15.2 Warranties in the Sale of Goods

15.2 Warranties in the Sale of Goods

Warranty questions follow a predictable sequence: identify each warranty the facts create, decide whether any warranty was effectively disclaimed or its remedies limited, confirm that the plaintiff is someone the warranty protects and gave any required notice, and then measure damages.

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1. Warranties under UCC Article 2

Under UCC Article 2, warranties represent obligations of the seller regarding the title, quality, and character of the goods sold.

                      ┌────────────────────────────────────────┐
                      │     UCC ARTICLE 2 WARRANTY SYSTEM      │
                      └───────────────────┬────────────────────┘
                                          │
     ┌───────────────────┬────────────────┴───────────────────┬───────────────────┐
     ▼                   ▼                                    ▼                   ▼
┌──────────────┐  ┌──────────────┐                     ┌──────────────┐    ┌──────────────┐
│   Express    │  │ Merchantab.  │                     │Fitness for a │    │    Title     │
│  Warranty    │  │  (§ 2-314)   │                     │Partic. Purp. │    │  (§ 2-312)   │
├──────────────┤  ├──────────────┤                     ├──────────────┤    ├──────────────┤
│Affirmation,  │  │Merchant who  │                     │ANY seller;   │    │Good title,   │
│fact, promise,│  │deals in goods│                     │buyer relies  │    │rightful      │
│model/sample; │  │Fit for       │                     │on skill for  │    │transfer, free│
│basis of deal │  │ordinary use  │                     │special use   │    │from liens    │
└──────────────┘  └──────────────┘                     └──────────────┘    └──────────────┘

1. Express Warranties (UCC § 2-313)

An express warranty is created by:

• Any affirmation of fact or promise made by the seller to the buyer relating to the goods;
• Any description of the goods; OR
• Any sample or model which is made part of the basis of the bargain.
• Basis of the Bargain: The buyer does not need to prove specific reliance; statements made during negotiations become part of the basis of the bargain unless the seller clearly proves otherwise.
• Puffery / Opinion: Statements of value, seller's opinion, or general sales puffery (e.g., "This is the best car in town," or "This engine runs like a dream") do NOT create an express warranty.

2. Implied Warranty of Merchantability (UCC § 2-314)

• Creator: Automatically implied in every contract for the sale of goods if the seller is a merchant with respect to goods of that kind.
• Standard: Warrants that the goods are merchantable, meaning they are fit for the ordinary purposes for which such goods are used, adequately packaged and labeled, and conform to the promises made on the container.
• Example: A lawnmower that cuts grass normally is merchantable; a lawnmower whose blade flies off during ordinary residential mowing breaches § 2-314.

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

• Creator: Implied by operation of law in a sale of goods by ANY seller (merchant or non-merchant) if:
  1. The seller has reason to know any particular purpose for which the goods are required; AND
  2. The seller has reason to know that the buyer is relying on the seller's skill or judgment to select or furnish suitable goods; AND
  3. The buyer actually relies upon the seller's skill or judgment.
• Distinction from Merchantability: Merchantability concerns ordinary use; Fitness for a Particular Purpose concerns a custom, specialized use (e.g., buyer asks seller for boots suitable for scaling frozen glaciers, and seller recommends ordinary hiking boots).

4. Warranty of Title (UCC § 2-312)

Warrants that the title conveyed is good, the transfer is rightful, and the goods are delivered free from any security interest, lien, or encumbrance unknown to the buyer.

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2. Disclaimers and Limitations of Warranties (UCC § 2-316 & § 2-719)

Sellers frequently attempt to disclaim warranties or limit buyers' remedies on the MBE.

