UCC Sales Contracts: Warranties

When you buy a good, the seller usually gives you warranties along with the good. In a sales contract, you'll typically see a specific section titled, "Representations and Warranties."

"Warranties" are, in essence, promises by the people who make or sell the goods that their goods are of a certain quality. If they break their promise, then you generally have some recourse against them—such as the ability to file a lawsuit and recover damages.

Article 2 of the Uniform Commercial Code (UCC) provides rules for contracts for the sale of goods. Within this UCC article, you can find rules for both express and implied warranties.

Types of Warranties Under UCC Article 2

The UCC provides three main types of warranties:

• Warranty of title. This is an important warranty that guarantees that the buyer will receive a clean title and transfer of the good.
• Express warranty. This type of warranty is one that the seller or manufacturer explicitly says. They'll either put a statement into the sales contract or give their verbal guarantee of their product's quality or performance.
• Implied warranty. This type of warranty is implied rather than explicitly stated. These warranties are guaranteed when you buy the product.

Let's look at these three kinds of warranties in more detail. You can also find more information on our warranty rights FAQ.

Warranty of Clear Title for Goods

A common warranty created in the sale of goods is one where the seller guarantees to the buyer that the goods being sold have clear title—also called a "clean title" or a "title free and clear." This type of warranty is particularly important because it relates to the underlying purpose of a business transaction: to sell a good.

Under the UCC, a "warranty of title" in a sales contract means:

• the title that's given to the buyer is good and its transfer rightful, and
• the goods are delivered free from any lien or security interest.

A lien (and security interest) is a legal claim of ownership over a good. A creditor generally puts a lien on a piece of property when the owner of that property owes them money—usually from a loan, unpaid taxes, or a court judgment. When a creditor puts a lien on a piece of property and the debtor (who's also the property owner) doesn't pay their debt, then the creditor can take possession of the property.

For example, suppose you buy a van for your housekeeping business. The sales contract says that the seller warrants a clear title on the van. Shortly after the purchase, you see that a lien was filed on the van in your county recorder's office last year before your purchase. The seller has breached their express warranty because they haven't actually transferred a clear title to you.

A sales contracts must contain this warranty unless the seller excludes or modifies it. A seller can only exclude or modify the warranty with specific language or by circumstances that makes it clear to the buyer that there's no claim of clear title.

UCC Express Warranties for Goods

Express warranties are affirmative statements by a seller to the buyer that relates to the goods being sold. The UCC describes a warranty as an "affirmation of fact or promise" about the goods that becomes "part of the bargain." According to the UCC, the seller doesn't need to use formal words like "warrant" or "guarantee" and they don't need to intend to make a warranty to create one. (U.C.C. § 2-313 (2023).)

The UCC gives two forms of express warranties that might be made by the seller:

• a description of the goods, and
• a sample or model.

If the seller gives a description of the goods or provides a sample or model to the seller that's meant to represent the goods being offered, then the goods must conform (match) the description, sample, or model. (U.C.C. § 2-313 (2023).)

While not part of the UCC, and not covered in this article, there are other laws that relate to express warranties. Perhaps the most important among these is the Magnuson-Moss Warranty Act, which is a federal law governing express warranties related to consumer products.

When Are Express Warranties Created?

An express warranty might be created when:

• a manufacturer sells to a retailer, and
• a retailer sells to a consumer.

For example, an electronics retailer might tell customers that they'll repair or replace any DVD player they sell if the player fails to work within three years of the sale, no questions asked. Or, an industrial machine manufacturer might tell an auto parts maker that the machines the manufacturer is selling will always be within certain tolerances.

As long as the buyers involved are relying on these types of statements—as long as the statements are part of the "basis of the bargain"—the statements qualify as express warranties under the UCC. These statements create legal obligations for the seller.

Where Are Express Warranties Found?

Express warranties can be oral as well as written. These warranties are usually found in or on:

• advertisements
• sales contracts
• certificates
• user manuals, and
• product tags and packaging.

