's case hinges on demonstrating that the defendant's product was particularly dangerous on escalators; thought, no probative evidence was presented, and thus Crocs had not associative risk with elevators Decision: Supported lower court

Case 21.3: Manley v Doe Implied Warranty of Merchantability, Federal Case

Facts: On 4 or 5 occasions over a 2 month period Manley purchased single or double hamburgers with garnishes etc from a Wendy's; Several months later, Manley experienced mild discomfort, which turned to fatigue and coughing and choking; Doctor's unable to diagnose symptoms for two years; finally a pulmonologist removed a foreign object approximately two inches in length from his lungs; it was a plastic fragment from an eating utensil and it had a small part of the Wendy's logo; Manley sued First Sun, the franchisee of the Wendy's alleging they breached implied warranty of merchantability; First Sun argued he had not identified the specific hamburger Issue: Has there been a breach of implied warranty of merchantability? Language: although the fragment included the Wendy's logo, that is not evidence it came from that restaurant; it is possible it entered his lung from outside the restaurant Decision: summary judgement for defendant, court of appeals affirmed it

Case 21.1: Osorio v One World Technologies Implied Warranty of Merchantability, Federal Case

Facts: Osorio was using Ryobi saw cutting wood on job site and his left hand slipt and slide into the saw's blade; Osorio sued on breach of implied warranty of merchantability; he brought a witness that invented a "Saw Stop" that senses flesh and stops the blade and Ryobi did not incorporate this after he presented it to them; Jury held Ryobi breached the warranty and awarded Osorio damages; Ryobi appealed Issue: Did Ryobi breach the warrany? Language: Manufacturers must design products so they are fit for ordinary purposes for which they are used; The jury can determine whether the design is unreasonable given the evidence Decision: Court of appeals found Ryobi breached the contract

Case 21.4 Roberts v. Lanigan Auto Sales Warranty Disclaimer, State Case

Facts: Roberts purchase vehicle from Lanigan to be "sold as is"; Roberts obtained report to see damage had been done to undercarriage; Robert sued Lanigan for damages alleging a breach of express and implied warranties by not disclosing accident history; Lanigan argued he never represented the quality of the vehicle and trial court dismissed Robert's action; Roberts appealed Issue: Did the "sold as is" language of the sales contract bar Roberts's action? Language: A valid "as is" agreement prevents a buyer from holding a seller liable if the thing sold turns out to be worth less than the price paid; the buyer agreed to make his or her appraisal of the bargain and accepted the risk Decision: the dismissal was upheld

Implied warranties

Warranties imposed by law, arising automatically because the sale has been made. implied warranty of merchantability, implied warranty of fitness for human consumption, implied warranty of fitness for a particular purpose

conpicuous

a requirement that warranty disclaimers be noticeable to a reasonable person a heading that is in uppercase letters or larger font etc

foreign substance test

a test to determine merchantability based on foreign objects found in food

warranty of no interference (warranty of quiet possession)

a warranty in which the lessor warrants that no person holds a claim or an interest in the goods that arose from an act or omission of the lessor that will interfere with the lessee's enjoyment of the leasehold interest

warranty of good title

a warranty in which the seller warrants that he or she has valid title to the goods he or she is selling and that the transfer of title is rightful

Implied Warranty of Fitness for a Particular Purpose

a warranty that arises when a seller or lessor warrants that the goods will meet the buyer's or lessee's expressed needs Implied at time if: 1. Seller or lessor has reason to know particular purpose 2. Seller or lessor makes statement that goods will serve this purpose 3. Buyer or lessee relies on seller's or lessor's skill and judgement and purchases or leases the goods

Full warranty

a warranty that guarantees that if a product is found to be defective within the warranty period, it will be repaired or replaced at no cost to the purchaser.

Implied warrant of merchantability does not apply to

sales or leases by nonmerchants or casual sales