Dynamic business law 4e kubasek 4e CH25

Chapter 25
Warranties

Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.


Overview

• LO25-1: What are express warranties?
• LO25-2: What is the implied warranty of title?
• LO25-3: What is the implied warranty of merchantability?
• LO25-4: What is the implied warranty of fitness for a particular purpose?
• LO25-5: Do warranties apply to third parties?
• LO25-6: Can warranties be disclaimed?

25-2


Chapter 25 Hypothetical Case 1
•

Last week, Richard Stamos purchased a used 2007 Honda Civic from his neighbor, Adam Lourdes. Yesterday,
Stamos experienced mechanical difficulties with his new purchase, and his mechanic diagnosed an
automatic transmission problem with a repair estimate of $2,150. Lourdes has refused to rescind the
contract and has said he will not pay for the transmission repair.

•

Does the Uniform Commercial Code (UCC) or the common law provide any remedies, warranty or
otherwise, for Richard Stamos in a lawsuit against Adam Lourdes for the failed transmission?

25-3


Chapter 25 Hypothetical Case 2
•

Recall from the Chapter 16 Hypothetical Case that Imogen Ledbetter was seriously injured in an automobile
accident when the steering wheel of a new car she had just purchased detached from the steering column
(the steering wheel literally came off in her hands), causing Ledbetter to crash into a culvert.

•

In terms of drafting the personal injury complaint against Fjord Motors, Inc. (the manufacturer of the sedan)
and Bjorn Fjord Motors, Inc. (the dealership), what theories of warranty liability should Ledbetter's attorney
include? Are there any non-warranty (i.e., non-Uniform Commercial Code) theories of liability that might be
applicable in this case?

25-4


What Is a Warranty?

• Definition: Assurance by one party that the other party can rely on its
representations of fact

25-5


Express Warranty Versus
Implied Warranty

• Express warranty: Explicitly stated in contract
• Implied warranty: Automatically (by operation of law) applied to contract

25-6


Express Warranties
•

Any description of the good's physical nature or its use, either in general or specific, that becomes
part of the contract

•
•
•
•

May be found in advertisements or brochures
May be material term of contract
Salesperson's oral promise concerning good can give rise to express warranty
Buyer's reliance on seller's representations generally means those representations become
express warranties, and part of contract

25-7


Sales Puffing

• Definition: Salesperson's mere statement of opinion, rather than

•

representation of facts
Puffing generally does not create express warranty liability

25-8


Implied Warranty of Title

• Implied warranty of title assumes:

• Seller has good and valid title to goods
• Seller has right to transfer title free and clear of liens, judgments, or
infringements of intellectual property rights of which buyer has no
knowledge

25-9


Implied Warranty of Merchantability
•
•

Implied warranty of merchantability: Warranty based on reasonable expectation of product performance
Good purchased must:

•
•
•

•
•
•

Pass without objection in trade/market for similar goods
Be of fair quality (within the product's description)
Be fit for ordinary use
Have even kind, quality, and quantity
Be adequately packaged and labeled
Conform to promises made on package/product label

25-10


Implied Warranty of Fitness for Particular Purpose

• Implied warranty of fitness for particular purpose: Warranty that arises when seller
knows purpose for which buyer purchasing goods, and buyer relies on seller's
judgment to recommend/select certain product

•

Seller does not have to be merchant to make this warranty

25-11


Implied Warranty of Trade Usage

• Implied warranty of trade usage

•

Definition: An assurance created through well-accepted course of dealing
or trade usage

25-12


Third Party Beneficiaries of Warranties

• Seller's warranties may extend to:

• Buyer's household members and guests
• Any reasonable and foreseeable user
• Anyone injured by good

25-13


Warranty Disclaimers and Waivers

• Methods of disclaiming/waiving warranties:
• Seller does not make express warranties
• Seller disclaims implied warranties in clear, unambiguous, conspicuous
language

• Buyer fails/refuses to examine goods
• Buyer fails to file suit within applicable statute of limitations period

25-14

Magnuson-Moss Warranty Act

• Provides that if seller decides to issue written warranty for consumer
good, seller must specify whether warranty is "full" or "limited"

25-15


Chapter 25 Hypothetical Case 3
•

Aristotle Mythos is having a mid-life crisis at 50. In an attempt to conquer his depression and prove that he is equivalent to a 20-year-old (at least in
spirit), Mythos plans to climb Mount Zeus, the highest peak in his ancestral homeland of Greconia.

In preparation for his climb, Mythos patronizes a local outdoors shop, Athena's Garden, and asks to speak with a trained sales associate. Mythos
specifies that he will be climbing Mount Zeus, and that he will need a tent and sleeping bag that can survive the wind and elements for two nights
during his ascent and descent. The associate selects a tent and sleeping bag from a wide variety of possibilities, and Mythos leaves the store a happy
camper.

Mythos begins his climb the following day and successfully reaches his checkpoint, halfway to Zeus's peak, before nightfall. He prepares his campsite
and looks forward to some much-needed rest. Unfortunately, he has a fitful night, shivering in his sleeping bag in a partially collapsed tent, with the
wind and the cold getting the best of Mythos and his camping gear.

25-16


Chapter 25 Hypothetical Case 3 (cont'd)
•

The following morning, Mythos awakens to see that the toes on both of his feet have turned a sickening shade of blue, and he
realizes with great disappointment that he will not be able to fulfill his dream of climbing Mount Zeus. Upon closer examination of
his tent and sleeping bag, he sees that both are labeled "The Young Mythologist"—gear clearly intended for children's backyard
camping.

As a result of his misfortune, Mythos must have four toes (two toes on each foot) amputated, and he incurs medical expenses of
$58,000 for treatment and rehabilitation. Mythos's doctor has rated him with a 20% permanent partial disability as a result of his
toe amputations.

•

Is Athena's Garden legally responsible for Mythos's medical expenses and partial disability? If so, on what theory?

25-17


Chapter 25 Hypothetical Case 4
•

Sanford Ngobo decided to purchase a new car from Fortuna Motors. Ngobo enjoys closed-track racing on the weekends, so he was seeking a car that
was better and faster than all the rest.

Before making his purchase, Ngobo browsed the cars for quite some time—but what really interested him were the recommendations of the sales
clerk he worked with, Sophia Farrell. Farrell told Ngobo that the Satyr 1000, a new model the dealership had just gotten in, would guarantee Ngobo 's
dominance in all the races in which he competed, as it had an extraordinarily powerful engine. Despite the fact that the Satyr was at least 30 percent
more expensive than the other cars he'd considered, he decided that it was what he was looking for.

A month later (and after putting 2,000 miles on his new car), Ngobo took his new Satyr to the track—and came in dead last. Furious, he went back to
Fortuna, and Farrell, and demanded his money back.

•

Should Fortuna take the Satyr back because it didn't live up to Farrell's promises? Is she guilty of puffing?

25-18