1. Sales and Lease Warranties
Chapter 13

2. Caveat Emptor Let the buyer beware
Doctrine governed law of sales and leases since Roman times.
Modern law recognizes that consumers need more protection.

3. Express Warranty
Created when seller/lessor affirms goods meet certain standards of quality, description, performance, or condition
May be written, oral, or inferred from conduct
Formal words not required to make such warranties

4. Express Warranty (continued)
It is not necessary to use formal words such as warrant or guarantee to create an express warranty.
Sellers and lessors are not required to make such warranties.
Created when seller/lessor indicates goods will conform to:
Affirmations of facts or promises
Any descriptions of them
Any model or sample

5. Express Warranty (continued)
Basis of the Bargain
Sellers and lessors of goods do not have to make express warranties concerning the quality of their goods.
They often make such warranties to convince people or businesses to purchase or lease goods from them.
Statements of Opinion
Sales “puffing” by sales-persons usually does not create a warranty.
It is merely a statement of opinion.

6. Damages Recoverable for Breach of Warranty
The buyer/lessee may sue the seller or lessor to recover compensatory damages.
May recover difference between value of goods as warranted and actual value at time and place of acceptance.
May also recover for personal injuries.

7. Warranties Implied By Law
Implied Warranty of Merchantability
Implied Warranty of Fitness for Human Consumption
Implied Warranty of Fitness for a Particular Purpose

8. Implied Warranty of Merchantability
If seller/lessor is a merchant with respect to the goods, there is an implied warranty of merchantability.
May be disclaimed
Does not apply to sales or leases by nonmerchants or casual sales.

9. Implied Warranty of Merchantability (continued)
The goods are warranted to:
be fit for the ordinary purposes for which they are used.
be adequately contained, packaged, and labeled.
be of an even kind, quality, and quantity within each unit.
conform to any promise or affirmation of fact made on the container or label.
Be of a quality that must pass without objection in the trade.
meet a fair average or middle range of quality if fungible goods.

10. Implied Warranty of Fitness for Human Consumption
Applies to food or drink consumed on or off the premises of:
Restaurants
Grocery stores
Fast-food outlets
Vending machines

11. Implied Warranty of Fitness for Human Consumption (continued)
Foreign Substance Test
Under this test, food product unmerchantable if foreign object in product causes injury to person.
Consumer Expectation Test
A test to determine merchantability based on what the average consumer would expect to find in food products.

12. Implied Warranty of Fitness for a Particular Purpose
A warranty that arises where a seller or lessor warrants that the goods will meet the buyer’s or lessee’s expressed needs.
The warranty applies to both merchant and nonmerchant sellers and lessors.

13. Summary: Express and Implied Warranties (1 of 2)
Type of Warranty
How Created
Description
Express warranty
Made by the seller or lessor
Affirmation that the goods meet certain standards of quality, description, performance, or condition
Implied warranty for fitness for a particular purpose
Implied by law
Implied that the goods are fit for the purpose for which the buyer or lessee acquires the goods.

14. Summary: Express and Implied Warranties (2 of 2)
Type of Warranty
How Created
Description
Implied warranty of merchantability
Implied by law if the seller or lessor is a merchant
Implied that the goods:
Are fit for the ordinary purposes for which they are used
Are adequately contained, packaged, and labeled
Are of an even kind, quality, and quantity within each unit
Conform to any promise or affirmation of fact made on the container or label
Pass without objection in the trade
Meet a fair average or middle range of quality for fungible goods

15. Warranty Disclaimer Express warranty: Implied warranty:
Can be disclaimed provided disclaimer and warranty can be construed together.
Implied warranty:
Disclaimed by language like “as is”, “with all faults”.
If no specific language, disclaimers must mention merchantability.
Fitness for particular purpose may be disclaimed in general language.

16. Magnuson-Moss Warranty Act
Covers written warranties relating to consumer products.
Commercial and industrial transactions are not governed by the Act.
The Act does not require a seller or lessor to make express written warranties.

17. Magnuson-Moss Warranty Act (continued)
Persons who do make such warranties are subject to the provisions of the Act.
Full Warranties
Limited Warranties
The Act does not create any implied warranties.

18. Warranties of Title and No Infringements
Good Title
No Security Interests
No Interference
No Infringements 3

19. Warranty of Good Title:
Sellers warrant that they have valid title to the goods they are selling and that transfer of title is rightful.

20. Warranty of No Security Interests
Under the UCC, sellers of goods warrant that the goods they sell are delivered free from any third-party security interests, liens, or encumbrances that are unknown to the buyer.

21. Warranty of No Infringements
A seller or lessor who is a merchant who regularly deals in goods of the kind sold or leased automatically warrants that the goods are delivered free of any:
Third-party patent,
Trademark, or
Copyright claim

22. Warranty of No Interference
The lessor warrants that no person holds a claim or interest in the goods that arose from an act or omission of the lessor that will interfere with the lessee’s enjoyment of his or her leasehold interest.
Warranty of Quiet Possession