Chapter 25 Warranties

Hypothetical Aristotle Mythos is having a “mid-life crisis,” in large part because he is 50 years old, and he realizes that most people do not live to be 100. In an attempt to conquer his depression, and to prove that he is equivalent to a 20-year-old (at least in spirit,) Mythos plans to climb Mount Zeus, the highest peak in his ancestor’s homeland of Greconia. In preparation for his climb, Mythos patronizes the local “outdoors” shop, Athena’s Garden, and asks to speak with a trained sales associate. Mythos specifies that he will be climbing Mount Zeus, and that he will need a tent and sleeping bag to survive the wind and elements on two nights during his ascent and descent. The associate selects a tent and sleeping bag from a wide variety of possibilities, and Mythos leaves the store a “happy camper.” Mythos begins his climb the following day, and successfully reaches his check point, halfway to Zeus’ peak, before nightfall. He prepares his campsite, and looks forward to some much- needed rest. Unfortunately, he has a fitful night, shivering in his sleeping bag below a partially-collapsed tent, with the wind and the cold “getting the best of” Mythos and his camping gear. In the daylight of the following morning, Mythos fully awakens to realize that the toes on both of his feet have turned a sickening shade of blue-purple, and he realizes with great disappointment that he will not be able to fulfill his dream of climbing Mount Zeus. Further, upon closer examination of his tent and sleeping bag, both are trademark-stamped “The Young Mythologist,” gear intended for backyard camping by children. As a result of his misfortune, Mythos must have four toes (two toes on each foot) amputated, and he incurs medical expenses of $58,000 for treatment and rehabilitation. Mythos’ doctor has rated him with 20% permanent partial disability as a result of his toe amputations. Is Athena’s Garden legally responsible for Mythos’ medical expenses and partial disability? If so, on what theory? 2

Warranty (Definition) o Seller’s promise(s) regarding certain characteristics of good(s) sold 3

4 Sales and Lease Warranties o Warranty of Title. o Express Warranty. o Implied Warranty of Merchantability. o Implied Warranty of Fitness for a Particular Purpose. o Implied warranty arising from the course of dealing or trade usage.

5 Warranty of Title o Automatically arises in most commercial sales transactions. o UCC-312 creates 3 warranties: o Good Title. o No Liens. o No Infringements.

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

7 Express Warranties o Can be oral or written-- don’t have to use the words “warrant” or “guarantee.” o Any Affirmation or Promise. o Any Description. o Any Sample or Model. o Description of good’s physical nature or its use o May be found in advertisements or brochures o May be material term of contract o Salesperson’s oral promise concerning good can give rise to express warranty

8 Express Warranties o To create an express warranty, the affirmation of fact must become the “basis of the bargain.” o Buyer must rely on warranty when he enters into contract.

9 Express Warranties o Statements of Opinion and Value. o Generally excludes “puffing” – “Best car in town”, not an express warranty. o However, expert opinion is not puffery.

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

11 Implied Warranty of Merchantability o Automatically arises from merchants. o Goods are of average, fair, or medium-grade (within the product’s description). o Adequately packaged and labeled. o Conform to promises on label. o Have a consistent quality and quantity among the commercial units. o Be fit for “ordinary use” o Applies to food products as well

12 Implied Warranty of Fitness for a Particular Purpose o Arises by any Seller who: o Knows the particular purpose for which the goods are being bought; and o Knows the buyer is relying on seller’s skill and judgment to select suitable goods. o Seller does not have to be a merchant to make this warranty.

13 Implied Warranty Arising from Course of Dealing or Trade Usage o Arises when both parties to a contract have knowledge of a well- recognized trade custom. o Courts infer that both meant this custom to apply to their transaction.

Warranty Rights of Third Parties: Third Party Beneficiaries of Warranties Seller’s warranties may extend to: o Buyer’s household members and guests o Any “reasonable and foreseeable” user o Anyone injured by good 14

15 Warranty Disclaimers o Express Warranties can be disclaimed: o If they were never made (evidentiary matter). o If a clear written disclaimer in contract with specific, unambiguous language and called to Buyer’s attention (BOLD CAPS UNDERLINED).

16 Warranty Disclaimers o Implied Warranties: o Merchantability: “As Is,” “With All Faults.” o Fitness for a Particular Purpose: must be in writing and conspicuous. o 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. o Buyer fails/refuses to examine goods o Buyer fails to file suit within applicable statute of limitations period

Magnuson-Moss Warranty Act o Provides that if seller decides to issue written warranty for consumer good, seller must specify whether warranty is “full” or “limited” 17