Contact: Ryan Hardy; Spencer Fane Britt & Browne LLP (Missouri, USA)
If you only read one series in the Manufacturer’s Corner, I hope it’s this one. In this series, we will discuss the implied warranties that come with your product unless you disclaim them. Without a working knowledge of these warranties, you may be breaching contract terms you didn’t know existed. And even worse, you are inviting a court to second-guess your determinations of what your industry and your product require. Please follow us carefully through this series.
The Uniform Commercial Code sets out several implied warranties that may apply to your sale of goods. This post will address the one that is most frequently litigated: the implied warranty of merchantability.
You’re a manufacturer, and you routinely deal in the goods you sell. In the language of the UCC, you are a “merchant” with respect to those goods. Your status as a merchant means that when you sell your goods, they carry with them an implied warranty of merchantability.
The warranty of merchantability expressly embraces a number of qualities, but the list set out in the UCC is not exclusive. Typically, lawyers tend to focus on only two: that the goods would pass without objection in the trade under the contract description, and that the goods are fit for the ordinary purpose for which they are used. The others are set out in a footnote, but just because they aren’t in the body of this post doesn’t mean they aren’t important.[1]
On its face, the warranty is not objectionable – of course your product is fit for its ordinary use. But it may expose you to liability you do not intend to assume. For instance, courts sometimes hold that to be fit for their ordinary uses, goods must be reasonably safe when put to those uses. If you manufacture goods that carry an inherent safety risk (e.g. scissors, fireworks, etc.), the implied warranty of merchantability raises the possibility that a court will determine whether or not your product is “reasonably” safe, and the court’s determination may well not be the same as yours. Generalizing from that example, the implied warranty of merchantability places you at the mercy of a court’s determination of what will “pass in the trade” or whether your product is “fit for its intended purpose.”
We will discuss the other implied warranties and how to disclaim them in future posts. But suffice it to say for now that disclaiming the implied warranty of merchantability is something that you want to do and, in fact, many manufacturers do so. This is not to say, of course, that you shouldn’t warrant your product. But you can limit the need to investigate the details of your industry or your product by offering limited warranties against, for example, defects in material or workmanship. Doing so is wise, because you simply cannot count on a court to fully understand your industry or your product.
[1] If the goods are fungible, they must be of fair average quality within the contract description. The goods must run within the variations permitted by the agreement. The goods must be adequately packaged and conform to any promises or affirmation of fact on the label.
