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Contract  & warranties

Contract & warranties



Contract & warranties

Contract & warranties



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  • Courts say people can reasonable expect bones in fish, cherry pits in cherry pies, nutshells in packages of shelled nuts not worms

Contract  & warranties Contract & warranties Presentation Transcript

  • Sales and Lease Warranties
  • Overview
    • A warranty is an assurance of fact upon which a party may rely.
      • Warranty of Title.
      • Express Warranty.
      • Implied Warranty of Merchantability.
      • Implied Warranty of Fitness for a Particular Purpose.
      • Implied warranty arising from the course of dealing or trade usage.
  • §1: Warranty of Title
    • Automatically arises in most commercial sales transactions.
    • UCC-312 creates 3 warranties:
      • Good Title.
      • No Liens.
      • No Infringements.
  • Warranty Title Disclaimer
    • Title warranty can generally be disclaimed only with specific language in contract.
    • Circumstances may be obvious to clearly indicate disclaimer of title, such as a sheriff’s sale.
  • §2: Express Warranties
    • Can be oral or written-- don’t have to use the words “warrant” or “guarantee.”
      • Any Affirmation or Promise.
      • Any Description.
      • Any Sample or Model.
  • Express Warranties [2]
    • To create an express warranty, the affirmation of fact must become the “basis of the bargain.”
    • And Buyer must rely on warranty when he enters into contract.
    • Case 23.1: Genetti v Caterpillar Inc (1999).
  • Express Warranties [3]
    • Statements of Opinion and Value.
      • Generally excludes “puffing” – “Best car in town”, not an express warranty.
      • However, expert opinion is not puffery.
  • §3: Implied Warranties
    • Warranty inferred at law based on the circumstances or nature of the transaction.
    • Under the UCC, merchants warrant the goods they sell are “merchantable”, i.e., fit for ordinary purpose for which such goods are sold.
  • Implied Warranty of Merchantability
    • Automatically arises from merchants.
    • Goods are of average, fair, or medium-grade.
    • Adequately packaged and labeled.
    • Conform to promises on label.
    • Have a consistent quality and quantity among the commercial units.
    • Case 23.2: Webster v. Blue Ship Tea Room (1964).
  • Implied Warranty of Fitness for a Particular Purpose
    • Arises by any Seller who:
      • Knows the particular purpose for which the goods are being bought; and
      • Knows the buyer is relying on seller’s skill and judgment to select suitable goods.
  • Implied Warranty Arising from Course of Dealing or Trade Usage
    • Arises when both parties to a contract have knowledge of a well-recognized trade custom. Courts infer that both meant this custom to apply to their transaction.
  • §4: Overlapping Warranties
    • Occurs when two or more warranties made in a single transaction:
      • If warranties are consistent, they are construed as cumulative.
      • If inconsistent:
        • First: implied warrant of fitness for a particular purpose.
        • Then: express.
  • §5: Warranties and Third Parties
    • At common law only the Buyer could sue the Seller because she is the one in privity of contract with the Seller.
    • UCC 2-318 provides 3 alternatives from which the states may choose.
  • §6: Warranty Disclaimers
    • Express Warranties can be disclaimed:
      • If they were never made (evidentiary matter).
      • If a clear written disclaimer in contract with specific, unambiguous language and called to Buyer’s attention ( BOLD CAPS UNDERLINED ).
  • Warranty Disclaimers [2]
    • Implied Warranties:
      • Merchantability: “As Is,” “With All Faults.”
      • Fitness for a Particular Purpose: must be in writing and conspicuous.
      • If Buyer has the right to fully inspect and either: does so or refuses to do so, warranties are disclaimed as to defects that could reasonably be found.
    • Case 23.3: International Turbine Services v. Vasp Brazilian Airlines (2002).
  • §7: Statute of Limitations
    • Action for Breach of Warranty :
      • Begins to toll at tender.
      • Buyer must notify Seller within a reasonable time.
      • Buyer must sue within four years after cause of action accrues.
    • If warranty is for future performance, action accrues when performance happens and breach is discovered.
  • §8: Magnuson-Moss Warranty Act
    • FTC enforces; Attorney general or consumer can bring action.
    • Modifies UCC for consumer sales.
    • Only applies when written warranties are made by Seller (including a service contract).
      • If goods > $10 label “full” or “limited.”
      • If goods > $15 Seller must make additional disclosures.
  • Magnuson-Moss [2]
    • Full Warranty: Seller must repair or replace.
    • Limited Warranty must be conspicuous.
      • If limit of time only must say, e.g., “full twelve-month warranty.”
    • UCC Implied Warranties:
      • May not be disclaimed, but can be limited, but must correspond with time of express warranty.
  • §9: Warranties Under the CISG
    • Art. 35: uses the word “conformity” instead of warranty, but very similar to UCC.