In its simplest form, a “warranty” is merely another form of “contract” which binds a party to perform in a specified way, either in terms of providing a product that accomplishes a specified task or in delivering a service that provides certain minimal benefits. Such warranties are provided for all types of products and services, from real estate to manufactured goods, from plumbers to soft ware engineers.
In an effort to protect consumers and buyers, legislatures and courts have increasingly developed theories of “implied” or statutory warranties in which a certain minimum criteria of performance is imposed as a matter of law even if the parties, themselves, did not agree upon a warranty or even consider whether a warranty should be provided.
This article shall outline the essentials of warranty that exist under the law in most states of the United States. Each particular state has variations on the warranties provided in this review.
The Basic Concepts:
A warranty is a legally binding commitment forming part of the sales contract which assures the buyer that the product or service is free from defects. A warranty often provides for a specific remedy such as repair or replacement in the event the article or service fails to meet the warranty. In business and legal transactions, a warranty is an assurance by one party to the other party that certain facts or conditions are true or will happen. The party who purchases the product is permitted to rely on the warranty and seek legal remedy if the warranty is breached.
A warranty is express or implied or both. In some cases, the seller of a particular commodity or property expressly guarantees the quality of the product purchased. In certain situations, the law implies a warranty where no express warranty was made. Both provide legal relief for the purchaser. Apart from products, warranties are made with respect to real estate, insurance, and sales and leases of goods and services.
In the case of real estate sale like land, houses or apartments, the seller usually includes a warranty regarding the title to the property. Other types of warranties related to real estate titles include special warranty deed that no party made a claim to the property during the seller’s ownership and covenants of further assurances. Efforts to restrict warranties in the real estate purchase can be nullified by State law. See our article on As Is purchases in California.
Implied Warranty of Merchant Seller
- Warranty against infringement. Unless otherwise agreed, every merchant seller warrants that the goods will be delivered free of the rightful claim of any third person by way of patent infringement, trademark infringement, or any other intellectual property law infringement.
- Warranty of fitness for normal use. A merchant seller makes an implied warranty of the merchantability of the goods sold. This warranty is in fact a larger set of warranties, the most important of which is that the goods are fit for the ordinary purposes for which they are sold.
An express warranty is a statement or binding document provided by the seller relating to the goods or services, which statement is part of the basis of the bargain. This means that the buyer has purchased the goods or services on the reasonable assumption that they were as stated by the seller. Thus, a statement by the seller with respect to the quality, capacity, or other characteristic of the goods is an express warranty. For example, “This shirt does not need ironing.” Or “One Hundred Percent Made in the United States.”
No particular form of words is necessary to constitute an express warranty. A sale does not need to state that a warranty is being made or that one is intended. It is sufficient that the seller assert a fact or offers a warranty that becomes a part or term of the bargain or transaction between the parties.
An express warranty may even be created by conduct. If the buyer asks to purchase a pair of pants that is nonshrinkable, and the seller hands over a pair of pants, the seller’s conduct expresses a warranty that the pants is nonshrinkable. The words on the label of a can for Florida orange juice is an express warranty that the orange juice comes from Florida. “Made in USA” means that Chinese products cannot be sold in their stead.
The reasonableness test of reliance on warranties is important to understand. Obvious sales talk or what is legally known as “puffery” by a seller such as, “this is the best pizza in the world” cannot ordinarily be treated as a legally binding warranty. Only if the buyer has reason to believe that the seller has unique or expert knowledge of the conditions of the market and the buyer requests the seller’s unique or crafted opinion as an expert, would the buyer be entitled to rely legally on the warranty,
When the contract is based in part on the understanding that the seller will supply goods according to a specified description or that the goods will be the same as the already provided sample, the seller is bound by an express warranty that the goods shall conform to the description, sample, or model.
If the express warranty is false, there is a breach of the warranty. The warrantor is then legally liable just as though the truth of the warranty had been guaranteed. It is no defense that the defendant honestly believed that the warranty was true, had exercised due care in manufacturing or handling the product, or had no reason to believe that the warranty was false. You make the express warranty, you will be held to the fact that it is true and will have to cover it even if you had relied on information that was false but unknown to you.
Implied versus Express Warranty Discussion
Recall that an implied warranty is one that was not made by the seller but is implied thus created by law. In certain instances, the law implies or reads a warranty into a sale, although the seller did not make it. That is, the implied warranty arises automatically from the fact that a sale has been made.
Express warranties arise because they form part of the contract upon which the sale has been made. The fact that express warranties are made does not exclude implied warranties. When both express and implied warranties exist, they should be construed as being consistent with each other and cumulative if such a construction is reasonable. In case it is impossible to construe express and implied warranties as consistent and cumulative, an express warranty prevails over an implied warranty as to the subject matter of the sale, except in the case of an implied warranty of fitness for a particular purpose.
A distinction is made between a merchant seller and the casual seller with regard to implied warranties. Put simply, a merchant is someone in the business of buying or selling the product or service rendered. Such a person is held to a higher standard of knowledge and the typical conduct of merchants in the field will be considered by the court in determining what implied warranties may be imposed. See our article Commercial Transactions in the United States.
