1
whole or in part.
Warranties
or she buys, including the risks and their assumption. Thus, caveat emptor was replaced with a consumer-oriented
approach. A warranty now covers most goods. The term warranty is synonymous with the term promise.
Breaching a warranty has the same consequences as breaching any contractual promise. If parties have not
agreed to limit or modify remedies available to a buyer on a seller’s breach of warranty, a buyer can sue to recover
Provisions similar to the following apply to leases [see UCC 2A–211(1), 2A–214(4), 2A–516(3)(b), 2A–
516(4)(b)]. These warranties can be disclaimed or modified only by specific language in the contract.
2 INSTRUCTOR’S MANUAL FOR BUSINESS LAW: COMMERCIAL LAW FOR ACCOUNTANTS
whole or in part.
A. GOOD TITLE
rightful [UCC 2–312(1)(a)].
B. NO LIENS
Sellers warrant that goods will be delivered free of encumbrances of which a buyer is unaware at the
time of contracting [UCC 2–312(1)(b)].
[UCC 2–312(3), 2–607(6)].
A. STATEMENTS THAT CREATE EXPRESS WARRANTIES
Express warranties arise if a seller indicates goods will conform to—
• An affirmation or promise of fact.
ENHANCING YOUR LECTURE—
THE DEBATE OVER PUFFERY
lessees will not be “taken in” by this puffery. Some customers do not recognize the difference between puffery
and statements of fact, however. This problem is exacerbated when customers do not have a complete
command of the English language and are taken in by fast-talking salespersons.
Should sales representatives be held accountable for the promises they make to their customers? Some
CHAPTER 19: WARRANTIES 3
whole or in part.
chemical fumigant that would suppress black shank disease, a fungal disease that destroys tobacco crops.
The ad specifically indicated how much of the product should be applied per acre and stated that, if applied as
directed, Chlor-O-Pic would give “season-long control with application in fall, winter, or spring.” The farmer
bought eight thousand pounds of Chlor-O-Pic and applied it as directed to 143 acres of his tobacco crop.
Nonetheless, the crop developed black shank disease, resulting in an estimated loss of three thousand
farmer. The manufacturer had indeed made a strong promise—one that created an express warranty.a
PUFFERY V. MISREPRESENTATION
The line between puffery and fraudulent misrepresentation is also not always readily discernible. For
Had the sales representative committed fraud? Did he have a duty to disclose that the car had been
stolen? When Garrett later experienced numerous problems with the car and eventually sued the dealer, the
court held that the theft of the car was a material fact and that the salesperson had a duty to disclose this
information. According to the court, the statements made by the salesperson crossed the line between
puffery, or “seller’s talk,” and misrepresentation.b
In the cases just discussed, the courts held those who made claims about their products liable either for
fact, mere puffery. Should the law be changed to hold sellers legally accountable for the often
exaggerated opinions and promises that they make to customers? Or would such a change in the law
create even greater problems?
whole or in part.
A seller’s statement about the value or worth of goods or a seller’s statement of opinion (puffery) is not
Clearly improbable claims and oral statements are less likely to qualify as warranties.
III. Implied Warranties
Merchants impliedly warrant that the goods they sell are merchantable and, in certain circumstances, fit for a
particular purpose. An implied warranty may arise from a course of dealing or usage of trade.
Goods that are merchantable are “reasonably fit for the ordinary purposes for which such goods are
used.” They must at least—
• Be of average, fair, or medium-grade quality.
• Pass without objection in the trade or market for goods of the same description.
Case 19.1: Shoop v. DaimlerChrysler Corp.
In 2002, Darrell Shoop bought a 2002 Dodge Dakota truck for $28,000 from Dempsey Dodge in Chicago,
Illinois, made by DaimlerChrysler Corp. Defects required repairs twelve times within the first eighteen months.
