6.4 UCC Article 2 Warranties & Risk of Loss

UCC Article 2 Warranties & Risk of Loss

Content map item 170 — UCC Article 2 is the single broadest entry in the Contracts map, and two of its components are easy to overlook because they do not fit the offer-acceptance-breach narrative: warranties, which define what the seller promised the goods would be, and risk of loss, which decides who absorbs the cost when goods are destroyed in transit through nobody's fault. Both generate clean, rule-driven multiple-choice questions, which is exactly why they get tested.

Remember the threshold question first. Article 2 applies to transactions in goods — things movable at the time of identification. For a hybrid contract mixing goods and services, most courts apply the predominant purpose test: if the deal is essentially for goods with incidental services, Article 2 governs the whole contract, and vice versa.

---

1. The Three Warranties of Quality

Express Warranties (§ 2-313)

An express warranty arises from an affirmation of fact, a promise, a description of the goods, or a sample or model, so long as it becomes part of the basis of the bargain. Three points carry most of the exam weight:

• No magic words. The seller need not say "warrant" or "guarantee," and need not intend to make a warranty.
• Puffery is not warranty. "This is the finest truck on the lot" is opinion; "this truck has a rebuilt transmission" is fact. The line between opinion and fact is the most common testing point.
• Basis of the bargain. The buyer need not prove detailed reliance; the affirmation is presumed part of the bargain unless the seller shows otherwise.

Implied Warranty of Merchantability (§ 2-314)

This warranty attaches only when the seller is a merchant in goods of that kind — a car dealer selling cars, not a dentist selling her own car. Merchantable goods must at minimum pass without objection in the trade, be of fair average quality, and be fit for the ordinary purposes for which such goods are used. The used-car buyer whose engine seizes on the drive home has a merchantability claim against a dealer and none against a private seller.

Implied Warranty of Fitness for a Particular Purpose (§ 2-315)

This warranty does not require a merchant seller. It requires only that the seller have reason to know of a particular purpose — one distinct from the ordinary use — and that the buyer actually rely on the seller's skill or judgment in selecting the goods. The buyer who asks the hardware clerk for a paint that will adhere to galvanised steel and is handed the wrong product has a fitness claim even though the paint is perfectly merchantable for ordinary use.

Disclaimer trap: an "as is" sale disclaims both implied warranties at once, but disclaims no express warranty. A contract that describes the goods as "a 2019 model with 40,000 miles" and then says "sold as is" still carries the express warranty created by that description.

---

2. Risk of Loss: Who Pays When the Goods Burn

Risk of loss asks a narrow question: the goods have been destroyed or damaged without fault of either party, so which party bears the loss and, if the buyer, must still pay the price? Work through the hierarchy in order.

Risk of Loss Analysis
├── 1. Has either party BREACHED?  → breaching party bears the risk (§ 2-510)
├── 2. Does the AGREEMENT allocate risk? → the agreement controls (§ 2-509(4))
├── 3. Is a common CARRIER involved?
│      ├── Shipment contract (FOB seller's city) → risk passes on DELIVERY TO CARRIER
│      └── Destination contract (FOB buyer's city) → risk passes on TENDER AT DESTINATION
├── 4. Goods held by a BAILEE → risk passes on receipt of a negotiable document of title,
│                                acknowledgment by the bailee, or receipt of a non-negotiable document
└── 5. No carrier, no bailee (§ 2-509(3))
       ├── MERCHANT seller → risk passes on the buyer's ACTUAL RECEIPT of the goods
       └── NON-MERCHANT seller → risk passes on TENDER of delivery

The carrier rules (§ 2-509(1))

The default is a shipment contract. A seller obliged only to ship — the ordinary case, and the result whenever the contract is silent — bears risk only until the goods are duly delivered to the carrier. A destination contract exists only where the contract expressly requires delivery at a particular destination, and there risk stays with the seller until tender at that destination. The mnemonic that decides most questions: FOB is the pivot. "FOB seller's city" is a shipment contract; "FOB buyer's city" is a destination contract.

The no-carrier rule (§ 2-509(3))

When the buyer is to collect the goods at the seller's place of business, the merchant/non-merchant distinction controls. A merchant seller keeps the risk until the buyer physically receives the goods — so goods that burn in the merchant's warehouse after the buyer has paid and been told they are ready remain the merchant's loss. A non-merchant seller sheds the risk at tender, so the same fire after tender falls on the buyer.

Breach shifts everything (§ 2-510)

Breach overrides the entire hierarchy. Where the goods so fail to conform that the buyer has a right of rejection, risk stays on the seller until cure or acceptance. Where the buyer repudiates or breaches after conforming goods have been identified, risk sits on the buyer for a commercially reasonable time, but only to the extent of any deficiency in the seller's insurance coverage.

The classic trap: candidates ask "who had title?" Article 2 deliberately abandoned title as the organising concept. Under § 2-401 title matters for a few discrete questions, but risk of loss is governed by §§ 2-509 and 2-510 regardless of where title sits. An answer choice that resolves risk of loss by locating title is almost always wrong.