Transcript Warranties

Warranties
Chapter 10
Warranties
• A warranty is an assurance by one party of
the existence of a fact on which the other
party can rely.
• Warranties include
a.warranties of title,
b.express warranties, and
c.implied warranties
Warranty of Title
• Title warranty arises automatically.
• UCC 2-312 imposes three types of
warranties of title.
– Good Title
– No Liens
– No Infringements
Good Title
• Sellers warrant that they have good and valid title
and that the transfer of title is rightful. UCC 2312(1)(a)].
– Example: Alice steals goods from Henry and sells them
to Ona, who does not know that they are stolen. If
Henry discovers that Ona has the goods, Henry has the
right to reclaim them from Ona. Alice automatically
warranted to Ona that the title conveyed was valid and
that its transfer was rightful. Because a thief has no title
to stolen goods, Alice breached the warranty of title
and became liable to the buyer for appropriate damages.
No Liens
• Sellers warrant that goods are free of a security
interest or other lein of which the buyer has no
knowledge.
• Example: Henderson buys a used boat from
Loring for cash. A month later, Barish repossesses
the boat from Henderson, having proved that she,
Barish, has a valid security interest in the boat and
that Loring, who has missed five payments, is in
default. Henderson has legal grounds to recover
his purchase price. UCC 2-312(1)(b)
•
No Infringements
• Merchant sellers warrant that the goods are
free of any third person's patent, trademark,
or copyright claims. UCC 2-312(3)
• Unless buyer has supplied specifications.
Disclaimer of Title Warranty
• Title warranty can be disclaimed or
modified only by specific language in a
contract.
• Example: Seller transfers only such rights,
title, and interest as they have in the goods.
Express Warranties
• A seller can create an express warranty by
making representations concerning the
quality, condition, description, or
performance potential of the goods.
UCC 2-313
Express Warranties
• Express Warranties are created by:
• A. Affirmation or promise of fact that the
about the goods.
• B. Description of the goods.
• C. Sample or Model.
Express Warranties
• Statement must be a statement of fact
statements of 0pinion and value will not
create an express warranty..
• "this is the best used car to come along in
years”
• "it's worth a fortune"
Implied Warranties
• Implied Warranty of Merchantability
• Implied Warranty of Fitness for a Particular
Purpose
• Implied Warranty Arising from Course of
Dealing or Trade Usage
Warranty of Merchantability
• An implied warranty of merchantability
automatically arises in every sale of goods
made by a merchant who deals in goods of
the kind sold.
Merchantability
a."reasonably fit for the ordinary purposes for which
such goods are used."
b. At least average, fair, or medium-grade quality.
c. Comparable to quality that will pass without
objection in the trade
d. Adequately packaged and labeled as provided by
the agreement,
e. Conform to the promises or affirmations of fact
made on the container or label, if any.
f. Run within permitted variations.
Implied Warranty of Fitness for a
Particular Purpose
• Arises when any seller (merchant or
nonmerchant) makes a recommendation
knowing the particular purpose for which a
buyer will use the goods and knows that the
buyer is relying on the skill and judgment of
the seller to select suitable goods. UCC 2315, 2A-213.
Implied Warranty from Course of
Dealing or Trade Usage
• When both parties to a sales 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.
Example: If it is an industry-wide custom to
lubricate a new car before it is delivered and a
dealer fails to do so, the dealer can be held liable
to a buyer for damages resulting from the breach
of an implied warranty.
Warranty Disclaimers
• Express Warranties:
– Obviously express warranties can be excluded if the
seller refrains from making any promise or affirmation
of fact relating to the goods, describing the goods, or
using a sample or model.
– The UCC does permit express warranties to be negated
or limited by specific and unambiguous language,
Therefore, a written disclaimer in language that is clear
and could negate all oral express warranties not
included in the written sales or lease contract [UCC 2316(1),
Warranty Disclaimers
• Implied warranties of merchantability and
fitness are disclaimed by the expressions "as
is," "with all faults," and other similar
expressions that in common understanding
for both parties call the buyer's attention to
the fact that there are no implied warranties
[UCC 2-316(3)(a), 2A-214(3)(a)].
Warranty Disclaimers
Iimplied warranty of fitness or of merchantability [U
To disclaim an implied warranty of fitness for a
particular purpose, the disclaimer must be in
writing and be conspicuous. The word fitness does
not have to be mentioned in the writing; it
is sufficient if, for example, the disclaimer states,
"THERE ARE NO WARRANTIES THAT
EXTEND BEYOND THE DESCRIPTION ON
THE FACE HEREOF."
•
Warranty Disclaimers
• A merchantability disclaimer must be more
specific; it must mention merchantability. It
need not be written; but if it is, the writing
must be conspicuous UCC 2-316(2)
Buyer's Examination of the
Goods
• If a buyer or lessee actually examines the goods
(or a sample or model) as fully as desired before
entering into a contract, or, if the buyer or lessee
refuses to examine the goods on the seller's
demand that he or she do so, there is no implied
warranty with respect to defects that a reasonable
examination would reveal or defects
that are found on examination [UCC 2-316(3)(b),
2A-214(2)(b)].
Magnuson-Moss Warranty Act
• The Magnuson-Moss Warranty Act
modifies UCC warranty rules to some
extent when consumer transactions are
involved. The UCC, however, remains the
primary codification of warranty rules for
industrial and commercial transactions.
Magnuson-Moss Warranty Act
If a seller chooses to make an express written
warranty, however, and the cost of the consumer
goods is more than $10, the warranty must be
labeled as either "full" or "limited." In addition, if
the cost of the goods is more than $15, by FTC
regulation, the warrantor must make certain
disclosures fully and conspicuously in a single
document in "readily understood language." This
disclosure states the names and addresses of the
warrantor(s), what specifically
warranted,procedures for enforcement