In 2005, Shoop accepted $16,500 for the trade-in value of the truck as part of a purchase of a new vehicle.
purposes for which such goods are used. With regard to automobiles, fitness for the ordinary purpose of
driving implies that the vehicle should be in a safe condition and substantially free from defects. Breach of an
implied warranty of merchantability may also occur where the warrantor has unsuccessfully attempted to
repair or replace defective parts.”
whole or in part.
How important are expert witnesses to a plaintiff such as Shoop? On this point, the court stated,
“[B]ecause the value of the Dakota at the time of acceptance is important to a damages analysis under
professional experience in estimating the Dakota’s diminished value. Walters believed that the Dakota had
these manufacturing defects at the time of sale. Plaintiff’s second witness, Joseph Pennacchio, opined based
on a review of the repair records that the value of the truck at the time of purchase was $22,300. Both of
these witnesses were experienced in the inspection or appraisal of vehicles. Accordingly, the testimony of
plaintiff’s opinion witnesses created a genuine issue of material fact that the value of the Dakota was
Should Shoop’s trade–in of the Dakota preclude his recovery in this case? Why or why not?
DaimlerChrysler made this argument in Shoop’s case. The court disagreed, however, and explained, “The
buyer’s damages for breach of warranty are not lessened because the buyer has resold the goods at an
enhanced price. Had the goods been as warranted, they might have been resold at a still higher price.”
Whether the price received on a resale is evidence of the value of the goods at the time of the breach is
ANSWER TO “THE LEGAL ENVIRONMENTAL DIMENSION”
QUESTION IN CASE 19.1
If Shoop is allowed to recover damages for breach of warranty, what should be the measure of
those damages? Under UCC 2–714(2), the measure of damages for breach of warranty when the buyer has
for warranty damages, the general rule specified by the UCC for the measurement of the damages must be
modified by deducting the profits made on resale.”
2. Merchantable Food
whole or in part.
[UCC 2–314(1)].
CASE SYNOPSIS—
The Supreme Judicial Court of Massachusetts “sympathized with a plaintiff who has suffered a peculiarly
New England injury,” but entered a judgment for Blue Ship Tea Room. No breach of warranty had occurred.
The question was whether a fish bone made chowder unfit for eating. “[T]he joys of life in New England
include the ready availability of fresh fish chowder. We should be prepared to cope with the hazards of fish
light of a hallowed tradition, do not impair their fitness or merchantability.”
This is a landmark case in Massachusetts where fish and clam chowder are common. Whether the same
result would prevail in a state in which chowder is not so common is open for conjecture, but the case is a
logical application of the UCC, and most students find it interesting.
of a particular purpose.
ANSWER TO “THE E-COMMERCE DIMENSION”
possibly neither goods nor a merchant. The question does not indicate that there would have been an
exchange for a price, a communication over the Internet could arguably be construed intangible, the source of
the recipe might easily have been a non-merchant. More importantly, perhaps, would be the fact that Webster
CHAPTER 19: WARRANTIES 7
would have made the “product.”
ADDITIONAL CASES ADDRESSING THIS ISSUE —
Other cases centering on food that allegedly breaches the implied warranty of merchantability in–
clude the following:
• L.T. Overseas Ltd. v. Hartej Corp., __ A.2d __ (Conn.Super. 2002) (an importer did not breach the
implied warranty of merchantability when it sold rice to a distributor, in part because there had been only two
complaints in the previous four years and the distributor continued to do business with the importer despite
the complaints).
B. IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE
This warranty arises when any seller knows a particular purpose for which a buyer will use goods and
that the buyer is relying on the seller’s skill and judgment to select suitable goods [UCC 2–315, 2A–213].
buyer must have relied on the seller or lessor’s skill or judgment to select suitable goods.
C. WARRANTIES IMPLIED FROM PRIOR DEALINGS OR TRADE CUSTOM
Warranties can arise from a course of dealing or usage of trade. When the parties know of a well-
recognized trade custom, courts will infer that they intended the custom to apply to their contract [UCC
8 INSTRUCTOR’S MANUAL FOR BUSINESS LAW: COMMERCIAL LAW FOR ACCOUNTANTS
whole or in part.
equivalent to the UCC express and implied warranties.
