Chapter 23

Question 1

Warranty

Answer 1

assurances, guarantees, promises about the title, express, and implied

Question 2

What is the source of warranty law?

Answer 2

UCC

Question 3

Warranty of Title

Answer 3

arises automatically on the sales of goods contract (have all of these if it is goods (not if it is real property))

Question 4

Good Title

Answer 4

lawful, rightful ownership (evidence of ownership) so that you have the lawful right to sell it to someone else

Question 5

No Liens

Answer 5

liens are rights to others (bank or dealership). If I sell, we need to protect the lienholders’ rights. Predators that have rights in the good.

Question 6

What is a good example of No Liens?

Answer 6

Car. We get a loan for the car. We need to verify that we are not violating the lien holders’ rights. If you steal the car you breached “good title”.

Question 7

No Infringements

Answer 7

Only a part of warranty and title if the sale is from a merchant. Infringements (copyrights, trademarks, patent…intellectual property rights).

Question 8

First Sale Doctrine

Answer 8

you have the right to resale it after you bought it and you don’t have to worry about the patent holder’s rights

Question 9

A seller can disclaim or modify the warranty of title by including specific language in the contract. What is the wording of disclaimer of the warranty of title?

Answer 9

Seller asserts they are transferring only such rights, title and interest as they have in the goods. “I warrant only such right, title and interest as I may own.”

Question 10

Who creates Express Warranties?

Answer 10

Created by the seller who makes representations concerning the quality, condition, description, or performance potential of the goods.

Question 11

Express Warranties:

Answer 11

1. The goods will conform to an affirmation or promise of fact which relates to the goods.
2. The goods will conform to a description of the goods.
3. The goods will conform to a sample or model of the goods.

Question 12

What are some examples of “The goods will conform to an affirmation or promise of fact which relates to the goods?”

Answer 12

“these drill bits will penetrate stainless steel without dulling.”
“100% genuine mink”

Question 13

What form does a promise of fact have to be?

Answer 13

Can be oral, said in writing, or said in advertisements. The seller never has to use the words “I warrant” or “I promise.”

Question 14

What kind of statement is puffery?

Answer 14

An opinion statement

Question 15

What is an example of “the goods will conform to a description of the goods?”

Answer 15

“this crate contains a 150 horse-power diesel engine.”

Question 16

Basis of the Bargain

Answer 16

1. An affirmation or promise becomes the basis of the bargain if it comes at such a time that the buyer could have relied on it when he agreed to the contract.
2. The buyer does not have to show that he actually relied upon the affirmation or promise.

Question 17

Reasonable Reliance by Buyer is a Statement of…

Answer 17

value (does not fall under express warranty)

Question 18

Texas Deceptive Trade Practices Act (DTPA)

Answer 18

Laundry list of deceptive practices. Can enhance your remedy in an ordinary breach of contract/breach of warranty case. Treble damages. Attorney’s fees. Cost of court.

Question 19

1988. Husband bought a new car (Ford Bronco 2). The salesman is talking about how harsh the air is in Houston – corrosive on paint jobs. The dealership is selling paint sealer with a lifetime warranty. 1994. The paint starts to chip. The dealership said they never sold anything with a lifetime warranty.

Answer 19

Seller breached warranty and didn’t hold their end of the bargain. Companies will see how far you will go.

Fraud and deceptive. Demand letter has to be sent when there is a statute violated before you can file a lawsuit. Found the DTPA. 5 to 6 hours of attorney’s fees. If the paint job was worth $1,000 they could have received $3,000 (treble damages).

Question 20

What are the three types of implied warranties?

Answer 20

1. Implied Warranty of Merchantability
2. Implied Warranty of Fitness for a Particular Purpose
3. Implied Warranty from Prior Dealings or Trade Custom

Question 21

Implied Warranty of Merchantability.

Answer 21

Goods are merchantable if the goods are “reasonably fit for the ordinary purposes for which they are used.”

Question 22

If the merchant deals in goods of the kind then they are…

Answer 22

warranting the merchantability.
Arises every time there is a sale of goods by a merchant.

