Chapter 23: Warranties

Question 1

Warranty

Answer 1

An assurance or guarantee of fact by the seller or lessor about the quality or features of the good

Question 2

Types of warranties

Answer 2

1. Warranties of Title
2. Express Warranty
3. Implied Warranty of Merchantability
4. Implied Warranty of Fitness for a Particular Purpose
5. Implied Warranty from Prior Dealings or Trade Custom

Question 3

3 Types of Warranties of Title

Answer 3

1. Good Title
2. No Liens
3. No Infringements

Question 4

Warranties of Title

Answer 4

Automatically arises in most commercial sales transactions

Question 5

Good Title Warranty

Answer 5

Seller warrants it has good and valid title to goods sold and the transfer of title is rightful

Question 6

No Liens Warranty

Answer 6

Protects buyer who unknowingly purchases goods that are subject to a creditor’s security interest (encumbered)

Question 7

What happens if creditor repossesses the goods?

Answer 7

Buyer can recover damages from seller. Does not need knowledge of the security interest

Question 8

No Infringement Warranty

Answer 8

Merchant-seller warrants that goods are free from any copyright, trademark, or patent claims of a 3rd party

Question 9

If breach and buyer is sued by 3rd party

Answer 9

1. Buyer must notify seller of the litigation
2. If seller states that seller will defend litigation buyer must let seller litigate the case
3. Otherwise, buyer barred from a remedy against seller

Question 10

Express Warranties

Answer 10

Created by making representation concerning quality, condition, description or performance. Can be oral or written. Can be found in seller’s advertisement, brochure or promotional materials as well as contract language. Does not need “warranty” or “guarantee”

Question 11

T/F: Statements of fact create expressed warranties

Answer 11

True. Not statements of opinion or value

Question 12

T/F: Statements of fact are the same as Puffing of wares and expression (sales talk)

Answer 12

False. Puffery is just trying to get someone to buy something

Question 13

Merchantable

Answer 13

Fit for ordinary purpose for which such goods are sold. Every time merchant sells goods, it’s merchantable

Question 14

Implied Warranty of Merchantability

Answer 14

1. Goods must be fit for ordinary purpose for which goods are used
2. Goods must be average, fair or medium quality
3. Goods must be adequately packaged and labeled and must conform to promise made on label
4. Merchant’s knowledge of defect not required

Question 15

Merchantable foods

Answer 15

Food or drink to be consumed on or off premises are goods subject to the implied warranty of merchantability. Food that is fit to eat on the basis of consumer expectations

Question 16

Implied Warranty o Fitness for a Particular Purpose

Answer 16

Arises by any merchant or nonmerchant seller who:
1. Knows the particular purpose for which the goods are being bought
2. Knows the buyer is relying on seller’s skill and judgment to select suitable goods

Question 17

Implied Warranty from Prior Dealings or Trade Customs

Answer 17

Arises when both parties to a contract have knowledge of a well-recognized trade custom. Courts infer that both parties meant this custom to apply to their contract

Question 18

Lemon Laws

Answer 18

Typically apply to automobiles under warranty that are defective in a way that significantly affects the vehicle’s value of use. Does not necessarily cover used car purchases (unless the car is covered by a manufacturer’s extended warranty) or vehicles that are leased

Question 19

Seller has had the opportunity to remedy defect

Answer 19

Car’s owner must notify the dealer or manufacturer of the defect and give several opportunities to remedy it. If seller fails to cure the problem, buyer may be entitled to a new car, replacement of defective parts, or return of all consideration paid

Question 20

Magnuson-Moss Warranty Act

Answer 20

Designed to prevent deception in warranties by making them easier to understand. Modifies UCC for consumer sales. Seller not required to give a written warranty

Question 21

Magnuson-Moss Warranty Act: Written Warranties requirement

Answer 21

1. Greater than $25
2. Must be labeled either “full” or “limited” warranty

Question 22

Magnuson-Moss Warranty Act: Full Warranty

Answer 22

Seller must repair or replace

Question 23

Magnuson-Moss Warranty Act: Limited Warranty

Answer 23

1. Must be conspicuous (clearly visible)
2. If limited time only: must say e.g. “full twelve-month warranty”

Question 24

Overlapping Warranties

Answer 24

Occurs when two or more warranties made in a single transactions

Question 25

Example of Overlapping Warranties: “The car engine is warranted to be free from defect for 36,000 miles or 36 months, whichever occurs first.”

Answer 25

Statement is an expressed warranty relating to the engine defects and implied warranty of merchantability that car is fit for its normal use

Question 26

If warranties are consistent

Answer 26

They are construed as cumulative

Question 27

If warranties are inconsistent, what order are they applied in?

Answer 27

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

Question 28

Warranty Disclaimers Requirements: Express Warranties

Answer 28

A seller/lessor can disclaim all oral express warranties be a written disclaimer included in the contract. Disclaimer must be in language that is clear and conspicuous and must be called to a buyer’s or lessee’s attention. Helps to avoid false allegations. Ensures only representations made by properly authorized individuals are included in the bargain.

Question 29

Warranty Disclaimers Requirements: Merchantability

Answer 29

• Language such as “As Is” “With All Faults”
• Disclaimer must mention “Merchantability”
• Does not need to be in writing
• Must be clear if in writing

Question 30

Warranty Disclaimers Requirements: Fitness for a Particular Purpose

Answer 30

Must be in writing and conspicuous

Question 31

How much risk does buyer take with “as is” clause

Answer 31

Buyer takes the ENTIRE RISK as to the quality of the goods involved

Question 32

What happens if Buyer refuses to inspect?

Answer 32

Ends up being a warranty disclaimer

Question 32

What happens if Buyer refuses to inspect?

Answer 32

Ends up being a warranty disclaimer