D. LEMON LAWS
1. Seller Has Had Opportunity to Remedy Defect
Some states have established mandatory, government-sponsored arbitration programs for lemon–
law disputes.
ADDITIONAL BACKGROUND—
CIVIL CODE
DIVISION 3. OBLIGATIONS
PART 4. OBLIGATIONS ARISING FROM PARTICULAR TRANSACTIONS
TITLE 1.7. CONSUMER WARRANTIES
CHAPTER 1. CONSUMER WARRANTY PROTECTION
protection used and irreparable motor vehicles are inundating the marketplace; that other states have
addressed this problem by requiring notices on the titles of these vehicles warning consumers that the motor
vehicles were repurchased by a dealer or manufacturer because either the vehicle could not be repaired in a
reasonable length of time or the dealer or manufacturer was not willing to repair the vehicle; that these notices
serve the interests of consumers who have a right to information relevant to their buying decisions; and that
CHAPTER 19: WARRANTIES 9
whole or in part.
(c) Any person, including any dealer or manufacturer, selling a motor vehicle in this state that is known or
should be known to have been required by law to be replaced or required by law to be accepted for restitution
by a manufacturer due to the inability of the manufacturer to conform the vehicle to applicable warranties
pursuant to subdivision (d) of Section 1793.2 or that is known or should be known to have been required by
law to be replaced or required by law to be accepted for restitution by a dealer or manufacturer due to the
DEFECT IN THE VEHICLE PURSUANT TO CONSUMER WARRANTY LAWS.”
(d) The disclosure requirement in subdivision (c) is cumulative with all other consumer notice requirements,
and does not relieve any person, including any dealer or manufacturer, from complying with any other
applicable law, including any requirement of paragraph (5) of subdivision (e) of Section 1793.2 or comparable
E. MAGNUSON–MOSS WARRANTY ACT
1. Applies Only to Consumer Transactions
Under this federal statute, a seller need not give a written warranty for consumer goods, but if he or
• A limited warranty is what its name implies. Generally, it must be conspicuous.
2. Requires Certain Disclosures
Certain information must be disclosed in “readily understood language.”
B. CONFLICTING WARRANTIES
2 INSTRUCTOR’S MANUAL FOR BUSINESS LAW: COMMERCIAL LAW FOR ACCOUNTANTS
whole or in part.
A. GOOD TITLE
rightful [UCC 2–312(1)(a)].
B. NO LIENS
Sellers warrant that goods will be delivered free of encumbrances of which a buyer is unaware at the
time of contracting [UCC 2–312(1)(b)].
[UCC 2–312(3), 2–607(6)].
A. STATEMENTS THAT CREATE EXPRESS WARRANTIES
Express warranties arise if a seller indicates goods will conform to—
• An affirmation or promise of fact.
ENHANCING YOUR LECTURE—
THE DEBATE OVER PUFFERY
lessees will not be “taken in” by this puffery. Some customers do not recognize the difference between puffery
and statements of fact, however. This problem is exacerbated when customers do not have a complete
command of the English language and are taken in by fast-talking salespersons.
Should sales representatives be held accountable for the promises they make to their customers? Some
CHAPTER 19: WARRANTIES 3
whole or in part.
chemical fumigant that would suppress black shank disease, a fungal disease that destroys tobacco crops.
The ad specifically indicated how much of the product should be applied per acre and stated that, if applied as
directed, Chlor-O-Pic would give “season-long control with application in fall, winter, or spring.” The farmer
bought eight thousand pounds of Chlor-O-Pic and applied it as directed to 143 acres of his tobacco crop.
