Section 14.1

The Importance of Chapter 14 Warranties Section 14.1 Express and Implied Warranties Section 14.2 Exclusion of Warranties, Privity, and Duty to Notify

What You’ll Learn How to describe the three ways an express warranty can be made (p. 294) How to state the obligations of merchants under the Magnuson-Moss Warranty Act (p. 297)

What You’ll Learn How to contrast a limited warranty with a full warranty (pp. 297, 298)

What You’ll Learn How to differentiate between the implied warranty of fitness of a particular purpose and the implied warranty of merchantability (pp. 301, 302) How to explain the warranty of title (p. 303)

Why It’s Important Understanding warranties will keep you from losing money.

Legal Terms warranty (p. 294) express warranty (p. 294) full/limited warranty (pp. 297, 298) implied warranty (p. 301)

Legal Terms warranty of fitness for a particular purpose (p. 301) warranty of merchantability (p. 302) usage of trade (p. 303) warranty of title (p. 304)

Section Outline Law of Warranties Express Warranties Statement of Fact or Promise Availability before Sale Advertising Express Warranties

Section Outline Express Warranties, continued Magnuson-Moss Warranty Act Description of the Goods Sample or Model

Section Outline Implied Warranties Warranty of Title Warranty of Fitness for a Particular Purpose Warranty of Merchantability Usage of Trade Warranty of Title

Pre-Learning Question What is a warranty?

Law of Warranties The UCC provides protection under its law of warranties for situations such as: Products that don’t work after you buy them. Impurities in foods in restaurants. Technical problems with computers.

Law of Warranties A warranty is another name for a guarantee. A breach of warranty is a breach of contract.

Pre-Learning Question What is an express warranty?

Express Warranties An express warranty is an oral or written statement, promise, or other representation about the quality, ability, or performance of a product. Express warranties apply to goods that are sold or leased.

Express Warranties Express warranties are conveyed in three ways: By a statement of fact or promise made by the seller By a description of the goods By the use of a sample or model

Statement of Fact or Promise An express warranty is created when a private party or a merchant sells goods and makes a statement of fact or a promise about the goods to the buyer.

Statement of Fact or Promise An express warranty may be a statement of fact or a promise of something that may happen in the future. Express warranties are often found in sales brochures, circulars, and advertisements.

Availability before Sale Written warranties on consumer products costing more than $15 must be made available before you buy the product.

Advertising Express Warranties An advertisement stating that a product is warranted must tell you how to get a copy of the warranty before you buy the product.

Magnuson-Moss Warranty Act The Magnuson-Moss Warranty Act is a law affecting only the sale of goods sold in interstate commerce (business activities that touch more than one state).

Magnuson-Moss Warranty Act This federal act gives added protection to consumers when written express warranties are made.

Magnuson-Moss Warranty Act When a written warranty is offered on consumer goods costing more that $10 and sold in interstate commerce, the warranty must be labeled as full or limited.

Full Warranty A full warranty promises to fix or replace a defective product at no charge to the consumer.

Full Warranty A full warranty: Must be honored within a reasonable amount of time. Is good for the period mentioned in the warranty, regardless of who owns the item when it breaks.

Limited Warranty A limited warranty is any written warranty that does not meet the requirements for a full warranty.

Limited Warranty A limited warranty: Does not promise free repair or replacement. Commonly covers only parts, not labor. May offer a partial refund.

Limited Warranty A limited warranty: May require you to pay shipping. May only apply to the original buyer. Must be labeled “limited warranty.”

Description of the Goods Any description of the goods that is part of a transaction also creates an express warranty. The seller warrants that the goods will be the same as the description.

Sample or Model Any sample or model that is part of a transaction creates an express warranty. When displaying a sample or model, the seller warrants that the goods sold will be the same.

Pre-Learning Question What is an implied warranty?

Implied Warranties An implied warranty is a guarantee of quality imposed by law.

Implied Warranties An implied warranty: Is not in writing. Applies only to goods that are sold, not services contracted.

Implied Warranties There are three types of implied warranties: Warranty of fitness for a particular purpose Warranty of merchantability Warranty that comes from a course of dealing or usage of trade

What is the difference between an express and an implied warranty?

ANSWER Express: provided by the seller; implied: imposed by law.

for a Particular Purpose Warranty of Fitness for a Particular Purpose A warranty of fitness for a particular purpose is created when the seller knows the purpose for which the goods are needed.

for a Particular Purpose Warranty of Fitness for a Particular Purpose The seller advises the buyer in making a purchase, and the buyer relies on the seller’s knowledge and advice.

for a Particular Purpose Warranty of Fitness for a Particular Purpose In this way, the seller warrants by implication that the goods will be fit for the purpose for which they are to be used.

for a Particular Purpose Warranty of Fitness for a Particular Purpose This warranty exists whether the seller is a merchant or a private party.

Warranty of Merchantability Under an implied warranty of merchantability, the merchant warrants that the goods being sold are merchantable.

Warranty of Merchantability This warranty is given only when the seller regularly sells goods of that kind. Unless disclaimed, retailers, wholesalers, and manufacturers imply such a warranty in every sale.

Warranty of Merchantability This gives assurance that their products are fit for the purpose for which they are purchased.

