Sales and Lease Warranties

Overview

A warranty is an assurance of fact upon which a party may rely.
• Warranty of Title.
• Express Warranty.
• Implied Warranty of Merchantability.
• Implied Warranty of Fitness for a Particular Purpose.
• Implied warranty arising from the course of dealing or trade usage.

Warranty of Title

Automatically arises in most commercial sales transactions.
UCC-312 creates 3 warranties:

• Good Title.
• No Liens.
• No Infringements.

Warranty Title Disclaimer

Title warranty can generally be disclaimed only with specific language in contract.
Circumstances may be obvious to clearly indicate disclaimer of title, such as a sheriff’s sale.

Express Warranties

Can be oral or written-- don’t have to use the words “warrant” or “guarantee.”

• Any Affirmation or Promise.
• Any Description.
• Any Sample or Model.
To create an express warranty, the affirmation of fact must become the “basis of the bargain.”
And Buyer must rely on warranty when he enters into contract.
Case 23.1: Genetti v Caterpillar Inc (1999).
Statements of Opinion and Value.
Generally excludes “puffing” – “Best car in town”, not an express warranty.
However, expert opinion is not puffery.

Implied Warranties

Warranty inferred at law based on the circumstances or nature of the transaction.
Under the UCC, merchants warrant the goods they sell are “merchantable”, i.e., fit for ordinary purpose for which such goods are sold.

Implied Warranty of Merchantability

• Automatically arises from merchants.
• Goods are of average, fair, or medium-grade.
• Adequately packaged and labeled.
• Conform to promises on label.
• Have a consistent quality and quantity among the commercial units.

Case 23.2: Webster v. Blue Ship Tea Room (1964).

Implied Warranty of Fitness for a Particular Purpose

Arises by any Seller who:

• Knows the particular purpose for which the goods are being bought; and
• Knows the buyer is relying on seller’s skill and judgment to select suitable goods.

Implied Warranty Arising from Course of Dealing or Trade Usage

Arises when both parties to a contract have knowledge of a well-recognized trade custom. Courts infer that both meant this custom to apply to their transaction.

Overlapping Warranties

Occurs when two or more warranties made in a single transaction:

• If warranties are consistent, they are construed as cumulative.
• If inconsistent:
• First: implied warrant of fitness for a particular purpose.
• Then: express.

Warranties and Third Parties

At common law only the Buyer could sue the Seller because she is the one in privity of contract with the Seller.
UCC 2-318 provides 3 alternatives from which the states may choose.

Warranty Disclaimer

Express Warranties can be disclaimed:

• If they were never made (evidentiary matter).
• If a clear written disclaimer in contract with specific, unambiguous language and called to Buyer’s attention (BOLD CAPS UNDERLINED).
Implied Warranties:
• Merchantability: “As Is,” “With All Faults.”
• Fitness for a Particular Purpose: must be in writing and conspicuous.
• If Buyer has the right to fully inspect and either: does so or refuses to do so, warranties are disclaimed as to defects that could reasonably be found.
Case 23.3: International Turbine Services v. Vasp Brazilian Airlines (2002).

Statute of Limitations

Action for Breach of Warranty:

• Begins to toll at tender.
• Buyer must notify Seller within a reasonable time.
• Buyer must sue within four years after cause of action accrues.
If warranty is for future performance, action accrues when performance happens and breach is discovered.

Magnuson-Moss Warranty Act

FTC enforces; Attorney general or consumer can bring action.
Modifies UCC for consumer sales.
Only applies when written warranties are made by Seller (including a service contract).

• If goods > $10 label “full” or “limited.”
• If goods > $15 Seller must make additional disclosures.
Full Warranty: Seller must repair or replace.
Limited Warranty must be conspicuous.
• If limit of time only must say, e.g., “full twelve-month warranty.”
UCC Implied Warranties:
• May not be disclaimed, but can be limited, but must correspond with time of express warranty.

Warranties under the CISG

Art. 35: uses the word “conformity” instead of warranty, but very similar to UCC.