Nonetheless, the crop developed black shank disease, resulting in an estimated loss of three thousand
farmer. The manufacturer had indeed made a strong promise—one that created an express warranty.a
PUFFERY V. MISREPRESENTATION
The line between puffery and fraudulent misrepresentation is also not always readily discernible. For
Had the sales representative committed fraud? Did he have a duty to disclose that the car had been
stolen? When Garrett later experienced numerous problems with the car and eventually sued the dealer, the
court held that the theft of the car was a material fact and that the salesperson had a duty to disclose this
information. According to the court, the statements made by the salesperson crossed the line between
puffery, or “seller’s talk,” and misrepresentation.b
In the cases just discussed, the courts held those who made claims about their products liable either for
fact, mere puffery. Should the law be changed to hold sellers legally accountable for the often
exaggerated opinions and promises that they make to customers? Or would such a change in the law
create even greater problems?
whole or in part.
A seller’s statement about the value or worth of goods or a seller’s statement of opinion (puffery) is not
Clearly improbable claims and oral statements are less likely to qualify as warranties.
III. Implied Warranties
Merchants impliedly warrant that the goods they sell are merchantable and, in certain circumstances, fit for a
particular purpose. An implied warranty may arise from a course of dealing or usage of trade.
Goods that are merchantable are “reasonably fit for the ordinary purposes for which such goods are
used.” They must at least—
• Be of average, fair, or medium-grade quality.
• Pass without objection in the trade or market for goods of the same description.
Case 19.1: Shoop v. DaimlerChrysler Corp.
In 2002, Darrell Shoop bought a 2002 Dodge Dakota truck for $28,000 from Dempsey Dodge in Chicago,
Illinois, made by DaimlerChrysler Corp. Defects required repairs twelve times within the first eighteen months.
In 2005, Shoop accepted $16,500 for the trade-in value of the truck as part of a purchase of a new vehicle.
purposes for which such goods are used. With regard to automobiles, fitness for the ordinary purpose of
driving implies that the vehicle should be in a safe condition and substantially free from defects. Breach of an
implied warranty of merchantability may also occur where the warrantor has unsuccessfully attempted to
repair or replace defective parts.”
whole or in part.
How important are expert witnesses to a plaintiff such as Shoop? On this point, the court stated,
“[B]ecause the value of the Dakota at the time of acceptance is important to a damages analysis under
professional experience in estimating the Dakota’s diminished value. Walters believed that the Dakota had
these manufacturing defects at the time of sale. Plaintiff’s second witness, Joseph Pennacchio, opined based
on a review of the repair records that the value of the truck at the time of purchase was $22,300. Both of
these witnesses were experienced in the inspection or appraisal of vehicles. Accordingly, the testimony of
plaintiff’s opinion witnesses created a genuine issue of material fact that the value of the Dakota was
Should Shoop’s trade–in of the Dakota preclude his recovery in this case? Why or why not?
DaimlerChrysler made this argument in Shoop’s case. The court disagreed, however, and explained, “The
buyer’s damages for breach of warranty are not lessened because the buyer has resold the goods at an
enhanced price. Had the goods been as warranted, they might have been resold at a still higher price.”
Whether the price received on a resale is evidence of the value of the goods at the time of the breach is
ANSWER TO “THE LEGAL ENVIRONMENTAL DIMENSION”
QUESTION IN CASE 19.1
If Shoop is allowed to recover damages for breach of warranty, what should be the measure of
those damages? Under UCC 2–714(2), the measure of damages for breach of warranty when the buyer has
for warranty damages, the general rule specified by the UCC for the measurement of the damages must be
modified by deducting the profits made on resale.”
2. Merchantable Food
whole or in part.
[UCC 2–314(1)].
CASE SYNOPSIS—
The Supreme Judicial Court of Massachusetts “sympathized with a plaintiff who has suffered a peculiarly
New England injury,” but entered a judgment for Blue Ship Tea Room. No breach of warranty had occurred.
The question was whether a fish bone made chowder unfit for eating. “[T]he joys of life in New England
include the ready availability of fresh fish chowder. We should be prepared to cope with the hazards of fish
light of a hallowed tradition, do not impair their fitness or merchantability.”
