8.2 Warranties and Sales Contracts
3 min read•june 24, 2024
Warranties in sales contracts protect buyers and set expectations for product quality. come from seller statements, while arise by law. Understanding these distinctions helps buyers know their rights and sellers manage their obligations.
Key warranty types include merchantability and fitness for purpose. Sellers can limit warranties, but laws like the Magnuson-Moss Act provide consumer protections. If warranties are breached, buyers have remedies including rejection, revocation, and damages.
Warranties in Sales Contracts
Express vs implied warranties
Top images from around the web for Express vs implied warranties
Introduction to Warranties | Introduction to Business View original
Is this image relevant?
Warranties | Introduction to Business View original
Is this image relevant?
Implied Warranty - Free of Charge Creative Commons Post it Note image View original
Is this image relevant?
Introduction to Warranties | Introduction to Business View original
Is this image relevant?
Warranties | Introduction to Business View original
Is this image relevant?
1 of 3
Top images from around the web for Express vs implied warranties
Introduction to Warranties | Introduction to Business View original
Is this image relevant?
Warranties | Introduction to Business View original
Is this image relevant?
Implied Warranty - Free of Charge Creative Commons Post it Note image View original
Is this image relevant?
Introduction to Warranties | Introduction to Business View original
Is this image relevant?
Warranties | Introduction to Business View original
Is this image relevant?
1 of 3
- Express warranties created by seller's affirmative statements or actions through words, descriptions, samples (product demonstrations), or models (prototypes)
- Express warranties do not require specific phrases like "warrant" or "guarantee" include any promise or statement that becomes part of the basis of the bargain
- Implied warranties arise by operation of law not explicitly stated by the seller based on presumption that seller will provide goods suitable for their intended purpose
Types of implied warranties
- () applies to merchants who deal in goods of the kind sold
- Goods must be fit for the ordinary purposes for which such goods are used meet certain minimum standards of quality and performance (safe, durable, free from defects)
- () applies when seller has reason to know of buyer's specific purpose for the goods
- Seller must have knowledge that buyer is relying on seller's skill or judgment to select suitable goods (specialized equipment for a manufacturing process)
- Goods must actually be fit for the buyer's particular purpose
- Implied warranties for non-merchant sellers generally do not apply to casual or occasional sellers (garage sales)
- Some jurisdictions may impose implied warranties on non-merchants in certain circumstances (selling a used car with known defects)
Warranty Limitations and Protections
- : Sellers may use specific language to limit or exclude certain warranties
- : Federal law governing warranties on consumer products
- : Legal relationship between parties to a contract, affecting warranty rights
- : Time limit for bringing legal action for warranty breaches
Remedies for warranty breaches
- () buyer may reject goods that fail to conform to the contract
- Rejection must occur within a reasonable time after delivery buyer must notify the seller of the rejection
- () buyer may revoke acceptance of goods with a non-conformity that substantially impairs their value
- Revocation must occur within a reasonable time after buyer discovers or should have discovered the non-conformity (latent defects)
- Buyer must notify the seller of the revocation
- Damages for breach of warranty () buyer may recover damages for the loss resulting from seller's breach of warranty
- Measure of damages is the difference between the value of the goods as accepted and the value they would have had if they had been as warranted (price reduction)
- Incidental and ()
- Buyer may recover , such as expenses reasonably incurred in inspection, receipt, transportation, and care of rejected goods (storage fees)
- Buyer may also recover consequential damages, such as losses resulting from buyer's particular needs that seller had reason to know about at time of contracting (lost profits due to defective machinery)
Key Terms to Review (19)
Consequential Damages: Consequential damages refer to the indirect or secondary losses that arise as a result of a breach of contract or other legal violation. These damages go beyond the immediate or direct loss and include financial losses, lost profits, and other indirect harms suffered by the injured party.
Express Warranties: An express warranty is a promise or affirmation made by a seller about the quality or characteristics of a product that becomes part of the basis of the bargain between the buyer and seller. These warranties are explicitly stated, either orally or in writing, and create a contractual obligation for the seller to stand behind the representations made about the goods.
Implied warranties: Implied warranties are legal assurances that a product meets certain standards of quality and performance, even if they are not explicitly stated in a sales contract. These warranties exist to protect consumers by ensuring that goods sold are fit for their intended use and conform to the seller's representations. They play a critical role in sales contracts by establishing minimum quality standards for products, contributing to consumer trust and fair trade practices.
Implied Warranty of Fitness for a Particular Purpose: An implied warranty that arises when a seller knows or has reason to know the particular purpose for which the buyer intends to use the goods and the buyer relies on the seller's skill or judgment to select or furnish suitable goods, thereby creating an implied promise that the goods will be fit for that particular purpose.
