Implied Warranties: Part One (Goods)

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Texas law imposes certain implied warranties on the sale of goods, regardless of whether the warranties are mentioned in the contract.  In particular, Texas law creates the warranty of “merchantability” and the warranty that the goods are “fit for a particular purpose.”

Merchantability

The implied warranty of merchantability requires goods to be merchantable.  Merchantable means the following:

1.  pass without objection in the trade under the contract description;

2.  in the case of fungible goods, are of fair average quality within the description;

3.  are fit for the ordinary purposes for which such goods are used;

4.  run, within variations permitted by agreement, of kind, quality and quantity for each and all units;

5.  are adequately contained, packaged, and labeled as the agreement may require;  and

6.  conform to the promises or affirmations of fact made on the container or label if any.

Thus, whether express or implied, warrantying the merchantability means a seller warrants that its goods will possess each of the foregoing qualities.

Fitness for a Particular Purpose

The implied warranty of fitness for a particular purpose applies to a sale of goods if the seller knows or has reason to know the buyer will use the goods for a particular purpose.  Unless disclaimed (more on this below), a seller with such knowledge (or reason to know) impliedly warrants that the goods are suitable for that particular purpose.

Disclaiming the Implied Warranties

Sellers of goods often do not realize they are making such implied warranties.  In many circumstances, sellers may not want to make any such warranties.  This is especially so, if the seller is a distributor rather than the manufacturer.  A distributor may wish to assign the manufacturer’s warranty rather than make any warranties itself.

Fortunately for sellers, the implied warranties of merchantability and fitness for a particular purpose may be modified or disclaimed.  However, to do so, the disclaimer must be in writing, conspicuous (e.g., bold and all caps) and specific (i.e., it must mention the specific warranty to be disclaimed rather than disclaiming warranties in general).   Prudent distributors and other sellers should include such disclaimers in their terms and conditions.

On the other hand, buyers rightfully often want some type of warranty.  If the proposed agreement disclaims the foregoing implied warranties, then the buyer should take care to ensure it is receiving a warranty of acceptable scope from someone in the chain of distribution of the goods.

 

Topics:  Fitness for Particular Purpose, Warranties

Published In: General Business Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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