This is a landmark case in Massachusetts where fish and clam chowder are common. Whether the same
result would prevail in a state in which chowder is not so common is open for conjecture, but the case is a
logical application of the UCC, and most students find it interesting.
of a particular purpose.
ANSWER TO “THE E-COMMERCE DIMENSION”
possibly neither goods nor a merchant. The question does not indicate that there would have been an
exchange for a price, a communication over the Internet could arguably be construed intangible, the source of
the recipe might easily have been a non-merchant. More importantly, perhaps, would be the fact that Webster
CHAPTER 19: WARRANTIES 7
would have made the “product.”
ADDITIONAL CASES ADDRESSING THIS ISSUE —
Other cases centering on food that allegedly breaches the implied warranty of merchantability in–
clude the following:
• L.T. Overseas Ltd. v. Hartej Corp., __ A.2d __ (Conn.Super. 2002) (an importer did not breach the
implied warranty of merchantability when it sold rice to a distributor, in part because there had been only two
complaints in the previous four years and the distributor continued to do business with the importer despite
the complaints).
B. IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE
This warranty arises when any seller knows a particular purpose for which a buyer will use goods and
that the buyer is relying on the seller’s skill and judgment to select suitable goods [UCC 2–315, 2A–213].
buyer must have relied on the seller or lessor’s skill or judgment to select suitable goods.
C. WARRANTIES IMPLIED FROM PRIOR DEALINGS OR TRADE CUSTOM
Warranties can arise from a course of dealing or usage of trade. When the parties know of a well-
recognized trade custom, courts will infer that they intended the custom to apply to their contract [UCC
8 INSTRUCTOR’S MANUAL FOR BUSINESS LAW: COMMERCIAL LAW FOR ACCOUNTANTS
whole or in part.
equivalent to the UCC express and implied warranties.
D. LEMON LAWS
1. Seller Has Had Opportunity to Remedy Defect
Some states have established mandatory, government-sponsored arbitration programs for lemon–
law disputes.
ADDITIONAL BACKGROUND—
CIVIL CODE
DIVISION 3. OBLIGATIONS
PART 4. OBLIGATIONS ARISING FROM PARTICULAR TRANSACTIONS
TITLE 1.7. CONSUMER WARRANTIES
CHAPTER 1. CONSUMER WARRANTY PROTECTION
protection used and irreparable motor vehicles are inundating the marketplace; that other states have
addressed this problem by requiring notices on the titles of these vehicles warning consumers that the motor
vehicles were repurchased by a dealer or manufacturer because either the vehicle could not be repaired in a
reasonable length of time or the dealer or manufacturer was not willing to repair the vehicle; that these notices
serve the interests of consumers who have a right to information relevant to their buying decisions; and that
CHAPTER 19: WARRANTIES 9
whole or in part.
(c) Any person, including any dealer or manufacturer, selling a motor vehicle in this state that is known or
should be known to have been required by law to be replaced or required by law to be accepted for restitution
by a manufacturer due to the inability of the manufacturer to conform the vehicle to applicable warranties
pursuant to subdivision (d) of Section 1793.2 or that is known or should be known to have been required by
law to be replaced or required by law to be accepted for restitution by a dealer or manufacturer due to the
DEFECT IN THE VEHICLE PURSUANT TO CONSUMER WARRANTY LAWS.”
(d) The disclosure requirement in subdivision (c) is cumulative with all other consumer notice requirements,
and does not relieve any person, including any dealer or manufacturer, from complying with any other
applicable law, including any requirement of paragraph (5) of subdivision (e) of Section 1793.2 or comparable
E. MAGNUSON–MOSS WARRANTY ACT
1. Applies Only to Consumer Transactions
Under this federal statute, a seller need not give a written warranty for consumer goods, but if he or
• A limited warranty is what its name implies. Generally, it must be conspicuous.
2. Requires Certain Disclosures
Certain information must be disclosed in “readily understood language.”
B. CONFLICTING WARRANTIES