Implied Warranty

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Related to Implied Warranty: Implied warranty of habitability

Implied Warranty

A promise, arising by operation of law, that something that is sold will be merchantable and fit for the purpose for which it is sold.

Every time goods are bought and sold, a sales contract is created: the buyer agrees to pay, and the seller agrees to accept, a certain price in exchange for a certain item or number of items. Sales contracts are frequently oral, unwritten agreements. The purchase of items like a candy bar hardly seems worth the trouble of drafting an agreement spelling out the buyer's expectation that the candy bar will be fresh and edible. Implied warranties protect the buyer whether or not a written sales contract exists.

Implied Warranty of Merchantability

Implied warranties come in two general types: merchantability and fitness. An implied warranty of merchantability is an unwritten and unspoken guarantee to the buyer that goods purchased conform to ordinary standards of care and that they are of the same average grade, quality, and value as similar goods sold under similar circumstances. In other words, merchantable goods are goods fit for the ordinary purposes for which they are to be used. The Uniform Commercial Code (UCC), adopted by most states, provides that courts may imply a Warranty of merchantability when (1) the seller is the merchant of such goods, and (2) the buyer uses the goods for the ordinary purposes for which such goods are sold (§ 2-314). Thus, a buyer can sue a seller for breaching the implied warranty by selling goods unfit for their ordinary purpose.

There is rarely any question as to whether the seller is the merchant of the goods sold. Nevertheless, in Huprich v. Bitto, 667 So.2d 685 (Ala. 1995), a farmer who sold defective horse feed was found not to be a merchant of horse feed. The court stated that the farmer did not hold himself out as having knowledge or skill peculiar to the sale of corn as horse feed, and therefore was not a merchant of horse feed for purposes of determining a breach of implied warranty of merchantability.

The question of whether goods are fit for their ordinary purpose is much more frequently litigated. Thomas Coffer sued the manufacturer of a jar of mixed nuts after he bit down on an unshelled filbert, believing it to have been shelled, and damaged a tooth. Coffer argued in part that the presence of the unshelled nut among shelled nuts was a breach of the implied warranty of merchantability. Unquestionably, Coffer was using the nuts for their ordinary purpose when he ate them, and unquestionably, he suffered a dental injury when he bit the filbert's hard shell. But the North Carolina appellate court held that the jar of mixed nuts was nonetheless fit for the ordinary purpose for which jars of mixed nuts are used (Coffer v. Standard Brands, 30 N.C. App. 134, 226 S.E.2d 534 [1976]). The court consulted the state agriculture board's regulations and noted that the peanut industry allows a small amount of unshelled nuts to be included with shelled nuts without rendering the shelled nuts inedible or adulterated. The court also noted that shells are a natural incident to nuts.

The policy behind the implied warranty of merchantability is basic: sellers are generally better suited than buyers to determine whether a product will perform properly. Holding the seller liable for a product that is not fit for its ordinary purpose shifts the costs of nonperformance from the buyer to the seller. This motivates the seller to ensure the product's proper performance before placing it on the market. The seller is better able to absorb the costs of a product's nonperformance, usually by spreading the risk to consumers in the form of increased prices.

The policy behind limiting the implied warranty of merchantability to the goods' ordinary use is also straightforward: a seller may not have sufficient expertise or control over a product to ensure that it will perform properly when used for nonstandard purposes.

Implied Warranty of Fitness

When a buyer wishes to use goods for a particular, nonordinary purpose, the UCC provides a distinct implied warranty of fitness (§ 2-315). Unlike the implied warranty of merchantability, the implied warranty of fitness does not contain a requirement that the seller be a merchant with respect to the goods sold. It merely requires that the seller possess knowledge and expertise on which the buyer may rely.

For example, one court found that horse buyers who indicated to the sellers their intention to use the horse for breeding were using the horse for a particular, nonordinary purpose (Whitehouse v. Lange, 128 Idaho 129, 910 P.2d 801 [1996]). The buyers soon discovered that the horse they purchased was incapable of reproducing. Because the court found this use of the horse to be nonordinary, the buyers were entitled to an implied warranty of fitness.

Before a court will imply a warranty of fitness, three requirements must be met: (1) the seller must have reason to know of the buyer's particular purpose for the goods; (2) the seller must have reason to know of the buyer's reliance on the seller's skill and knowledge in furnishing the appropriate goods; and (3) the buyer must, in fact, rely on the seller's skill and knowledge. Even when these requirements are met, courts will not imply a warranty of fitness under certain circumstances. A buyer who specifies a particular brand of goods is not entitled to an implied warranty of fitness. Also, a buyer who has greater expertise than the seller regarding the goods generally is precluded from asserting an implied warranty of fitness, as is a buyer who provides the seller with specifications, such as a blueprint or design plan, detailing the types of material to be used in the goods.

Further readings

Gonzales, Vincent M. 1987. "The Buyer's Specifications

Exception to the Implied Warranty of Fitness for a Particular Purpose: Design or Performance?" California Law Review 61 (November).

West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. All rights reserved.

implied warranty

n. an assumption at law that products are "merchantable," meaning they work and are useable as normally expected by consumers, unless there is a warning that they are sold "as is" or second-hand without any warranty. A grant deed of real property carries the implied warranty of good title, meaning the grantor (seller) had a title (ownership) to transfer. (See: implied, caveat emptor)

Copyright © 1981-2005 by Gerald N. Hill and Kathleen T. Hill. All Right reserved.
References in periodicals archive ?
"The Court is not persuaded, however, that the Supreme Judicial Court would apply this logic to categorically exclude sales of residential property to commercial entities from the ambit of the implied warranty of habitability, given that 'the public policy of Massachusetts strongly favors the safety and habitability of homes,' and the ultimate use of such property is residential.
On projects in which the United States is the owner, the case law further breaks down the implied warranty of specifications into three categories: design, performance, and purchase description specifications.
However, the idea of extending the implied warranty of habitability to land contracts has not garnered as much support as requiring mandatory inspections.
Johnson, who was represented by LSEM, filed an answer, affirmative defenses including a breach of the implied warranty of habitability, and a two-count counterclaim for violation of the Missouri Merchandising Practices Act and a common law breach of lease alleging violation of the implied warranty of habitability.
[section] 2-315: "Implied Warranty: Fitness for Particular Purpose"
Gomulkiewicz, The Implied Warranty of Merchantability in Software Contracts: A Warranty No One Dares to Give and How to Change That, 16 J.
* The association also asserted fiduciary duty, implied warranty, and statutory claims, but the trial court dismissed those claims as not applicable to this case on other grounds.
This decision preliminarily approved several products liability instructions as set forth in appendix to the decision: 403.1 Introduction; 403.2 Summary of Claims; 403.4 Express Warranty; 403.5 Implied Warranty of Merchantability; 403.6 Implied Warranty of Fitness for Particular Purpose; 403.8 Strict Liability Failure to Warn; 403.9 Negligence; 403.10 Negligent Failure to Warn; 403.12 Legal Cause; 403.14 Burden of Proof on Preliminary Issue; 403.15 Issues on Main Claim; 403.17 Burden of Proof on Main Claim; 403.18 Defense Issues; and 403.19 Burden of Proof on Defense issues.
(73) In the class action, however, patients who used Duract sought a refund of the purchase price under a variety of legal theories including statutory consumer fraud, the implied warranty of merchantability, and common law unjust enrichment.
Hospitals usually escape liability for ad verse drug reactions, with courts tending to shield them against implied warranty (hospitals are not merchants) or strict liability.
Statements herein are based on normal operating conditions and are not intended to create any implied warranty of merchantability or fitness for a particular purpose.