Contracts Chapter 8 -- Implied Warranty of Merchantability

What is an implied warranty?

An implied warranty arises by operation of law, not from anything the seller says. The law reads it into the contract to protect buyers' reasonable expectations. When you buy a toaster, you expect it to toast bread, even if the seller never said so.

What are the three implied warranties under UCC Article 2?

• Merchantability

  1. fit for ordinary purpose

  2. § 2-314

• Fitness for Particular Purpose

  1. fit for buyer’s special use

  2. § 2-315

• Good Title

  1. Seller owns it; transfer is rightful

  2. § 2-312

When does the implied warranty of merchantability apply?

Only when the seller is a "merchant with respect to goods of that kind." This means the seller must have professional status with respect to those particular goods, not just be a merchant in the general sense.

What is the difference between a "merchant" and a "merchant with respect to goods of the kind"?

A plumber is a merchant in the general sense (runs a business). But the plumber is only a "merchant with respect to goods of the kind" for plumbing supplies, not for vehicles. The warranty follows the seller's line of business.

What is the key case for merchant status?

Fred J. Moore, Inc. v. Schinmann: A farmer who grew mint to make mint oil made a one-time sale of mint roots. The court held he was a dealer in mint oil but not in mint roots. No implied warranty of merchantability for the roots

What does "merchantable" mean?

Section 2-314(2) lists six standards. To be merchantable, goods must:

1. Pass without objection in the trade under the contract description← Frequent issue in litigation

2. Be of fair average quality (fungible goods)

3. Be fit for the ordinary purposes for which such goods are used ← Frequent issue in litigation

4. Be of even kind, quality, and quantity

5. Be adequately contained, packaged, and labeled

6. Conform to promises or facts stated on the label

What is the most important merchantability standard?

Fit for ordinary purpose. The goods must be capable of performing the ordinary tasks for which they were designed and purchased. A car must provide safe, reliable transportation. A toaster must toast bread.

Does "merchantable" mean "perfect"?

No. Goods can have minor defects and still be merchantable. The question is whether they can perform their ordinary purpose. In Taterka v. Ford Motor Co., a defective taillight gasket caused rust over 75,000 miles, but the car was still merchantable because it provided safe, reliable transportation.

What is the key case for merchantability analysis?

Bayliner Marine Corp. v. Crow (Va. 1999)

Facts: buyer purchased offshore fishing boat expecting 30 mph; boat maxed at 17-23 mph

Claim: breach of implied warranty of merchantability (not fit for ordinary purpose)

Held: no breach

Why no breach?

• Buyer failed to prove the trade standard (no evidence what speed offshore fishing boats

typically achieve)

• Buyer failed to prove goods would not "pass without objection in the trade"

• 850 hours of logged use showed the boat was fit for its ordinary purpose

What is the lesson from Bayliner on merchantability?

"Fit for ordinary purpose" doesn't mean "perfect for buyer's expectations." The buyer must prove:

1. The trade standard (what is expected in that trade)

2. That the goods failed to meet it

Extensive use of the goods undermines a claim they're unfit.

What does "pass without objection in the trade" mean?

This incorporates trade standards for merchantability. In Royal Typewriter Co. v. Xerographic Supplies Corp., the court looked at industry-wide safety standards to evaluate whether a copying machine that was a fire hazard was merchantable.

How does merchantability relate to product liability?

In personal injury cases, plaintiffs often plead both breach of implied warranty of merchantability (contract) and strict liability under § 402A (tort). Courts often find these standards are "congruent in nearly all respects."

Are inherently dangerous products unmerchantable?

Generally no. Cigarettes are not unmerchantable simply because they cause cancer. If cigarettes were unmerchantable for being dangerous, so would cream cheese, motorcycles, and sugar. The question is whether the product is fit for its ordinary purpose, not whether it can cause harm.

What is breach of the implied warranty of merchantability?

The goods do not conform to the merchantability standards. If the goods are not fit for their ordinary purpose, the warranty is breached.

What is the analysis framework for merchantability?

Step 1: Is seller a merchant with respect to goods of the kind?

• If NO → No warranty exists

• If YES → Warranty exists by operation of law

Step 2: Are goods merchantable?

• Fit for ordinary purpose?

• Would they pass without objection in the trade?

• If NO → Breach

Note: Buyer must PROVE the trade standard and the failure to meet it.

Can the implied warranty of merchantability be disclaimed?

Yes. Unlike express warranties (which cannot be disclaimed once made), implied warranties can be disclaimed with proper language. To disclaim merchantability:

• Must mention the word "merchantability"

• If in writing, must be CONSPICUOUS (bold, all caps, larger font)

"As is" or "with all faults" language also excludes implied warranties.

Express Warranties Takeaways

The implied warranty of merchantability is a promise imposed by law (not agreement) that goods sold by a merchant will be fit for their ordinary purpose, breached only when the buyer proves the goods fail to meet the applicable trade standard.