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Chapter 25

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Chapter 25
Warranties
Copyright©2017McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Overview
LO25-1: What are express warranties?LO25-2: What is the implied warranty of title?LO25-3: What is the implied warranty of merchantability?LO25-4: What is the implied warranty of fitness for a particular purpose?LO25-5: Do warranties apply to third parties?LO25-6: Can warranties be disclaimed?
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Chapter 25 Hypothetical Case 1
Last week, Richard Stamos purchased a used 2007 Honda Civic from his neighbor, Adam Lourdes. Yesterday, Stamos experienced mechanical difficulties with his new purchase, and his mechanic diagnosed an automatic transmission problem with a repair estimate of $2,150. Lourdes has refused to rescind the contract and has said he will not pay for the transmission repair.Does the Uniform Commercial Code (UCC) or the common law provide any remedies, warranty or otherwise, for Richard Stamos in a lawsuit against Adam Lourdes for the failed transmission?
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Chapter 25 Hypothetical Case 2
Recall from the Chapter 16 Hypothetical Case that Imogen Ledbetter was seriously injured in an automobile accident when the steering wheel of a new car she had just purchased detached from the steering column (the steering wheel literally came off in her hands), causing Ledbetter to crash into a culvert.In terms of drafting the personal injury complaint against Fjord Motors, Inc. (the manufacturer of the sedan) and Bjorn Fjord Motors, Inc. (the dealership), what theories of warranty liability should Ledbetter's attorney include? Are there any non-warranty (i.e., non-Uniform Commercial Code) theories of liability that might be applicable in this case?
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What Is a Warranty?
Definition: Assurance by one party that the other party can rely on its representations of fact
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Express Warranty VersusImplied Warranty
Express warranty: Explicitly stated in contractImplied warranty: Automatically (by operation of law) applied to contract
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Express Warranties
Anydescription of the good's physical nature or its use, either in general or specific, that becomes part of thecontractMay be found in advertisements or brochuresMay be material term of contractSalesperson's oral promise concerning good can give rise to express warrantyBuyer's reliance on seller's representations generally means those representations become express warranties, and part of contract
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Sales Puffing
Definition: Salesperson's mere statement of opinion, rather than representation of factsPuffing generally does not create express warranty liability
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Implied Warranty of Title
Implied warranty of title assumes:Seller has good and valid title to goodsSeller has right to transfer title free and clear of liens, judgments, or infringements of intellectual property rights of which buyer has no knowledge
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Implied Warranty of Merchantability
Implied warranty of merchantability: Warranty based on reasonable expectation of product performanceGood purchased must:Pass without objection in trade/market for similar goodsBe of fair quality (within the product's description)Be fit for ordinary useHave even kind, quality, and quantityBe adequately packaged and labeledConform to promises made on package/product label
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Implied Warranty of Fitness for Particular Purpose
Implied warranty of fitness for particular purpose: Warranty that arises when seller knows purpose for which buyer purchasing goods, and buyer relies on seller's judgment to recommend/select certain productSeller does not have to be merchant to make this warranty
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Implied Warranty of Trade Usage
Implied warranty of trade usageDefinition: An assurance created through well-accepted course of dealing or trade usage
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Third Party Beneficiaries of Warranties
Seller's warranties may extend to:Buyer's household members and guestsAny reasonable and foreseeable userAnyone injured by good
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Warranty Disclaimers and Waivers
Methods of disclaiming/waiving warranties:Seller does not make express warrantiesSeller disclaims implied warranties in clear, unambiguous, conspicuous languageBuyer fails/refuses to examine goodsBuyer fails to file suit within applicable statute of limitations period
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Magnuson-Moss Warranty Act
Provides that if seller decides to issue written warranty for consumer good, seller must specify whether warranty is"full"or"limited"
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Chapter 25 Hypothetical Case 3
Aristotle Mythos is having a mid-life crisis at 50. In an attempt to conquer his depression and prove that he is equivalent to a 20-year-old (at least in spirit), Mythos plans to climb Mount Zeus, the highest peak in his ancestral homeland of Greconia.In preparation for his climb, Mythos patronizes a local outdoors shop, Athena's Garden, and asks to speak with a trained sales associate. Mythos specifies that he will be climbing Mount Zeus, and that he will need a tent and sleeping bag that can survive the wind and elements for two nights during his ascent and descent. The associate selects a tent and sleeping bag from a wide variety of possibilities, and Mythos leaves the store a happy camper.Mythos begins his climb the following day and successfully reaches his checkpoint, halfway to Zeus'speak, before nightfall. He prepares his campsite and looks forward to some much-needed rest. Unfortunately, he has a fitful night, shivering in his sleeping bag in a partially collapsed tent, with the wind and the cold getting the best of Mythos and his camping gear.
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Chapter 25 Hypothetical Case 3 (cont'd)
The following morning, Mythos awakens to see that the toes on both of his feet have turned a sickening shade of blue, and he realizes with great disappointment that he will not be able to fulfill his dream of climbing Mount Zeus. Upon closer examination of his tent and sleeping bag, he sees that both are labeled"The Young Mythologist"—gear clearly intended for children's backyard camping.As a result of his misfortune, Mythos must have four toes (two toes on each foot) amputated, and he incurs medical expenses of $58,000 for treatment and rehabilitation. Mythos'sdoctor has rated him with a 20% permanent partial disability as a result of his toe amputations.Is Athena's Garden legally responsible for Mythos'smedical expenses and partial disability? If so, on what theory?
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Chapter 25 Hypothetical Case 4
Sanford Ngobo decided to purchase a new car from Fortuna Motors. Ngobo enjoys closed-track racing on the weekends, so he was seeking a car that was better and faster than all the rest.Before making his purchase, Ngobo browsed the cars for quite some time—but what really interested him were the recommendations of the sales clerk he worked with, Sophia Farrell. Farrell told Ngobo that the Satyr 1000, a new model the dealership had just gotten in, would guarantee Ngobo's dominance in all the races in which he competed, as it had an extraordinarily powerful engine. Despite the fact that the Satyr was at least 30 percent more expensive than the other cars he'd considered, he decided that it was what he was looking for.A month later (and after putting 2,000 miles on his new car), Ngobo took his new Satyr to the track—and came in dead last. Furious, he went back to Fortuna, and Farrell, and demanded his money back.Should Fortuna take the Satyr back because it didn't live up to Farrell's promises? Is she guilty of puffing?
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Chapter 25