Implied Warranty of Merchantability
To impose liability for breach of the implied warranty of merchantability, it is ordinarily necessary to show that there was a defect in the product and that this defect made the product not fit for its normal use and that this caused the plaintiff’s harm. A product may be defective because there is:
- a manufacturing defect,
- a design defect,
- inadequate instruction on how to use the product, or
- inadequate warning against dangers involved in using the product.
Example: If the manufacturer’s blueprint shows that there should be two safety catches at a particular place on the product and the manufacturer installs one safety catch, there is a manufacturing defect. If the two safety catches are put in but the product breaks because three catches are required to provide sufficient safety, there is no manufacturing defect, but there is a design defect. And note that a product that is properly designed and properly manufactured may still be dangerous because the user is not given sufficient instructions on how to use the product and thus impose the liability for breach of the implied warranty of merchantability. Also, a product is defective if there is a danger that is not obvious and there is no warning at all or a warning that does not describe the full danger.
Particular Situational Warranties
- Sale on Buyer’s Specifications. When the buyer furnishes the seller with exact specifications for the preparation or manufacture of goods, the same warranties arise as in the case of any other sale of such goods by the particular seller. However, no warranty of fitness for a particular purpose can arise since it is clear that the buyer is purchasing on the basis of the buyer’s own decision and is not relying on the seller’s skill and judgment.
- Sale of Secondhand or Used Goods. As far as the Uniform Commercial Code which applies only to merchants is concerned, there is no difference between the warranties arising in the sale of used goods and those arising in the sale of new goods. However, with respect to used goods, what is “fit for normal use” will be a lower standard for used than for new goods.
- Sale of Food or Drink. The sale of food or drink, whether to be consumed on or off the seller’s premises, is a sale. When made by a merchant, a sale of food or drink carries the implied warranty that the food is fit for its ordinary purpose, i.e., human consumption.
Warranty of Fitness for a Special Purpose
A buyer may intend to use the goods for a particular or unusual purpose, compared to the ordinary use for which the goods are customarily sold. If so, the seller makes an implied warranty that the goods will be fit for that purpose only when:
- the buyer relies on the seller‘s skill or judgment to select or furnish suitable goods, and
- when the seller at the time of contracting knows or has reason to know the buyer’s particular purpose and of the buyer’s reliance on the seller’s judgment.
When the buyer makes the purchase without relying on the seller’s skill and judgment, no warranty of fitness for a particular purpose arises. This is particularly true when a buyer intends to utilize a product in a manner that is not typical for the public. As an example, if I purchase a stainless steel bolt normally utilized for marine use but use it to build a lighter than air craft at high altitudes and the cold air at such attitudes causes the bolt to fail, the seller would only be liable if I had so advised him of the intended use before the sale and he indicated that the bolt was acceptable.
A seller in such instance would be well advised to indicate in writing to the buyer the lack of warranty for that particular purpose. Such provisions should form part of the average terms and conditions of sale that every seller should have for every transaction.
Warranty of Title
Every seller, by the mere act of selling, makes a warranty that the seller’s title is good and that the transfer is lawful as to passage of title.
A warranty of title may be specifically excluded in the contract documents, or the circumstances may be such as to prevent the warranty from arising. The latter situation is found when the buyer has reason to know that the seller does not claim to hold the title or that the seller is purporting to sell only such right or title as the seller or a third person may have. For example, no warranty of title arises when the seller makes the sale in a representative capacity, such as a sheriff, an auctioneer, or an administrator of a decedent’s estate.
Additionally, every seller, by the act of selling, makes a warranty that the goods shall be delivered free from any lien of which the buyer at the time of the sales transaction had no knowledge even if the seller may also have had no knowledge of the lien.
While most business people readily understand the concept of express warranties, there is a reluctance to fully grasp the power of implied warranties. One naturally feels that one should not be liable for a promise never made.
The simple fact of American life, however, is that implied warranties form an inherent part of every transaction and that is one of the reasons that American products are considered safer and more reliable than products made in those nations in which such warranties are not enforced. And since the average buyer who is a consumer does not bother to read the “fine print” in most purchases, the government has imposed specified minimum performance criteria that will be imposed whether the parties expressly provide for it or not.
In reality, all of us utilize such implied warranties on a daily basis. Each time you eat out at a restaurant or fast food location and do not become ill from tainted food or purchase oil for your vehicle which works to lubricate your car motor you are relying on such implied warranties and they are critical to the level of trust and reliance on business transactions that is so much a part of American life that it is taken for granted.
If you are in business, learn the implied warranties that pertain and adhere to them. Your own terms and conditions should be carefully reviewed by competent counsel and should form part of every transactions. Spending a few hundred or thousand now will save you tens of thousands of dollars…or your business…in the future. If you are a buyer, take the time to read the terms and conditions since someone has crafted them presumably to limit liability and it is vital to you to understand precisely what you are buying.
One thing neither the buyer or seller can do…is attempt to ignore the warranties. They are as much a part of every transaction as the price.