A1 Business and Technical College Business Law Discussion

Review the Case Opener on p.84 (Wrap Up on p. 97) and discuss whether you agree with the court’s decision.  Be sure to consider the following questions:

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Chapter 25
Warranties
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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?
25-2
What Is a Warranty?
• Definition: Assurance by one party that
the other party can rely on its
representations of fact
25-3
1
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Express Warranty Versus
Implied Warranty
• Express warranty: Explicitly stated in
contract
• Implied warranty: Automatically (by
operation of law) applied to contract
25-4
Express Warranties
• Any description of the good’s physical nature or its use,
either in general or specific, that becomes part of the
contract
• May be found in advertisements or brochures
• May be material term of contract
• Salesperson’s oral promise concerning good can give
rise to express warranty
• Buyer’s reliance on seller’s representations generally
means those representations become express
warranties, and part of contract
25-5
Sales Puffing
• Definition: Salesperson’s mere statement
of opinion, rather than representation of
facts
• Puffing generally does not create express
warranty liability
25-6
2
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Implied Warranty of Title
• Implied warranty of title assumes:
• Seller has good and valid title to goods
• Seller has right to transfer title free and
clear of liens, judgments, or infringements
of intellectual property rights of which
buyer has no knowledge
25-7
Implied Warranty of
Merchantability
• Implied warranty of merchantability: Warranty based on
reasonable expectation of product performance
• Good purchased must:
•
•
•
•
•
•
Pass without objection in trade/market for similar goods
Be of fair quality (within the product’s description)
Be fit for ordinary use
Have even kind, quality, and quantity
Be adequately packaged and labeled
Conform to promises made on package/product label
25-8
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 product
• Seller does not have to be merchant to make this
warranty
25-9
3
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Implied Warranty of Trade Usage
• Implied warranty of trade usage
• Definition: An assurance created through
well-accepted course of dealing or trade
usage
25-10
Third Party Beneficiaries of
Warranties
• Seller’s warranties may extend to:
• Buyer’s household members and guests
• Any reasonable and foreseeable user
• Anyone injured by good
25-11
Warranty Disclaimers and Waivers
• Methods of disclaiming/waiving
warranties:
• Seller does not make express warranties
• Seller disclaims implied warranties in clear,
unambiguous, conspicuous language
• Buyer fails/refuses to examine goods
• Buyer fails to file suit within applicable
statute of limitations period
25-12
4
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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”
25-13
5