UCC Warranties and Risk of Loss

The Three Warranties

Article 2 gives buyers three sources of quality protection:

• Express warranty (2-313): Created by (a) any affirmation of fact or promise relating to the goods, (b) any description of the goods, or (c) any sample or model, that becomes part of the basis of the bargain. No magic words ('warrant,' 'guarantee') are needed, and the seller need not intend to warrant. BUT a statement of opinion, value, or 'puffery' ('this is a great truck,' 'best on the market') is NOT an express warranty. A sample drawn from the actual goods or a model shown creates a warranty that the bulk will conform.
• Implied warranty of merchantability (2-314): Implied by law whenever the seller is a merchant with respect to goods of that kind. The goods must be fit for the ordinary purposes for which such goods are used, pass without objection in the trade, be of fair average quality, adequately contained and labeled, and conform to label promises. Food and drink served carry it too.
• Implied warranty of fitness for a particular purpose (2-315): Arises (merchant status NOT required) when the seller, at the time of contracting, has reason to know the buyer's PARTICULAR purpose and that the buyer is relying on the seller's skill or judgment to select suitable goods, and the buyer in fact relies. 'Particular' means a specific, non-ordinary use.

Disclaimers and Limitations

Sellers may disclaim implied warranties, but 2-316 imposes form requirements:

Other disclaimer routes: the buyer's examination of the goods (or refusal to examine) excludes implied warranties as to defects an exam would reveal; and course of dealing, course of performance, or usage of trade can exclude or modify implied warranties.

Limitation of remedies (2-719): Parties may limit remedies (e.g., 'repair or replace only') and exclude consequential damages, BUT a limitation that fails of its essential purpose is unenforceable, and a clause limiting consequential damages for personal injury from consumer goods is prima facie unconscionable. Note also the Magnuson-Moss Warranty Act restricts disclaimers when a written warranty is given to a consumer.

Risk of Loss

Risk of loss determines who bears the loss when conforming goods are damaged or destroyed without the fault of either party after the contract is formed but before the buyer has them. Analyze in order:

1. Is there an agreement? The parties' contract controls (2-509(4)).
2. Is there a breach? Under 2-510, if the goods are nonconforming and the buyer has a right to reject, risk stays on the seller until cure or acceptance — even on a shipment term. If the buyer rightfully revokes acceptance, risk shifts back to the seller to the extent of any deficiency in insurance coverage. A buyer's repudiation can shift risk to the buyer for a commercially reasonable time.
3. Carrier cases (2-509(1)):
   • Shipment contract (the default; 'FOB seller's plant,' or simply 'ship via carrier'): risk passes to the buyer when the seller duly delivers the goods to the carrier.
   • Destination contract ('FOB buyer's city'): risk passes when the goods are tendered at the destination so the buyer can take delivery.
4. No carrier (2-509(2)-(3)):
   • Merchant seller: risk passes when the buyer RECEIVES (takes physical possession of) the goods.
   • Non-merchant seller: risk passes on tender of delivery (when goods are made available to the buyer).

Mnemonic: Goods lost in transit on a SHIPMENT term → buyer bears the loss (and still must pay, then look to the carrier). Goods destroyed in a merchant seller's warehouse before the buyer picks them up → seller bears the loss. Title (2-401) generally does NOT control risk of loss under the modern UCC — do not confuse the two.

Shipping-term glossary: 'FOB [seller's location]' = shipment contract (risk passes at origin on delivery to carrier). 'FOB [buyer's/destination location]' = destination contract (risk passes on tender at destination). 'FAS vessel' (free alongside) is a maritime shipment term. 'CIF' (cost, insurance, freight) and 'C&F' are shipment terms in which the price includes carriage, so risk still passes at shipment. When a problem gives no shipping term but authorizes shipment by carrier, the default is a shipment contract — a frequent MBE trap, because students assume the seller must get the goods all the way to the buyer.

Sale on approval vs. sale or return: In a sale on approval (goods delivered primarily for the buyer's USE), risk and title stay with the seller until the buyer accepts. In a sale or return (goods delivered primarily for RESALE with a right to return unsold goods), risk and title pass to the buyer as in an ordinary sale, and returned-goods risk is on the buyer.