Warranties And Conditions Flashcards
Under the UCC, express warranties by the seller are created as follows:
Any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise.
Any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description.
Any sample or model which is made part of the basis of the bargain creates an express warranty that the whole of the goods shall conform to the sample or model.
Disclaimer. Disclaimers that grossly conflict with express warranties are
unenforceable (e.g., broad disclaimers such as, “all warranties, express or implied, are disclaimed” are not enforceable). A seller is liable for breach of contract if she violates an express warranty.
Implied Warranty of Merchantability
Under the UCC, all merchants make an implied warranty (unless disclaimed) that the goods being sold are fit for their ordinary commercial purposes. Merchants are liable for breach of contract if the implied warranty of merchantability is violated.
Implied Warranty of Merchantability Disclaimers
Disclaimer. A merchant can disclaim the implied warranty of merchantability if the language used to disclaim is conspicuous. Language of “as is” or “with all faults” or language that puts the buyer on notice will be sufficient for disclaiming the implied warranty of merchantability. The disclaimer may be made orally so long as the term “merchantability” is used.
Implied Warranty of Merchantability and Inspection.
If the buyer, before entering into the contract, has examined the goods or a sample as fully as the buyer desires, or has refused to examine the goods, then there is NO implied warranty of merchantability with respect to defects that an examination ought to have revealed to the buyer.
Implied Warranty of Fitness for a Particular Purpose
A warranty that the goods are fit for a particular purpose is implied whenever the seller has reason to know that the buyer has a particular use for the goods, and the buyer is relying upon the seller’s skill to select the goods. The seller need NOT be a merchant for this warranty to apply. A party is liable for breach of contract if she violates the implied warranty of fitness for a particular purpose.
Implied Warranty of Fitness for a Particular Purpose Disclaimers
Disclaimer. An implied warranty of fitness for a particular purpose can be disclaimed by general language (e.g., “as is”), but the disclaimer MUST be in writing and conspicuous.
A condition is
another way to shift risk by stating that one party’s contractual
obligations will kick in only if some future event takes place.
An express condition in a contract makes
performance conditional upon the completion of the condition (look for language like: “only if,” “provided that,” “on the condition that,” or “only in the event that,” etc.).
Express conditions must be
satisfied strictly, unless the condition is excused by waiver:
The party receiving the protection of the condition waives the condition with words or conduct;
OR
The party receiving the protection of the condition wrongfully interferes or
hinders the occurrence of the condition when judged by a good faith standard.
Good Faith and Fair Dealing
All contracts contain an implied obligation which requires the parties to a contract to act in good faith and deal fairly with one another without:
Breaking their word;
Using deceptive means to avoid obligations;
OR
Denying what the other party obviously understood.
Substantial Performance Under the Common Law
Under the common law, substantial performance is required, which means that performance will be satisfied so long as there is NOT a material breach of the contract. If there is a material breach, the non-breaching party’s performance is excused. If the breach is not material, the non-breaching party’s performance is not excused.
Perfect Tender Under the UCC
Under the UCC, perfect tender is required, which means that a seller must deliver conforming goods in accordance with the terms of the contract (i.e., “perfect goods” + “perfect delivery”). The smallest nonconformity is a breach that allows the buyer to reject all or a portion of the goods.
Exceptions to Perfect Tender Requirement
three main exceptions:
The parties can contractually change the default rules to include discussion of substantial performance instead of perfect tender;
Installment contracts (agreement for delivery in separate lots) do NOT have to satisfy perfect tender – the buyer can reject a specific installment delivery when there is a substantial impairment in the installment that cannot be cured;
If the seller fails to tender perfect goods, the buyer MUST give the seller a
chance to cure the nonconformity if:
The time for performance under the contract has NOT yet expired;
OR
The seller has reasonable grounds to believe that the buyer would accept a replacement for the nonconformity.
Revocation of Acceptance. If a buyer fails to reject nonconforming goods after having had a reasonable opportunity to inspect the goods, the buyer is deemed
to have accepted the goods.
The buyer may revoke his acceptance if:
The nonconformity substantially impairs the value of the goods;
The revocation occurs within a reasonable time after the buyer discovers or should have discovered the ground for nonconformity and before any substantial change in condition of the goods which was not caused by their own defects;
AND
The buyer accepted the goods:
On the reasonable assumption that the nonconformity would be cured and it has not been seasonably cured;
OR
Without discovery of such nonconformity if his acceptance was reasonably induced either by the difficulty of discovery before acceptance or by the seller’s assurances.