For example, a car dealership might say in their advertisement that they offer free tire rotations and oil changes for any car you purchase from them for the life of the car. Or, a user manual might provide a two-year warranty on a printer that allows a buyer to send in their broken printer for a repair or replacement.

Excluding or Modifying Express Warranties

The seller or manufacturer can alter or disclaim an express warranty in whole or in part. The UCC says that the words or actions taken by the seller to create the warranty should be considered together with the words or actions taken to negate or limit the warranty. When considered together, you should conclude whatever's reasonable and consistent. (U.C.C. § 2-316 (2023).)

For example, suppose you're shopping for employee uniforms. You come across shirts that are advertised as medium blue on a website. But a note at the end of the product description says that the colors can range in their shades of blue due to different dye lots and no specific shade of blue is guaranteed for any shirt. So, even though the webpage lists the shirts as medium blue, the note in the product description modifies this express warranty. The modified warranty instead communicates that the shirt that you buy might differ in its shade of blue—a reasonable conclusion given the details provided.

UCC Implied Warranties for Goods

Apart from express warranties, the UCC has various rules regarding implied warranties. Basically, these are warranties that automatically exist when goods are being sold, without the need for any specific "affirmation."

Two particularly important implied warranties under the UCC are:

• the warranty of merchantability, and
• the warranty of fitness for a particular purpose.

Along with these two kinds of implied warranties, other implied warranties might come up from the "course of dealing" or "usage of trade." (U.C.C. § 2-314 (2023).)

Implied Warranty of Merchantability

There are an array of general standards under Article 2 for when goods are merchantable. Probably the most important of these standards is that the goods "are fit for the ordinary purposes" for which those types of goods are used. (U.C.C. § 2-314 (2023).) Consequently, the merchantability standard depends on the good sold.

At the very least, to be merchantable, the goods should:

• "pass without objection" under the standards of the relevant trade (for example, machine screws will meet or exceed the industry standard for such screws)
• be adequately contained, packaged, and labeled as required by the sales contract, and
• match the promises made on the container or label (if any).

An implied warranty of merchantability only applies to sellers who are merchants of those goods. The UCC defines a "merchant" as someone who regularly deals in their kind of goods or who's considered (either by themselves or by their employment) as someone with knowledge or skill in those goods. For instance, a vacuum salesperson would be a merchant in relation to vacuums because they regularly sell them.

Implied Warranty of Fitness for a Particular Purpose

This type of warranty is created when a seller has reason to know that:

• the buyer intends to use the goods being sold for a particular purpose, and
• the buyer is relying on the seller's skill or judgment when selecting which goods to buy for that purpose.

(U.C.C. § 2-315 (2023).)

When these two conditions are met, the seller will be bound by this warranty. Here are a few examples that help demonstrate how this warranty works:

Example one: Jorge asks an appliance dealer for a clothes dryer that can dry twenty pounds of wet clothes. The dealer recommends a specific model of dryer and on the basis of that recommendation, Jorge buys that model. If the dryer subsequently is unable to dry twenty pounds of wet clothes, then, even if it can handle smaller loads, Jorge likely has the basis for a warranty claim against the dealer.

Example two: Susan asks an outdoors outfitter for a parka that can keep her warm in weather below zero Fahrenheit. The outfitter assures Susan that a particular parka will keep her very warm well below zero Fahrenheit. Susan buys that parka on the strength of the outfitter's advice. If it turns out that the parka can't keep a person warm when the temperature is below freezing, much less below zero Fahrenheit, Susan probably has the basis for a warranty claim against the outfitter.

Example three: Charlotte asks a paint store manager for the best wood stain to use on the new tables and chairs she has made for herself, and the manager recommends a particular product. If the product is actually dark paint and not stain, and ruins Charlotte's furniture, the warranty created by the manager has likely been breached.

Having looked at examples where implied warranties might be breached, it's important to understand that implied warranties don't cover every possible failure of goods or products.

For example, implied warranties generally don't cover such things as:

• abuse
• misuse
• ordinary wear and tear
• improper maintenance, and
• failure to follow instructions.