Implied warranty of merchantability: The implied warranty of merchantability is a legal assurance that a product sold by a merchant meets certain standards of quality and performance. This means the product is fit for the ordinary purposes for which such goods are used and conforms to any promises or affirmations made on its label or packaging. It ensures that consumers receive goods that are free from defects and that function as expected, fostering trust between buyers and sellers in sales contracts.
Incidental damages: Incidental damages are the additional costs that a party incurs as a result of a breach of contract. These damages typically arise when one party fails to fulfill their contractual obligations, leading the other party to experience unforeseen expenses while trying to remedy the situation. Understanding incidental damages is crucial in the context of warranties and sales contracts, as it helps to clarify the extent of liability and potential recovery for non-performance.
Magnuson-Moss Warranty Act: The Magnuson-Moss Warranty Act is a federal law enacted in 1975 that governs warranties on consumer products, ensuring that warranties are clear and easy to understand. It aims to protect consumers by requiring manufacturers and sellers to provide detailed information about warranty coverage and conditions. This act also allows consumers to seek legal recourse if warranties are violated, promoting fair business practices in the marketplace.
Privity of Contract: Privity of contract refers to the legal principle that a contract can only create rights and obligations between the parties to the contract, and not for any third parties who are not a party to the agreement. It establishes the direct connection between the contracting parties and the enforceability of the contract's terms.
Rejection of goods: Rejection of goods refers to the buyer's refusal to accept delivery of goods that do not conform to the terms of a sales contract. This concept is essential in understanding how buyers can protect their rights and interests when the goods delivered fail to meet specified warranties or quality standards. It also highlights the responsibilities of sellers to ensure that their goods comply with contractual agreements, as well as the procedures involved in effectively rejecting non-conforming goods.
Revocation of Acceptance: Revocation of acceptance refers to the legal concept where a buyer can rescind or cancel their acceptance of goods or services after the initial acceptance, typically due to the discovery of a defect or non-conformity with the original agreement.
Statute of Limitations: The statute of limitations is a law that sets the maximum time period within which legal proceedings may be brought for a particular type of case or offense. It is a crucial concept in the legal system that helps ensure the fairness and efficiency of the judicial process by preventing the prosecution or filing of claims after a certain amount of time has elapsed.
Substantial Impairment: Substantial impairment refers to a significant or material defect or deficiency in the quality, quantity, or performance of a product or service that substantially interferes with its intended use or purpose. This concept is particularly relevant in the context of warranties and sales contracts, where it can impact the buyer's rights and the seller's obligations.
UCC § 2-314: UCC § 2-314 outlines the implied warranty of merchantability in sales contracts, ensuring that goods sold by a merchant meet certain minimum standards of quality and performance. This section is vital in defining the rights of buyers and obligations of sellers, particularly in commercial transactions, emphasizing that products must be fit for their ordinary use.
UCC § 2-315: UCC § 2-315, also known as the Implied Warranty of Fitness for a Particular Purpose, is a section within the Uniform Commercial Code that outlines the seller's obligation to provide goods that are fit for the buyer's intended use when the seller has reason to know of that particular purpose.
UCC § 2-601: UCC § 2-601, also known as the 'perfect tender rule', is a provision within the Uniform Commercial Code that outlines the buyer's rights and obligations when it comes to the delivery of goods in a sales contract. It establishes the criteria for when a buyer can rightfully reject goods that do not conform to the contract.
UCC § 2-608: UCC § 2-608, also known as the 'Revocation of Acceptance' provision, is a section of the Uniform Commercial Code (UCC) that outlines the circumstances under which a buyer can revoke their acceptance of goods in a sales contract. This term is particularly relevant in the context of warranties and sales contracts.
UCC § 2-714: UCC § 2-714 is a section of the Uniform Commercial Code (UCC) that outlines the remedies available to a buyer who has accepted goods that do not conform to the contract. It provides guidelines for the buyer to recover damages for the non-conforming goods.
UCC § 2-715: UCC § 2-715 outlines the consequential damages that a buyer can recover in a sales contract when there is a breach. This section of the Uniform Commercial Code (UCC) focuses on damages that arise from the buyer's specific needs or circumstances and are not directly tied to the product itself. Understanding this provision is essential for determining the extent of damages recoverable in case of non-performance by the seller, emphasizing the importance of clear communication of expectations in sales contracts.
Warranty disclaimers: Warranty disclaimers are statements made by sellers that limit or exclude the warranties on a product, which can clarify what the seller is and isn't responsible for after the sale. These disclaimers serve to protect sellers from potential liability regarding product defects or failures, and they often highlight that the buyer assumes certain risks associated with the purchase. Understanding warranty disclaimers is essential for consumers and businesses alike, as they outline the limitations of liability in sales contracts.