Chapter 23: Warranties Flashcards
Warranty
An assurance or guarantee of fact by the seller or lessor about the quality or features of the good
Types of warranties
- Warranties of Title
- Express Warranty
- Implied Warranty of Merchantability
- Implied Warranty of Fitness for a Particular Purpose
- Implied Warranty from Prior Dealings or Trade Custom
3 Types of Warranties of Title
- Good Title
- No Liens
- No Infringements
Warranties of Title
Automatically arises in most commercial sales transactions
Good Title Warranty
Seller warrants it has good and valid title to goods sold and the transfer of title is rightful
No Liens Warranty
Protects buyer who unknowingly purchases goods that are subject to a creditor’s security interest (encumbered)
What happens if creditor repossesses the goods?
Buyer can recover damages from seller. Does not need knowledge of the security interest
No Infringement Warranty
Merchant-seller warrants that goods are free from any copyright, trademark, or patent claims of a 3rd party
If breach and buyer is sued by 3rd party
- Buyer must notify seller of the litigation
- If seller states that seller will defend litigation buyer must let seller litigate the case
- Otherwise, buyer barred from a remedy against seller
Express Warranties
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”
T/F: Statements of fact create expressed warranties
True. Not statements of opinion or value
T/F: Statements of fact are the same as Puffing of wares and expression (sales talk)
False. Puffery is just trying to get someone to buy something
Merchantable
Fit for ordinary purpose for which such goods are sold. Every time merchant sells goods, it’s merchantable
Implied Warranty of Merchantability
- Goods must be fit for ordinary purpose for which goods are used
- Goods must be average, fair or medium quality
- Goods must be adequately packaged and labeled and must conform to promise made on label
- Merchant’s knowledge of defect not required
Merchantable foods
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
Implied Warranty o Fitness for a Particular Purpose
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
Implied Warranty from Prior Dealings or Trade Customs
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
Lemon Laws
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
Seller has had the opportunity to remedy defect
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
Magnuson-Moss Warranty Act
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
Magnuson-Moss Warranty Act: Written Warranties requirement
- Greater than $25
- Must be labeled either “full” or “limited” warranty
Magnuson-Moss Warranty Act: Full Warranty
Seller must repair or replace
Magnuson-Moss Warranty Act: Limited Warranty
- Must be conspicuous (clearly visible)
- If limited time only: must say e.g. “full twelve-month warranty”
Overlapping Warranties
Occurs when two or more warranties made in a single transactions
