Exclusion of Warranties, Privity, and Duty to Notify Exclusion of Warranties, Privity, and Duty to...

Exclusion of Warranties, Privity, and Duty to Notify


Section 14.1Section 14.1

Understanding Business and Personal Law

Exclusion of Warranties, Exclusion of Warranties, Privity, and Duty to Notify Privity, and Duty to Notify


The Importance of Warranties

Reviewing What You Learned

1. What are the three ways an express warranty can be made?

Section 14.1 Assessment






By a statement of fact or promise made by the seller, by a description of the goods, and by the use of a sample or model.


Answer






2. What are the obligations of merchants under the Magnuson-Moss Warranty Act?







Merchants must label written warranties as either “full” or “limited” for consumer products costing more than $10.


Answer






3. What is difference between a limited warranty and a full warranty?







A limited warranty is one that does not meet all of the requirements for a full warranty.


Answer






4. What is the difference between the implied warranty of fitness for a particular purpose and the implied warranty of merchantability?







A warranty of fitness for a particular purpose is created when the seller knows about a particular purpose for which the goods are needed.


Answer






The seller advises the buyer in making a purchase and the buyer relies on the seller’s advice. This warranty exists whether the seller is a merchant or a private party.


Answer






In contrast, sellers who regularly sell goods of a particular kind imply a warranty of merchantability in every sale, assuring that their products are fit for the purpose for which they are purchased.


Answer






Private parties do not provide the warranty of merchantability.


Answer






5. What is the warranty of title?







Guarantees that the title being conveyed is good, and the transfer is lawful.


Answer








To exclude the warrant of To exclude the warrant of merchantability, merchantability, merchantabilitymerchantability must be mentioned specifically.must be mentioned specifically.The warranty of title may be not The warranty of title may be not excluded.excluded.Implied warranties can also be Implied warranties can also be excluded by words such as “as is.” excluded by words such as “as is.”

Exclusion of Warranties Exclusion of Warranties





Under the Magnuson-Moss Warranty Under the Magnuson-Moss Warranty Act, any clause that excludes or limits Act, any clause that excludes or limits consequential damages for breach of consequential damages for breach of warranty must appear conspicuously warranty must appear conspicuously on the face of the warranty. on the face of the warranty.






Consequential damagesConsequential damages are losses are losses that do not flow directly from an act that do not flow directly from an act but only from some of the but only from some of the consequences or results of the act.consequences or results of the act.






Harriet loves to shop at the outlet stores in Commerce. Her favorite name brand store has an As Is rack.





After returning home from shopping there one day, she discovered the skirt she bought off the As Is rack has a large tear. Can Harriet take the skirt back? Why or why not?





No. This is an example of an excluded implied warranty.

ANSWERANSWER





The Magnuson-Moss Warranty Act The Magnuson-Moss Warranty Act limits the exclusions of implied limits the exclusions of implied warranties to consumers. Under this warranties to consumers. Under this law, if a seller makes a written law, if a seller makes a written express warranty to a consumer, the express warranty to a consumer, the implied warranties cannot be implied warranties cannot be disclaimed or excluded.disclaimed or excluded.

Consumer Protection Consumer Protection





Some states have gone further to Some states have gone further to protect consumers by saying that protect consumers by saying that implied warranties cannot be excluded implied warranties cannot be excluded when goods are sold.when goods are sold.

Consumer Protection Consumer Protection





People who contract directly with each People who contract directly with each other are said to be in other are said to be in privity of privity of contractcontract. .

In the past, warranties extended only In the past, warranties extended only to the actual buyer of a product.to the actual buyer of a product.

Privity of Contract Not Required Privity of Contract Not Required





The UCC has abolished the The UCC has abolished the requirement of privity of contract. requirement of privity of contract. Instead it provides states with three Instead it provides states with three alternatives. alternatives.






In all of the three alternatives, express In all of the three alternatives, express and implied warranties extend to and implied warranties extend to people who would reasonably be people who would reasonably be expected to use, consume, or be expected to use, consume, or be affected by the goods purchased by affected by the goods purchased by the buyer.the buyer.






14.214.2

Comparing the Alternatives Comparing the Alternatives

Alternative A Alternative B Alternative C

gives sellers’ warranties to any person injured by a breach of warranty who is in the family or household of the buyer, including guests

gives sellers’ warranties to any person injured by a breach of warranty.

gives sellers’ warranties to any person or corporation injured by a breach of warranty.





14.214.2

Comparing the Alternatives Comparing the Alternatives

Alternative A Alternative B Alternative C

Sellers cannot exclude this provision.

Sellers cannot exclude this provision.

Sellers may exclude this provision with respect to injuries to corporations but not to individuals.

Warranties are not extended to corporations.

Warranties are not extended to corporations.





Most states have adopted one of the Most states have adopted one of the three alternatives, but a few states three alternatives, but a few states have written their own versions (OV).have written their own versions (OV).

UCC Alternatives to Privity UCC Alternatives to Privity





14.214.2

UCC Alternatives to Privity UCC Alternatives to Privity

AA

BB

CC

OVOV

NANA

AK, AZ, AR, CT, DC, FL, GA, ID, IL, IN, KY, MD, MI, MS, MO, MT, NE, NV, NJ, NM, NC, OH, OK, OR, PA, SC, TN, WA, WV, WI

AL, CO, DE, KS, SD, VT, WY

HI, IA, MN, ND, UT

ME, MA, NH, NY, RI, TX, VA

CA, LA





To succeed in a claim for breach of To succeed in a claim for breach of warranty, the buyer must satisfy his or warranty, the buyer must satisfy his or her her duty to notifyduty to notify. .

Duty to Notify and Remedies Duty to Notify and Remedies for Breach for Breach





This duty requires that the buyer notify This duty requires that the buyer notify the seller within a reasonable time the seller within a reasonable time after the defect is discovered. after the defect is discovered.

Failure to do so will prevent the buyer Failure to do so will prevent the buyer from recovering. from recovering.






Often, when sellers are notified that a Often, when sellers are notified that a product is defective or that a warranty product is defective or that a warranty has been breached, they will arrange has been breached, they will arrange to correct the situation.to correct the situation.






When the warranty of title is breached, When the warranty of title is breached, the buyer has a claim against the the buyer has a claim against the seller for damages. This could be the seller for damages. This could be the cost of clearing the title or the cost of clearing the title or the purchase price of the goods.purchase price of the goods.






Chunta bought a digital camera from his friend Thomas for $50 only to find out that it was stolen. What remedy does Chunta have?





ANSWERANSWER

Chunta has a claim against Thomas for $50.






1. To whom are warranties made under the laws of your state?







Answers will vary by state.


Answer






2. How may warranties be excluded under the laws of your state?







Answers will vary by state.


Answer






3. What is the buyer’s duty to notify the seller of a defect?







The buyer must notify the seller within a reasonable time after the defect is discovered.


Answer



End of Section 14.2End of Section 14.2

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