Business Law Class Council Rock School District Mr. Sherpinsky – W355 Chapter 14

UCC  The UCC provides protection in these and other situations under its law of warranties  A warranty is another name for a guarantee.  A breach of warranty is a breach of contract

Express Warrantyoral or writtenstatementpromise other representation about the quality, ability, or performance of a product  An Express Warranty is an oral or written statement, promise, or other representation about the quality, ability, or performance of a product  Created when a private party or merchant sells goods and makes a statement of fact or a promise about the goods to the buyer  Often found in sales brochures, circulars, and advertisements

 To be useful, a warranty must be stated in precise and understandable terms:  Seller says, “This product is warranted” or “This product is guaranteed.” ▪ These words alone would NOT be enough to give you protection know exactly what the seller will do for you ▪ You need to know exactly what the seller will do for you in the event of a problem

 Always seek written warranties:  Although express warranties do not have to be written, oral statements are difficult to prove in court  (Parol Evidence Rule)  Courts may not recognized oral statements if a written warranty exists  Warranty Law allows for a certain amount of sales talk, “Puffery” that does not qualify as warranty ▪ Statements about the value of goods or a seller’s opinion is NOT considered a warranty ▪ Statement of Facts ▪ Statement of Facts creates an express warranty

 Availability before sale:  Written warranties on consumer products costing more than $10 must be made available before you buy the product ▪ Stores must put written warranties close to product or display a sign stating that warranties can be examined upon request ▪ Manufacturers provide retailers with materials to meet warranties such as stickers, tags, signs, or posters ▪ Can also be printed on product’s package (Very Common)

Advertising Express Warranties:  Advertising stating that a product is warranted MUST TELL YOU HOW TO GET A COPY OF WARRANTY before you buy the product  Also applies to mail, telephone, and Internet orders  Following Examples of advertisements: ▪ “The Big wheel bicycle is warranted for five years. Some restrictions may apply. See a copy our warranty wherever Big wheel bicycles are sold.”  Advertisers who warrant products must explain the terms of their promise!

Advertising Express Warranties:  Advertisers who use expressions such as “Satisfaction Guaranteed” or “Money-Back Guarantee,” and “Free Trial Offer” must refund the full purchase price of their product at the purchaser’s request.  All conditions of returns MUST be stated in the ad.  Warranting products for a lifetime must fully explain the terms of their promise.

 Magnuson-Moss Warranty Act  Magnuson-Moss Warranty Act is a law affecting only the sale of goods sold in interstate commerce over $10  Gives added protection to consumers when written express warranties are made for products over $10  Product must be labeled as full or limited  Full Warranty: Promises to fix or replace a defective product at NO CHARGE reasonable amount of time ▪ Must be honored in reasonable amount of time after complaint is made ▪ Good for period mentioned, regardless of who owns it when it breaks  Limited Warranty: All other warranties not consider FULL WARRANTY. ▪ Does NOT promise free repair or replacement ▪ Common examples: Cover parts, not labor ▪ Also gives you partial refunds at specific intervals ▪ Read the warranty completely!

creates express warranty  Any description of the goods that is part of a transaction also creates an express warranty  Seller warrants goods as described ▪ Example: Earnest ordered a handheld GPS receiver from a catalog. ▪ The catalog described the item and had a picture of it. ▪ When the system arrived it was a different model and not the same unit as pictured. ▪ This is a breach of warranty

Implied Warranties: Implied Warranties: a guarantee of quality imposed by law  Not in writing  Under UCC, only applies to goods that are sold, NOT contracts for services  Three types of implied warranties: 1.Warranty of fitness for a particular purpose 2.Warranty of merchantability 3.Warranty that comes from a course of dealing or usage of trade

Warranty of Fitness for a particular purpose: is created when the seller knows the purpose for which the goods are needed  Seller advises the buyer in making the purchases  Buyer relies on the seller’s knowledge and advice ▪ Seller warrants by implication that the goods will be fit for the purpose for which they are to be used ▪ This warranty exists whether the seller is a merchant or a private party

Warranty of Merchantability: here the merchant warrants that the goods being sold are merchantable  Given only when seller regularly sell goods of that kind  Unless disclaimed  Unless disclaimed, retailers, wholesalers, and manufacturers imply such a warranty in every sale, giving assurance that their products are fit for the purpose for which they are purchased  Does NOT apply to private persons

Warranty of Merchantability:  Merchantable goods must:  Pass without objection in the trade under the contract description  Be fit for the ordinary purposes for which such goods are used  Be adequately contained, packaged, and labeled as the agreement may require  Conform to the promises or statements of fact made on the container or label, if any.

Usage of Trade:  Arises from the customary ways in which parties have dealt in the past Warranty of Title:  When a merchant or private party sells goods, the seller warrants that the title being conveyed is good and transfer is lawful:  Promise that to seller’s knowledge, the goods will be delivered free from any lien or claim by another.

 To exclude the warranty of merchantability, the word merchantability must be mentioned specifically.  Disclaimers:

 Warranty of Title can NEVER be excluded.  Most Common Display of Such Exclusions: ▪ Exclusion will be printed on receipt: “THE SELLER HEREBY EXCLUDES THE WARRANTY OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.” ▪ Implied Warranties can also be excluded when you see the words: “As is” or “with all faults”. exclude warranty ▪ Having buyers exam goods exclude warranty since all defects should have been discovered by the inspection.

 Under Magnuson-Moss Warranty Act, any clause that excludes or limits consequential damages MUST appear conspicuously on the face of the warranty.  Example: ▪ Statement on receipt citing: “Not responsible for any damages caused by defective product.”

Losses that do not flow directly from an act but only from some of the consequences or results of the act.  Disclaimer: “In no event shall this company be liable for consequential damages.”  Example: Freeze fails due to a faulty compressor. Company is responsible for repair to freezer not the spoiled food inside it..

privity of contract People who contract directly with each other are said to be in privity of contract  Warranty extended only to the ORIGINAL buyer of a product Under UCC privity of contract has been abolished. ▪ Modern Day Rules: Under UCC privity of contract has been abolished. Extend warranty to people who would reasonably be expected to use, consume, or be affected by the goods purchased by the buyer

 To succeed in a claim for breach of warranty, the buyer must satisfy his or her duty to notify.  This requires that the buyer notify the seller within a reasonable time after the defect is discovered ▪ Failure to do so will prevent the buyer from recovering