Question 23

In order to be merchantable, the goods must at least:

Answer 23

1. Be of average, fair, or medium grade quality;
2. Pass, without objection in the trade or market, for goods of the same description;
3. Be adequately packaged and labeled as provided by the agreement; and
4. Conform to the affirmations of fact or promise made on the label or container.

Question 24

The merchant seller is liable for breach of the warranty of merchantability, without regard to…

Answer 24

whether the seller knew of or could have discovered a defect which caused the goods not to be reasonably fit for the ordinary purpose for which they are used

Question 25

What is an example of not having ordinary purpose?

Answer 25

Roommate tried to fry an egg in an oil popcorn machine. And then tried to fry an egg on her iron. (people do crazy things).

Question 26

Joy Pipe, USA, L.P., is in the business of selling steel couplings for use in oil field drilling operations. Joy Pipe entered into a contract with Fremak Industries (a broker) to purchase grade P-110 steel made in India by ISMT Limited. When the steel arrived, Joy Pipe machined it into couplings, which it then sold to its customers. Two companies that used these couplings in oil wells had well failures and notified Joy Pipe.

Joy Pipe then discovered that the ISMT steel it had purchased was of a much lower grade than P-110. It was the lower quality that had caused the couplings to fail.

Answer 26

After Joy Pipe paid another company to locate and replace the nonconforming steel, it sued ISMT, in part for breach of the implied warranty of merchantability. A jury awarded Joy Pipe nearly $3 million in damages, and an appellate court affirmed the jury’s award.

Question 27

Ilan Brand leased a new Hyundai Genesis from Allen Hyundai. The next day, when he was driving on an interstate highway, the sunroof began opening and closing, although Brand was not pushing the sunroof buttons. He immediately returned the vehicle to the Hyundai dealer. He was told it had a defective sunroof switch, which would be repaired within twenty-four hours. In spite of the dealer’s assurances, however, the problem was not repaired. Ten days later, Brand—who still had not been able to pick up the vehicle—attempted to rescind the lease. Hyundai would not allow him to do so.

Answer 27

Brand then filed an action for breach of the implied warranty of merchantability in state court. The trial court dismissed the case, but the appellate court reversed. The reviewing court held that a reasonable jury could conclude that the unintentional opening and closing of the sunroof constituted a safety hazard and therefore breached the implied warranty of merchantability. The court remanded the case for a jury trial.

Question 28

Sellers can be sued by any foreseeable user of a product for breach of the warranty of merchantability without regard to….

Answer 28

privity of contract

Question 29

Merchantable Food

Answer 29

if there are things in the food that are naturally occurring (even if you would rather not eat it) it is still merchantable

Question 30

What is an example of merchantable food?

Answer 30

Cherry pie – pits of the cherry are naturally occurring…still merchantable. If you broke a tooth on the cherry pit the restaurant may comp your meal but they aren’t legally required to pay for your $3k crown.

Question 31

Implied Warranty of Fitness for a Particular Purpose

Answer 31

The implied warranty of fitness for a particular purpose is made by a seller who has reason to know (but not necessarily actually knows) the particular use for which the buyer is purchasing the goods and that the buyer relies on the skill and judgment of the seller in selecting suitable goods.

Question 32

What is a critical component of an implied warranty of fitness for a particular purpose?

Answer 32

Comes from something the buyer tells the seller at the time of the deal. The buyer’s particular purpose. The seller makes a recommendation to attempt to fulfill the buyer’s communicated purpose.
*need to see dialogue between buyer and seller

Question 33

Implied warranties of fitness for a particular purpose and merchantibility may…

Answer 33

both be included in a contract for the sale of goods

Question 34

Moon, a farmer, needs to install a two-thousand-pound piece of equipment in his barn. This will require lifting the equipment thirty feet up into a hayloft. Moon goes to Davidson Hardware and tells Davidson that he needs some heavy-duty rope to be used on his farm. Davidson recommends a one-inch-thick nylon rope, and Moon purchases two hundred feet of it. Moon ties the rope around the piece of equipment; puts the rope through a pulley; and, with a tractor, lifts the equipment off the ground. Suddenly, the rope breaks. The equipment crashes to the ground and is severely damaged. Moon files a suit against Davidson for breach of the implied warranty of fitness for a particular purpose. Discuss how successful Moon will be in his suit.

