MILLER CHAPTER 23 WARRANTIES 2015 Cengage Learning All

MILLER CHAPTER 23: WARRANTIES © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

OVERVIEW u. A warranty is an assurance or guarantee by the seller or lessor of certain facts concerning the goods being sold or leased. u If seller breaches a warranty, buyer can recover damages, or rescind the contract. © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 2

OVERVIEW u Warranties automatically arise in most commercial sales transactions. u Normally warranties can be disclaimed or modified with specific language in the contract. © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 3

§ 1: WARRANTIESOF TITLE u UCC-312 can creates three express warranties at sale: Good Title. No Liens. No Infringements. © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 4

§ 2: EXPRESS WARRANTIES u Statements That Create: Quality, condition, description, or performance potential of goods. Can be created by: • Any Affirmation or Promise. • Any Description. • Any Sample or Model. © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 5

EXPRESS WARRANTIES u Basis of the Bargain. Seller does not have to use the words “guarantee” or “warranty. ” Buyer must rely on warranty when he enters into contract. © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 6

EXPRESS WARRANTIES u Statements of Opinion and Value. Only statements of fact create express warranties. Puffery versus Express Warranties. Exception for Statements of Opinion by Experts. Reasonable Reliance. © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 7

§ 3: IMPLIED WARRANTIES u Inferred at law based on the circumstances or nature of the transaction. © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 8

IMPLIED WARRANTIES u Merchantability. Automatically arises from merchants. Merchantable Goods: • Goods are of average, fair, or medium-grade. • Adequately packaged and labeled. • Conform to promises on label. © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 9

IMPLIED WARRANTIES u Merchantability. Merchantable Goods: • Warranty can be breached even if merchant did not know product was defective. • CASE 23. 1 SHOOP V. DAIMLERCHRYSLER CORP. (2007). © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 10

IMPLIED WARRANTIES u Merchantability. Merchantable Food: • Serving of food or drinks in a public establishment also has an implied warranty of merchantability. • CASE 23. 2 WEBSTER V. BLUE SHIP TEA ROOM, INC. (1964). © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 11

IMPLIED WARRANTIES u Fitness for a Particular Purpose. Particular vs. Ordinary Purpose: Differs from ordinary purpose of merchantability. Goods can be merchantable but unfit for a particular purpose. © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 12

IMPLIED WARRANTIES u Fitness for a Particular Purpose. Knowledge and Reliance Requirements: seller must have reason to know purpose, and buyer must have relied on the recommendation. © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 13

IMPLIED WARRANTIES u Prior Dealings or Custom. Arises when both parties to a contract have knowledge of a wellrecognized trade custom. Courts infer that both meant this custom to apply to their transaction. © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 14

IMPLIED WARRANTIES u Lemon Laws. Defective automobiles that repeatedly fail to meet standards of quality or performance. Seller has had opportunity to fix. Arbitration often required. © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 15

IMPLIED WARRANTIES u Magnuson-Moss Warranty Act. Modifies UCC for consumer sales. Only applies when written warranties are made by Seller. • If goods > $10 label “full” or “limited. ” • If goods > $15 Seller must make additional disclosures. © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 16

IMPLIED WARRANTIES u Magnuson-Moss Warranty Act. 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. ” © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 17

IMPLIED WARRANTIES u Magnuson-Moss Warranty Act. UCC Implied Warranties: • May not be disclaimed, but can be limited, but must correspond with time of express warranty. • Requires document of all warranties in “readily understood language. ” © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 18

§ 4: OVERLAPPING WARRANTIES u Occurs when two or more warranties are made in a single transaction: Consistent Warranties are construed as cumulative. © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 19

OVERLAPPING WARRANTIES u Inconsistent Warranties: Express warranties displace inconsistent implied warranties – except fitness for a particular purpose. © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 20

OVERLAPPING WARRANTIES u Inconsistent Warranties: Samples take precedence over inconsistent descriptions. Exact or technical specifications displace inconsistent samples or descriptions. © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 21

§ 5: WARRANTY DISCLAIMERSAND LIMITATIONSON LIABILITY u Express Warranties 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). © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 22

WARRANTY DISCLAIMERSAND LIMITATIONSON LIABILITY u Implied Warranties. Unless circumstances indicate otherwise, warranties of fitness and merchantability can be disclaimed with the words “As Is, ” “With All Faults. ” © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 23

WARRANTY DISCLAIMERSAND LIMITATIONSON LIABILITY u Implied Warranties. • CASE 23. 3 ROBERTS V. LANIGAN AUTO SALES (2013). Disclaimer of the Implied Warranty of Merchantability: must use the word merchantability. © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 24

WARRANTY DISCLAIMERSAND LIMITATIONSON LIABILITY u Implied Warranties. Disclaimer of the Implied Warranty of Fitness: must be in writing and conspicuous. © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 25

WARRANTY DISCLAIMERSAND LIMITATIONSON LIABILITY u Buyer or Lessee’s Examination or Refusal to Inspect. Warranties are disclaimed as to defects that could reasonably be found on examination. © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 26

WARRANTY DISCLAIMERSAND LIMITATIONSON LIABILITY u Warranty Disclaimers and Unconscionability. Factors include ‘take-it-or-leave-it’ provision or unequal bargaining power. © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 27

WARRANTY DISCLAIMERSAND LIMITATIONSON LIABILITY u Statutes of Limitation. Action for Breach of Warranty must commence within four (4) years after the action accrues (breach). Begins to toll at tender, but buyer must notify Seller within a reasonable time. © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 28