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Contract & warranties


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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
  • Transcript

    • 1. Sales and Lease Warranties
    • 2. 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.
    • 3. §1: Warranty of Title
      • Automatically arises in most commercial sales transactions.
      • UCC-312 creates 3 warranties:
        • Good Title.
        • No Liens.
        • No Infringements.
    • 4. 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.
    • 5. §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.
    • 6. 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).
    • 7. 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.
    • 8. §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.
    • 9. 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).
    • 10. 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.
    • 11. 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.
    • 12. §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.
    • 13. §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.
    • 14. §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 ).
    • 15. 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).
    • 16. §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.
    • 17. §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.
    • 18. 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.
    • 19. §9: Warranties Under the CISG
      • Art. 35: uses the word “conformity” instead of warranty, but very similar to UCC.