Answer 34

Moon won’t be very successful at all. Moon didn’t actually express the real purpose “I need to lift a 2,000lb piece of equipment 30 feet in the air.”

Question 35

Implied Warranty from Prior Dealings or Custom Trade

Answer 35

If both parties to a sales/lease contract have knowledge of a well-recognized trade custom, the courts will infer that both parties intended for that custom to apply to their contract. Not as common as the other implied warranty.

Question 36

Hailey’s son in 8th grade had a size 14 cleats. Nike shock tennis shoes ordered in a size 14. They come in and the box says exactly what we ordered. We opened the box and find a ladies pair of high heel shoes.

Answer 36

Express warranty is breached.

Question 37

If the shoes are right. He’s been wearing them for 2 weeks and the toe cap starts pealing. Call EastBay and see what they do…”we will send you a brand new pair of shoes.” Why did they do that?

Answer 37

Implied Warranty of Merchantability is breached (the glue should last for more than 2 weeks – ordinary purpose).

Question 38

Academy: wanting to take up marathon running. Asks salesperson to help her find shoes that are good for marathon running. The shoes fall apart after 2 weeks of running. What breach occurred?

Answer 38

(Both merchantability and fitness could be claimed – but what was said to the seller hints fitness.)

Question 39

Lemon Laws

Answer 39

1. (in addition to UCC remedies) state laws providing remedies to consumers who buy cars that repeatedly (usually 4 times) fail to meet standards or quality and performance.
2. buyer may be entitled to a new car, replacement of defective parts, or return of all consideration paid, in addition to attorney’s fees
3. binding arbitration is often required

Question 40

Overlapping warranties

Answer 40

More than one warranty may be made by a seller in a sales transaction.

Question 41

A sales contract for a new car states that “this car engine is warranted to be free from defects for 36,000 miles or thirty-six months, whichever occurs first.”

Answer 41

This statement creates an express warranty against all defects, as well as an implied warranty that the car will be fit for normal use.

Question 42

If multiple warranties are consistent with each other, a buyer can base an action for breach of warranty against the seller based upon all of the warranties; the warranties are construed to be _____________.

Answer 42

cumulative

Question 43

If multiple warranties are inconsistent, the intention of the parties will determine which will prevail. The following rules are used as guides in order to determine the parties’ intentions:

Answer 43

1. Express warranties displace inconsistent implied warranties, except implied warranty of fitness for a particular purpose.
2. Samples prevail over inconsistent general descriptions.
3. Exact or technical specifications prevail over inconsistent models, samples, or general descriptions.

Question 44

Express Warranties

Answer 44

1. A seller can avoid making any oral express warranties.
2. A seller may effectively disclaim those oral express warranties which the seller has made with unambiguous language to that effect in the written contract for the sale of goods.

Question 45

Implied Warranties

Warranty of Merchantability may be disclaimed or modified by:

Answer 45

1. Using conspicuous language which must include the word “merchantability.”
2. Need not be in writing.

Question 46

Implied Warranties

Warranty of Fitness for a Particular Purpose may be disclaimed or modified by:

Answer 46

1. Using expressions such as “as is” or “with all faults.” By selling things “as is.”
2. A written, conspicuous disclaimer.

Question 47

Buyer’s Examination of (or refusal to inspect) the Goods

Answer 47

1. If a buyer has examined the goods or a sample as fully as the buyer desires, or has refused to examine the goods, there is not implied warranty with respect to defects that a reasonable examination would reveal.
2. Seller is liable for breach of warranty for defects that an ordinary inspection would not reveal.

Question 48

Unconsionability

Answer 48

A court may refuse to enforce a warranty disclaimer clause in a contract for the sale of goods if the clause in unconscionable

Question 49

Statute of Limitations

Answer 49

1. Actions for breach of contract brought under the UCC must be commenced within four years after the cause of action arose.
2. Parties may not extend the four-year period but may reduce the period to not less than one year.
3. Cause of action for breach of warranty accrues when the seller makes tender of delivery, even though the buyer did not know of the defect.