Ch. 21

Caveat emptor

• “Let the buyer beware”

• Governed law of sales and leases for centuries

• Better suited to small community markets where buyers and sellers knew each other personally

• Law developed buyer protections in response to changing modes of commerce

Warranties

• Buyer’s or lessee’s assurance that the goods meet certain standards

• Based on contract law, may be either expressly stated or implied by law

• If goods fail to conform to the warrantee, buyer or lessee may sue for breach of warrantee

Express Warranty

• Created when seller/lessor affirms goods will meet certain standards of quality, description, performance, or condition

• Any affirmative factual representation will automatically form a warranty

• Does not require the intent to form a warranty

• Can be written, oral, or inferred from seller's conduct

• Sellers and lessors are not required to make express warranties

• Some contracts expressly disclaim all warranties (sold “as is”)

Warranty assures that goods must conform to

• All affirmations of fact or promise made about the goods

• Any description of the goods

• Any model or sample of the goods

Compensatory damages

• The difference between value of goods as warranted and the actual value of the goods delivered

• $V as warranted – actual $ = damages

• Amount paid for the good is irrelevant

• Purchaser or lessee can also recover for personal injuries that are caused by a breach of warranty

Forms of implied warranties

• Implied warranty of merchantability

• Implied warranty of fitness for human consumption

• Implied warranty of fitness for a particular purpose

Implied Warranty of Merchantability Standards

• Goods must be fit for the ordinary purposes for which they are used

• Goods must be adequately contained, packaged, and labeled

• Goods must be of an even kind, quality, and quantity

• Goods must conform to any promise or affirmation of fact made on the container or label

• Quality of the goods must pass without objection in the trade (i.e., at least passable quality)

• Fungible goods must meet a fair average or middle range of quality for goods of that type or grade

Implied Warranty of Fitness for Human Consumption

• Applies to food or drink from restaurants, grocery stores, fast-food outlets, coffee shops, bars, vending machines, and other purveyors of food and drink

• Warrants that food products can be safely consumed

Implied Warranty of Fitness for Human Consumption Tests

• Foreign substance test (minority of states)

• Consumer expectation test (majority of states)

Foreign substance test (minority of states)

Based on presence of foreign objects (objects unrelated to ingredients) found in food

Consumer expectation test (majority of states)

Based on what the average consumer would expect to find in food products

Warranty Disclaimers

Statement that negates express and implied warranties

Warranty of good title

Seller warrants that they have valid title to the goods being sold and rightfully transfer that title to buyer

Warranty of no security interests

• Sellers of goods warrant that the goods they sell are delivered free from any third-party security interests, liens, or encumbrances that are unknown to the buyer

• Can be disclaimed (e.g., “seller only sells whatever interest they have, subject to 3rd party claims”)

Warranty against infringements

A merchant automatically that warrants that goods are delivered free of any third-party patent, trademark, or copyright claims

Warranty of no interference

A lessor automatically warrants that no person holds a claim or an interest in the goods that will interfere with the lessee’s use and enjoyment of the leased goods

Warranty

a​ seller's express or implied assurance to a buyer that the goods sold meet certain quality standards

Puffing

a​ seller's commendation of goods that does not create an express warranty

Magnuson-Moss Warranty Act

a federal statute that regulates written warranties on consumer products

Warranty of no interference

also known as the​ warranty of quiet possession