Generally, the seller isn't responsible for the product's quality and performance that result from these uses.

Excluding or Modifying Implied Warranties

Under the UCC, just as with express warranties, it's possible for sellers to exclude or modify implied warranties. To exclude or modify an implied warranty, the seller generally must provide the exclusion or modification:

• in a record (which generally means in a printed document, such as the sales contract), and
• in a manner that makes the exclusion or modification conspicuous (obvious).

Implied warranties of merchantability. If you're limiting, modifying, or excluding an implied warranty of merchantability, you must mention the word "merchantability."

Implied warranties of fitness for a particular purpose. You can exclude an implied warranty of fitness by saying: "There are no warranties which extend beyond the description on the face hereof."

Any implied warranties. You can exclude any implied warranties by using language like "as is," "with faults," or other similar wording that makes plain that there's no implied warranty provided with the product. You can also exclude or modify an implied warranty by course of dealing, course of performance, or usage of trade.

It's important to note another way in which an implied warranty can be excluded. If the buyer was given the chance to inspect the goods as much as they wanted or they refused to inspect the goods, then there's no implied warranty as to any defect that should've been revealed during an examination of those goods.

For example, suppose Arisu wants to buy a desk for his new employee to use at the office. He goes to a furniture store where he finds the desk he wants. Before buying the desk, the manager allows Arisu to take all the time he needs to inspect the desk to make sure he's happy with it. Arisu takes his time examining the desk and proceeds with the purchase. A day later, he realizes that one of the three drawers doesn't open. Here, there's no implied warranty—or subsequent breach—because Arisu had ample opportunity to discover the broken drawer during his inspection.

(U.C.C. § 2-316 (2023).)

UCC Breach of Warranty for Goods

A breach of warranty for goods occurs when a warranty is created and then violated. We've already discussed how the different warranties under the UCC are created. Put simply, when a product doesn't align with a particular warranty, then the seller has breached the warranty.

Generally, buyers have to tell the seller (or manufacturer) that the warranty has been breached, and do it within a certain period of time.

Notice. If the seller breaches, the buyer must notify the seller of the breach within a reasonable time after they discovered the breach or should've discovered the breach. (U.C.C. § 2-607 (2023).)

Statute of limitations. The UCC says that any action against a breach of warranty has to be started within four years of the breach, even if the buyer didn't know about the breach until much later. This rule limiting the time to make a claim is known as a "statute of limitations." The breach is said to happen (and the clock starts ticking) when the goods are delivered (or tendered). So, essentially, buyers have four years from the time the goods are delivered to discover relevant defects in the goods sold and to take action against the seller. The parties can limit the statute of limitations to no less than one year in the sales contract. (U.C.C. § 2-725 (2023).)

Depending on the circumstances, the buyer has various available remedies. If there's a breach, the buyer can:

• cancel the contract and buy substitute goods, recovering from the seller the difference between the cost of the replacement goods and the contract price
• cancel the contract, recovering from the seller the difference between the market price of the goods at the time the buyer learned of the breach and the contract price; and
• specific performance (where the seller must provide goods that meet all warranties).

You can read more about a buyer's right to damages in our article on the buyer's performance under the UCC.

Additional UCC Guidance

If you're dealing with a merchant, then you can usually count on the implied warranty of merchantability applying. If you took the seller's advice when buying a particular good, you can usually expect the implied warranty of fitness for a particular purpose to apply. For express warranties, pay attention to promises or guarantees that are made in contracts, advertisements, and documents that come with the product (as well as the verbal promises the seller makes).

People and businesses expect the product they buy to align with the product description and to perform the way they expect it to. As a result, warranties are often overlooked. Usually products turn out more or less how they're supposed to. But in some cases, they don't. In those situations, make sure you know which warranties apply to your case and what your rights are.

While the UCC serves as a good guide, you should check your state law. The UCC itself isn't law—states adopt the code and sometimes make changes to it. If you need legal guidance, talk to a business or product liability lawyer. They can look at the facts of your case to determine whether you have a valid breach of warranty case.