business law chapter 21 notes

Topics: Implied warranty, Warranty, Product liability Pages: 7 (2384 words) Published: March 31, 2014
CHAPTER 21: WARRANTIES AND PRODUCT LIABILITY
A warranty is an assurance by one party of the existence of a fact on which the other party can rely. WARRANTIES: Several types of warranties: (1) warranties of title, (2) express warranties, (3) implied warranties. 1. WARRANTIES OF TITLE: 3 types of title warranties- good title, no liens, and no infringements-can automatically arise in sales and lease contracts. Sellers warrant they have good and valid title; if buyer learns they don’t the buyer can sue seller for breach of warranty. Liens-protects buyers who unknowingly purchase goods that are subject to a creditor’s security interest. Free of infringements-when seller is merchant, s/he automatically warrants that the goods delivered are free from any copyright, trademark, or patent claims of a third person. 2. EXPRESS WARRANTIES: arise when a seller/lessor indicates any of the following: Goods conform to any affirmation (declaration that something is true) or promise of fact that seller makes to the buyer about the goods. (i.e. statements such as “these drill bits will penetrate stainless steel-and without dulling.”) Goods conform to any description of them (i.e. a label that reads “crate contains one 150 horsepower diesel engine” or delivery of “camel’s hair coat”) Goods conform to any sample or model of the goods shown to buyer BASIS OF THE BARGAIN: A seller does not have to use formal words such as warrant or guarantee. It is only necessary that a reasonable buyer would regard the representation of fact as part of the basis of the bargain. STATEMENTS OF OPINION AND VALUE: only statements of fact create express warranties. If seller makes a statement that relates to the supposed value or worth of the goods, or makes a statement of opinion or recommendation about the goods, seller is not creating an express warranty. PUFFERY- is the expression of opinion by a seller that is not made as a representation of fact and creates no warranty. IF seller is an expert and gives an opinion as an expert to a layperson, then a warranty may be created. 3. IMPLIED WARRANTIES: One that the law derives by implication or inference because of the circumstances of a sale, rather than by the seller’s express promise. Necessary to show that an implied warranty existed and that the breach of the warranty proximately caused the damage sustained. IMPLIED WARRANTY OF MERCHANTABILITY: Every sale or lease of goods made by a merchant who deals in goods of the kind sold or leased automatically gives rise to an implied warranty of merchantability. MERCHANTABLE GOODS: goods that are merchantable are “reasonably fit for the ordinary purposes for which such goods are used.” Quality must be comparable to a level that will pass without objection in the market for goods of the same description. Goods must also be adequately packaged and labeled and they must conform to the promises or affirmations of fact made on the label. MERCHANTABLE FOOD: Merchantable food means food that is fit to eat. Courts assume consumers should reasonably expect on occasion to find substances that are natural of food. (cherry pits in cherry pie, a nutshell in a package of shelled nuts). IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE: arises when any seller knows the particular purpose for which a buyer will use the goods and knows that the buyer is relying on the skill and judgment of the seller to select suitable goods. PARTICULAR VS ORDINARY PUPOSE: Goods can be merchantable but unfit for a particular purpose. KNOWLEDGE AND RELIANCE REQUIREMENTS: seller is not required to have actual knowledge of the buyer’s particular purpose, so long as the seller has a reason to know the purpose. Buyer must have relied on the skill judgment of the seller in selecting or furnishing suitable goods. WARRANTIES IMPLIED FROM PRIOR DEALINGS OR TRADE CUSTOM: may arise as a result of course of dealing or usage of trade. In the absence of evidence to the contrary, when both parties to a sales...
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