Chapter 21
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CHAPTER 21. SALES AND LEASE WARRANTIES. © 2010 Pearson Education, Inc., publishing as Prentice-Hall. Caveat Emptor. “ Let the buyer beware .” Doctrine governed law of sales and leases since Roman times. Warranties that apply under UCC give buyers more protection. Express Warranty.


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© 2010 Pearson Education, Inc., publishing as Prentice-Hall

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Caveat Emptor

“Let the buyer beware.”

Doctrine governed law of sales and leases since Roman times.

Warranties that apply under UCC give buyers more protection.

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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.

Sellers/lessors not required to make such warranties, but goods accompanied by warranty often attractive to buyers/lessees.

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Express Warranty(continued)

Not necessary to use formal words such as warrant or guarantee to create express warranty.

Created when seller/lessor indicates goods will conform to:

Affirmations of facts or promises

Any descriptions of them (“Idaho potatoes”; “v.v.s. quality diamonds”)

Any model or sample

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Express Warranty(continued)

Basis of the Bargain

Warranty must be contributing factor that enticed buyer/lessee to enter contract.

Statements made at or before time of contracting.

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Express Warranty(continued)

Statement of Opinion

Puffing or sales talk

E.g., “This is the best roast beef in town.”

Not actionable as warranty.

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Damages Recoverable for Breach of Warranty

Compensatory damages: difference between value of goods as warranted and actual value at time and place of acceptance.

May also recover for personal injuries.

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Warranties Implied By Law

Implied Warranty of Merchantability

Implied Warranty of Fitness for Human Consumption

Implied Warranty of Fitness for a Particular Purpose

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Implied Warranty of Merchantability

Merchant seller/lessor warrants goods:

Fit for ordinary purposes.

Adequately packaged and labeled.

Of even kind, quality, and quantity.

Conform to promises or facts on container or label.

Of average quality for fungible goods.

Would pass without objection in industry.

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Implied Warranty of Fitness for Human Consumption

Applies to food or drink obtained from restaurants, grocery stores, fast-food outlets, vending machines.

Warranty breached if food:

Contains foreign substance, or

Fails to meet consumer expectations. E.g., chicken bone in chicken sandwich.

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Implied Warranty of Fitness for a Particular Purpose

Arises where a seller/lessor warrants that the goods will meet the buyer/lessee’s expressed needs.

May be made by both merchant and nonmerchant sellers/lessors.

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Warranty Disclaimers

Express 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, disclaimer must mention merchantability.

Fitness for particular purpose may be disclaimed in general language.

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Warranty Disclaimers(continued)

Express Warranty

Can disclaim only if disclaimer and warranty can reasonably be construed together.

Implied Warranties

“As is” or “with all faults” disclaims all implied warranties.

For merchantability, must mention “merchantability.”

For fitness, must be in writing and be conspicuous.

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Magnuson-Moss Warranty Act

Covers written warranties relating to consumer products.

Commercial and industrial transactions not governed by the Act.

Does not require a seller/lessor to make express written warranties.

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Magnuson-Moss Warranty Act(continued)

Sellers/lessors who do make such warranties are subject to the provisions of the Act.

Must indicate whether warranties are full or limited.

May not disclaim merchantability or fitness.

Violators pay damages, attorney fees.

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Warranties of Title and No Infringements

No Security Interests

Good Title

No Interference

No Infringements

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Warranty of Good Title:

Sellers warrant that they have valid title to the goods they are selling and that transfer of title is rightful.

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Warranty of No Security Interests

Sellers warrant that the goods are delivered free from any third-party security interests, liens, or encumbrances that are unknown to the buyer.

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Warranty Against Infringements

Merchant seller/lessor warrants that the goods are delivered free of any:

Third-party patent,

Trademark, or

Copyright claim.

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Warranty of No Interference

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.

Also called warranty of quiet possession.