A warranty is a contractual term that relates to the character, quality or condition of goods in a sales transaction. A warranty may be an “express” warranty, arising from the parties’ negotiations, or an “implied” warranty, arising automatically under the law. The purpose of the laws governing warranties is to determine and protect what it is that the seller has in essence agreed to sell to the buyer. Where a seller breaches a warranty to a buyer, the buyer has several available options to protect their business.
The business litigation attorneys of Brown & Charbonneau, LLP can help. We have experience going to trial on claims involving all forms of warranties and have litigated the nuances and potential pitfalls for the inexperienced.
What is an Express Warranty?
An express warranty arises from the parties’ negotiations in a sales transaction. Express warranties are often included in the written terms of a contract. An “express” warranty by a seller is created by:
- Any statement of fact or promise relating to the goods sold which becomes part of the basis of the bargain between the parties, creating a warranty that the goods will conform to the statement or promise.
- Any description of the goods sold which becomes part of the basis of the bargain between the parties, creating a warranty that the goods will conform to the description.
- Any sample or model, which becomes part of the basis of the bargain between the parties, creating a warranty that the goods will conform to the sample or model.
An express warranty may be created even if the seller does not use formal words such as “warranty” or “guarantee,” and even if the seller does not have a specific intention to make a warranty. However, an express warranty is not created merely because the seller makes a statement as to the value of the goods, or as to seller’s opinion of the goods. Generally, statements made by a seller during the course of contract negotiations are treated as statements of fact, unless it can be shown that the buyer could only have reasonably considered the statement to be an opinion.
What is an Implied Warranty?
An “implied” warranty arises automatically under the law. There are 2 primary types of implied warranties in sales transactions: (1) the implied warranty of merchantability, and (2) the implied warranty of fitness for a particular purpose.
Unless excluded or modified, there is warranty of merchantability implied in any sale, by a seller who is a merchant, with respect to the kind of goods sold. A “merchant” is a person who deals in the kind of goods sold, or by his occupation holds himself out as having knowledge or particular skill with respect to the kind of goods sold. Under the implied warranty of merchantability, the seller warrants a minimum (reasonable) level of quality in the goods sold.
Where a seller has reason to know that the buyer requires the goods to be used for a particular purpose, and that the buyer is relying on the seller’s skill or judgment to select or furnish suitable goods, there is an implied warranty by the seller that the goods will be reasonably fit for such purpose, unless the warranty is excluded or modified. A “particular purpose” is a specific use by the buyer which is peculiar to the nature of its business.
Breach of Express and Implied Warranty
Where a seller breaches an express or implied warranty to a buyer, the buyer has several options, including:
- If a buyer rightfully rejects nonconforming goods (or revokes acceptance of them), the buyer may cancel the contract as to the goods involved, or where the nonconformity impairs the value of the whole contract, the buyer may cancel the whole contract. The buyer may also “cover” by purchasing substitute goods, and recover the difference between the contract price and market price for the substitute goods.
- If a buyer accepts nonconforming goods, the buyer can recover monetary compensation for breach of warranty called damages. The buyer must however give notice of the breach of warranty within a reasonable time. The general measure of damages is the difference between the value of the goods accepted, and the value they would have had if they had been as warranted.
- If the seller fails to deliver the goods, the buyer has the same rights available as in the case of a rejection, or instead, the buyer may seek to recover the goods and any incidental losses.
Getting Legal Help
Brown & Charbonneau, LLP represents individuals as well as large and small companies in cases involving all forms of breach of warranty claims. If you are involved in a warranty dispute, or would like to learn about your rights and how to protect your business, we can provide you with the information you need. Call today at (714) 505-3000 to schedule a consultation and learn more about how we can help you.