Whether You Know it or Not - You Gave a Warranty
You may not know it, but when you sell a product you automatically provide the buyer
with a very extensive warranty. Article Two of the Uniform Commercial Code provides
buyers with implied warranties of merchantability, fitness, and noninfringement. Few
sellers are even aware of the existence of these warranties, yet they expose the
seller to liability far in excess of the products price.
Implied Warranty of Merchantability
The Implied Warranty of Merchantability means your product must be "fit for the
ordinary purposes for which such goods are used". Because the standard for
"merchantability" has never been defined, this warranty is very ambiguous. Over the
years, merchantability has been defined on a case-by-case basis.
When you sell a product, a warranty that the product is "merchantable" is implied,
unless you specifically exclude that warranty. The Warranty of Merchantability can
be excluded only with "conspicuous" text. The exclusion text must use a different
size or color of text than the rest of the contract. The exclusion language must
explicitly mention "merchantability".
Implied Warranty of Fitness
The Implied Warranty of Fitness means your product must be "fit for a particular
purpose". Will The court interpret the Warranty to mean fit only for the purpose for
which the product was designed? Do you know every purpose and situation for which your
product may be used?
When you sell a product, the ambiguous "warranty of fitness for a particular purpose"
is implied. Specifically exclude the implied warranty of fitness for a particular
purpose, or clearly document that the product is sold "as-is".
Implied Warranty of Noninfringement
The Implied Warranty of Noninfringement means that your product does not infringe on
a third parties intellectual property rights. Can you guarantee that every aspect of
your product does not infringe on some patent, trademark, or copyright?
If your product does infringe on a third parties property rights, you will be liable
to reimburse the buyer for "consequential" damages, (costs of the lawsuit resulting
from the infringement), and "incidental" damages (costs to replace the product).
when you sell a product, a Warranty of Noninfringement is implied. Specifically exclude
the implied warranty of noninfringement. Clearly document that "In no event shall you
be liable for incidental, or consequential damages arising out of the use of the product.
Offer a Limited Warranty
When you sell a product, you should exclude all of the Uniform Commercial Code's implied
warranties. Instead, provide your own limited warranty. Warrent only that the product
will, for a limited period of time, be free from defects in materials and craftsmanship
when used for the purpose for which it was designed. The warranty should limit the
buyer's remedy to repair of the defect in the product, replacement of the product, or
refund of the purchase price.
Any statement that you publish in your advertising and marketing creates an "express"
warranty. Be careful about what your advertising and marketing says. Avoid making
express warranties that you don't mean to make. If your products are being sold through
distributors, make sure that your distributors are aware of the limited warranty and
that they avoid making statements that create express warranties.
If you sell products online, make sure that customers are required to review the
warranty before completing the transaction. They should have to read the limited
warranty and then click on an [I Accept] button prior to completing the transaction.
Make sure they have the ability to print the limited warranty.
Disclaimer: This information is provided with the understanding that the author is not
a lawyer. If legal advice is required, the services of a competent professional should
be sought. By using this material, the user assumes complete responsibility for any and
all damages resulting from that use.