Business Law 4510 Chapter 17 Notes Warranties and Product Liability I Warranties a Warranty an assurance by one party of the existence of a fact on which the other party can rely Protects buyers b Warranties of Title i Good Title 1 Sellers automatically warrant that they have good and valid title to the goods sold and that transfer of the title is rightful ii No Liens 1 2 iii No Infringements 1 Liens claims charges or liabilities Protects buyers who are unaware of any liens against the goods at the time the contract is made Sellers automatically warrant that the goods are free from any copyright trademark or patent claims of a third person a If buyer is sued for infringement they must notify the seller within a reasonable time to enable the seller to decide whether to defend the lawsuit i If seller states in writing that they will defend and bear all expenses buyer must turn over control of the litigation to the seller or else be barred from any remedy against the seller for liability established by the litigation ii When leases are involved there is an exception when the lease is for personal family or household purposes 1 A consumer who fails to notify the lessor within a reasonable time does not lose their remedy against the lessor for liability established iv Disclaimer of Title Warranty The title warranty can be disclaimed or modified by specific language in the contract Express Warranties 1 c i Express warranty created when a seller makes representations concerning the quality condition description or performance potential of the goods ii Express warranties arise when a seller indicates any of the following 1 2 3 1 The goods conform to any affirmation or promise of fact that the seller makes to the buyer about the goods Such affirmations or promises are usually made during the bargaining process The goods conform to any description of them The goods conform to any sample or model of the goods shown to the buyer iii Basis of the Bargain iv Statements of Opinion and Value Express warranties do not need formal language such as warrant or guarantee only necessary that a reasonable buyer would regard representation of fact as part of the basis of the bargain 1 Only statements of fact create express warranties 2 Statements about the value or an opinion or recommendation about the goods do not create express warranties a Puffery the expression of opinion by a seller that is not made as a representation of fact i Hard to distinguish if a statement is puffery or an express warranty 1 Reasonableness of buyer s reliance is key b If the seller is an expert then their opinion does create a warranty i ii Implied warranty law derives by implication or inference because of the circumstances of a sale rather than by the seller s express promise Implied Warranty of Merchantability 1 Automatic for every sale made by a merchant who deals in goods of the kind sold 2 Merchantable Goods a Reasonably fit for the ordinary purposes for which such goods are used i Must be of at least average fair or medium grade quality ii Quality must be comparable to a level that will pass without objection in the trade or market for goods of the same description iii Must be adequately packaged and labeled and must conform to promises or affirmations of fact made on the container or label 3 Shoop v DaimlerChrysler Corp d Implied Warranties b a a a Issue was there sufficient evidence that DaimlerChrysler breached the implied warranty of merchantability i If the buyer of a product that requires a significant number of repairs sells the item before filing a complaint against its manufactures is the sale evidence of the product s merchantability Yes Fitness for the ordinary purpose of driving implies that the vehicle should be in safe condition and free from defects A breach of an implied warranty of merchantability may able occur when the warrantor has unsuccessfully attempted to repair or replace defective parts 4 Merchantable Food Food that is fit to eat based on consumer expectations 5 Webster v Blue Ship Tea Room Inc Issue does serving fish chowder that contains a bone constitute a breach of an implied warranty of merchantability on the party of the restaurant b No The occasional presence of fish bones are to be anticipated in fresh chowders iii Implied Warranty of Fitness for a Particular Purpose 1 2 This arises when a seller knows the particular purpose for which a buyer will use the goods and knows that the buyer is relying on the skill and judgment of the seller to select suitable goods Particular versus Ordinary Purpose a Particular purpose differs from ordinary purpose merchantability i A good can be merchantable but unfit for a particular purpose 3 Knowledge and Reliance Requirements a Seller is not required to have actual knowledge of the buyer s particular purpose as long as the seller has reason to know the purpose i For an implied warranty the buyer must have relied on the skill or judgment of iv Warranties Implied from Prior Dealings or Trade Custom the seller in selecting suitable goods 1 Implied warranties also arise as a result of course of dealing or trade usage a When both parties have knowledge of a well recognized trade custom the courts will infer that both parties intended for that trade custom to apply to the contract e Overlapping Warranties i ii If express and implied warranties are consistent with each other they are construed as cumulative If they are not then the following rules are used to interpret which warranty is the most important 1 2 3 Express warranties displace inconsistent implied warranties expect for implied warranties of fitness for a particular purpose Samples take precedence over inconsistent general descriptions Exact or technical specifications displace inconsistent samples or general descriptions f Warranty Disclaimers i Express Warranties 1 Can be excluded if the seller refrains from making any promise or affirmation of fact relating to the goods describing the goods or using a sample or model a A recorded or written disclaimer that is clear and conspicuous written or displayed in such a way that a reasonable person would notice it Words set it capital letter in a larger font or in a different color and called to the buyer s attention can negate all oral express warranties not included in the contract ii Implied Warranties 1 Unless circumstances indicate otherwise all implied warranties are disclaimed by the expressions as is with all faults and other similar