A. Disclaimer Rules (§ 2-316)

1. Express Warranties: Under § 2-316(1), words creating an express warranty and words tending to negate or limit warranties are construed as consistent wherever reasonable. A general disclaimer ("Seller makes no warranties") is ineffective against an express warranty.
2. Implied Warranty of Merchantability (§ 2-316(2)):
   • Can be disclaimed orally or in writing.
   • Must specifically mention the word "merchantability".
   • If in writing, the disclaimer must be CONSPICUOUS (capital letters, contrasting color, boldface, or larger font).
3. Implied Warranty of Fitness for a Particular Purpose (§ 2-316(2)):
   • Can be disclaimed ONLY BY A CONSPICUOUS WRITING (an oral disclaimer is completely void).
   • Need not mention "fitness"; sufficient if it states: "There are no warranties which extend beyond the description on the face hereof."
4. The "As Is" Safe Harbor (§ 2-316(3)(a)):
   • Unless the circumstances indicate otherwise, all implied warranties (both merchantability and fitness) are disclaimed by expressions like "as is," "with all faults," or other language calling the buyer's attention to the exclusion of warranties.
   • Section 2-316(3)(a) does not expressly require conspicuousness, but many courts require that the language be conspicuous or otherwise called to the buyer's attention, and the circumstances—such as a consumer sale of a new product—may show that the buyer did not understand that warranties were excluded.

B. Limitation of Remedies (UCC § 2-719)

Parties may agree to limit the buyer's remedies under UCC § 2-719 (e.g., limiting the remedy to "repair or replacement of defective parts"):

• Failure of Essential Purpose: If the exclusive or limited remedy fails of its essential purpose (e.g., the seller attempts repairs five times and cannot fix the vehicle), the limitation is stricken, and the default remedies of the UCC are restored (including revocation of acceptance and damages).
• Personal Injury in Consumer Goods: Under UCC § 2-719(3), limitation of consequential damages for personal injury in the case of consumer goods is prima facie unconscionable.

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Comparison: UCC Warranties

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3. Other Warranty Rules

Additional Ways Implied Warranties Are Excluded (§ 2-316(3)(b)–(c))

• Examination: If the buyer, before contracting, examined the goods, sample, or model as fully as desired, or refused to examine them after the seller demanded an examination, there is no implied warranty as to defects that an examination ought to have revealed. Merely making goods available for inspection is not enough to show a refusal.
• Course of dealing, course of performance, and trade usage may also exclude or modify implied warranties.
• Federal consumer law: Under the Magnuson-Moss Warranty Act, a supplier that gives a written warranty on a consumer product may not disclaim implied warranties, although it may limit their duration to that of a limited written warranty.

Warranty of Title and Against Infringement (§ 2-312)

• The seller warrants that the title conveyed is good, the transfer rightful, and the goods free from any security interest or lien the buyer did not know of. This warranty is excluded only by specific language or by circumstances giving the buyer reason to know the seller does not claim full title, such as a sheriff's sale.
• A merchant regularly dealing in goods of the kind warrants that the goods will be delivered free of any rightful claim of patent or trademark infringement, but a buyer who furnishes the specifications must protect the seller against claims arising from compliance with them.

Who Is Protected (§ 2-318)

Under all three alternatives, a seller may not exclude or limit the operation of § 2-318 (although Alternative C permits excluding liability to persons other than individuals for injury to the person).

Notice, Burden of Proof, and Time Limits

• Notice: A buyer who has accepted goods must notify the seller of the breach within a reasonable time after discovering or when it should have discovered it, or be barred from any remedy (§ 2-607(3)(a)). The rule gives the seller a chance to cure, investigate, and negotiate. Courts apply it more leniently to consumers than to merchants.
• Burden: The buyer bears the burden of proving a breach with respect to goods it has accepted (§ 2-607(4)).
• Statute of limitations: An action for breach of a sales contract must be brought within four years after the cause of action accrues; a breach of warranty accrues on tender of delivery, whether or not the buyer knows of it, unless the warranty explicitly extends to future performance (§ 2-725). The parties may shorten the period to not less than one year.

Damages for Breach of Warranty

For accepted goods, the buyer may recover the difference, at the time and place of acceptance, between the value of the goods as accepted and their value as warranted, plus incidental and consequential damages (§§ 2-714, 2-715). After notifying the seller, a buyer may deduct damages from any part of the price still due (§ 2-717). Rejection and revocation of acceptance are covered in Section 16.3, and the full range of buyer's remedies in Section 17.2.