Business, Legal & Accounting Glossary
In common law jurisdictions, an implied warranty is a contract law term for certain assurances that are presumed to be made in the sale of products or real property, due to the circumstances of the sale. These assurances are characterized as warranties irrespective of whether the seller has expressly promised them verbally or in writing. They include an implied warranty of fitness for a particular purpose, an implied warranty of merchantability for products, and an implied warranty of habitability for a home.
An implied warranty of fitness for a particular purpose, sometimes referred to simply as a warranty of fitness, is a warranty implied by law that if a seller knows or has reason to know of a particular purpose for which some item is being purchased by the buyer, the seller is guaranteeing that the item is fit for that particular purpose. This differs from a warranty of merchantability in two ways:
For example, if Joey buys four end-tables from Susan (a non-merchant) and then uses them to prop up his car while he works on the muffler, Susan is not liable for any injury that occurs to Joey – unless Joey told Susan that he was buying the end-tables for that purpose.
The implied warranty of fitness is described in US law by Article 2, Section 315 of the Uniform Commercial Code.
An implied warranty of merchantability is a warranty implied by law that if a merchant (meaning someone who makes an occupation of selling things) sells something, that merchant is guaranteeing that the goods are reasonably fit for the general purpose for which they are sold. To be merchantable (salable), goods must meet the following conditions:
This warranty will apply to one who is a merchant and regularly deals in the type of merchandise sold. If the merchandise is sold with an express “guarantee”, the terms of the implied warranty of merchantability will fill the gaps left by that guarantee. If the terms of the express guarantee are not specified, they will be considered to be the terms of the implied warranty of merchantability.
In the United States, this subject is governed by Article 2 of the Uniform Commercial Code (UCC). The UCC allows sellers to disclaim the implied warranty of merchantability, provided the disclaimer is made conspicuously and the disclaimer explicitly uses the term “merchantability” in the disclaimer. Some states, however, have implemented the UCC such that this can not be disclaimed.
An implied warranty of habitability is a warranty implied by law that by leasing a residential property, the lessor is promising that it is suitable to be lived in, and will remain so for the duration of the lease.
An implied warranty can be expressly disclaimed in a sales contract by the use of specific language, such as the words, “as is” or “with all faults”. Such language must be conspicuous in the contract, e.g., in a different kind of print or font that makes it stand out. On the other hand, express warranty, that is, any affirmation of fact or promise to the buyer, or description of the good, oral or written, can be negated or limited only if such disclaimers are not unreasonable. (Uniform Commercial Code, Section 2-316 (1)).
Some jurisdictions, however, limit the ability of sellers or manufacturers to disclaim the implied warranty of merchantability or fitness, such as Massachusetts. (Massachusetts General Laws, Chapter 106: Section 2-316A).
Contractual language can also limit the remedies available for breach of an implied warranty – for example, capping recoverable damages or limiting the remedy to a replacement of a defective item. However, such a term can be found to be unconscionable. For example, if a defective product causes a personal injury, a contractual provision limiting recovery in such a case will be deemed prima facie unconscionable. (Uniform Commercial Code, §2-719(3).)
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This glossary post was last updated: 24th April, 2020 | 36 Views.