Warranty of Merchantability Private parties do not provide the warranty of merchantability.

Usage of Trade Another implied warranty arises from the customary ways in which the parties have dealt in the past, or the usage of trade.

Pre-Learning Question What is a warranty of title?

Warranty of Title When a merchant or a private party sells goods, the seller warrants that the title being conveyed is good and that the transfer is lawful. This is called the warranty of title.

Reviewing What You Learned Section 14.1 Assessment Reviewing What You Learned What are the three ways an express warranty can be made?

Reviewing What You Learned Answer Section 14.1 Assessment Reviewing What You Learned Answer 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.

Reviewing What You Learned Section 14.1 Assessment Reviewing What You Learned What are the obligations of merchants under the Magnuson-Moss Warranty Act?

Reviewing What You Learned Answer Section 14.1 Assessment Reviewing What You Learned Answer Merchants must label written warranties as either “full” or “limited” for consumer products costing more than $10.

Reviewing What You Learned Section 14.1 Assessment Reviewing What You Learned What is difference between a limited warranty and a full warranty?

Reviewing What You Learned Answer Section 14.1 Assessment Reviewing What You Learned Answer A limited warranty is one that does not meet all of the requirements for a full warranty.

Reviewing What You Learned Section 14.1 Assessment Reviewing What You Learned What is the difference between the implied warranty of fitness for a particular purpose and the implied warranty of merchantability?

Reviewing What You Learned Answer Section 14.1 Assessment Reviewing What You Learned Answer A warranty of fitness for a particular purpose is created when the seller knows about a particular purpose for which the goods are needed.

Reviewing What You Learned Answer Section 14.1 Assessment Reviewing What You Learned 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.

Reviewing What You Learned Answer Section 14.1 Assessment Reviewing What You Learned 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.

Reviewing What You Learned Answer Section 14.1 Assessment Reviewing What You Learned Answer Private parties do not provide the warranty of merchantability.

Reviewing What You Learned What is the warranty of title? Section 14.1 Assessment Reviewing What You Learned What is the warranty of title?

Reviewing What You Learned Answer Section 14.1 Assessment Reviewing What You Learned Answer Guarantees that the title being conveyed is good, and the transfer is lawful.

Critical Thinking Activity Opinion or Fact Section 14.1 Assessment Critical Thinking Activity Opinion or Fact A statement of fact by a seller about a product is a warranty; a seller’s opinion is not. Talk with another class member and compare the following pairs of statements.

Critical Thinking Activity Opinion or Fact Section 14.1 Assessment Critical Thinking Activity Opinion or Fact Classify each statement as fact or opinion.

Critical Thinking Activity Opinion or Fact Section 14.1 Assessment Critical Thinking Activity Opinion or Fact These goods are 100 percent wool. This is the finest wool around.

Critical Thinking Activity Answer Opinion or Fact Section 14.1 Assessment Critical Thinking Activity Answer Opinion or Fact These goods are 100 percent wool. (fact) This is the finest wool around. (opinion)

Critical Thinking Activity Opinion or Fact Section 14.1 Assessment Critical Thinking Activity Opinion or Fact This truck has never been in an accident. This truck is solid.

Critical Thinking Activity Answer Opinion or Fact Section 14.1 Assessment Critical Thinking Activity Answer Opinion or Fact This truck has never been in an accident. (fact) This truck is solid. (opinion)

Critical Thinking Activity Opinion or Fact Section 14.1 Assessment Critical Thinking Activity Opinion or Fact This ink will not stain clothes. This ink is safe to use.

Critical Thinking Activity Answer Opinion or Fact Section 14.1 Assessment Critical Thinking Activity Answer Opinion or Fact This ink will not stain clothes. (fact) This ink is safe to use. (opinion)

Critical Thinking Activity Opinion or Fact Section 14.1 Assessment Critical Thinking Activity Opinion or Fact This is an IBM-compatible computer. This computer is as good as any IBM.

Critical Thinking Activity Answer Opinion or Fact Section 14.1 Assessment Critical Thinking Activity Answer Opinion or Fact This is an IBM-compatible computer. (fact) This computer is as good as any IBM. (opinion)

Critical Thinking Activity Opinion or Fact Section 14.1 Assessment Critical Thinking Activity Opinion or Fact This watch is waterproof. This watch is durable.

Critical Thinking Activity Answer Opinion or Fact Section 14.1 Assessment Critical Thinking Activity Answer Opinion or Fact This watch is waterproof. (fact) This watch is durable. (opinion)

Legal Skills in Action Written Guarantees Section 14.1 Assessment Legal Skills in Action Written Guarantees Turner is planning to sell his computer system to Lynne. It is only two years old and has a modem, color monitor, and CD-ROM drive. According to Turner, the system has never had a problem.

Legal Skills in Action Written Guarantees Section 14.1 Assessment Legal Skills in Action Written Guarantees Lynne is a little nervous about buying a used system and wants a written guarantee. In groups of two, help Turner write a warranty on his computer system.

Legal Skills in Action Answer Section 14.1 Assessment Legal Skills in Action Answer Written Guarantees Warranties will vary, but should recognize that Turner need only provide Lynne with a warranty of fitness for a particular purpose.

End of Section 14.1