Disclaimers

Warranty is contract, but it is also more and that makes analysis of warranty issues somewhat complicated. A warranty may be an express or implied agreement regarding quality, but there is a warranty action which provides a remedy for persons injured by a defective product. Here we focus our attention away from the personal injury aspect of warranty, and discuss primarily the contractual right to insist contractually on a product which meets specifications.

A seller can disclaim warranties, but the disclaimer process is regulated by the UCC, by certain federal laws, and by state consumer protection laws. Generally, it is much more difficult to disclaim warranties in consumer transactions. Federal safety specifications, state consumer protection laws, and federal warranty laws may constrain the ability of sellers to disclaim a warranty. Lets look first at the Uniform Commercial Code provisions on warranty disclaimer. Often, a transaction is complicated by a series of competing statements in the contract, at the sales presentation, and in sales brochures and advertisements. Perhaps the sales person makes glowing oral representations about the quality and performance of the product; perhaps the contract documents prohibit reliance on these representations. Section 2-316 of the UCC acknowledges this problem as follows:

(1) Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit warranty shall be construed wherever reasonable as consistent with each other; but subject to the provisions of this article on parol or extrinsic evidence negation or limitation is inoperative to the extent that such construction is unreasonable.

Where differing statements seem inconsistent, a court should attempt to harmonize the statements in a way which makes the warranty statements reasonable. If the salesperson has promised performance, the court should attempt to give meaning to those statements, if possible. This, however is subject to "the provisions of this Article on parol or extrinsic evidence. The doctrine of parol evidence excludes evidence of oral representations under some circumstances when those representations are inconsistent with the written contract. It seeks to prevent a party from claiming that the contract signed is not the real agreement, that there is more outside the document, when the document seems to reflect the whole agreement.

Section 2-317 deals with another kind of inconsistency, where different statements or representations make differing promises:

Warranties whether express or implied shall be construed as consistent with each other and as cumulative, but if such construction is unreasonable the intention of the parties shall determine which warranty is dominant. In ascertaining that intention the following rules apply:

(a) Exact or technical specifications displace an inconsistent sample or model or general language of description.
(b) A sample from an existing bulk displaces inconsistent general language of description.
(c) Express warranties displace inconsistent implied warranties other than an implied warranty of fitness for a particular purpose.

It takes a fair amount of experience and care to sort through these principles, to determine whether a document disclaims oral warranties, to harmonize different statements and contract language. And that's what good lawyers are for.

Conspicuous Disclaimer:

The UCC forces sellers to call attention to warranty disclaimers. The code says that written disclaimers of the warranty of merchantability "must be conspicuous." Under the code, to disclaim the warranty of merchantability, the contract must meet one of the following requirements:

it must mention merchantability;
use language such as "as is," "with all faults" or other language which in common understanding calls the buyer's attention to the exclusion of warranties and makes plain that there is no implied warranty; or
an implied warranty can also be excluded or modified by course of dealing or course of performance or usage of trade.

The code also penalizes a buyer for failing to find apparent defects:

(b) when the buyer before entering into the contract has examined the goods or the sample or model as fully as desired or has refused to examine the goods there is no implied warranty with regard to defects which an examination ought in the circumstances to have revealed;,/

One way a seller limits responsibility for the quality of a product, then, is to disclaim express or implied warranties in written conspicuous language. But there is a more subtle way of effecting a disclaimer: that is to limit the remedy available for breach. The seller says, look, I don't make any promises about the product, and not only that, if a court should find that I broke a promise, then your damages will be limited. Perhaps the seller might seek to limit the remedy to replacement of defective parts, or refund of the purchase price. Commonly, a contract will disclaim consequential damages. The computer manufacture doesn't want to be liable for your lost profits when you lose your data because the hard disc failed.

The Code says:

(4) Remedies for breach of warranty can be limited in accordance with the provisions of this article on liquidation or limitation of damages and on contractual modification of remedy (sections 2-718 and 2-719).

More on remedies later.

Minnesota Limitation: Minnesota statutes section 325G.18 reaffirms the UCC's implied warranties, and prevents disclaimer except as follows:

No consumer sale on an "as is" or "with all faults" basis shall be effective to disclaim the implied warranty of merchantability, or, where applicable, the implied warranty of fitness, unless a conspicuous writing clearly informs the buyer, prior to the sale, in simple and concise language each of the following: (1) The goods are being sold on an "as is" or "with all faults" basis; and (2) The entire risk as to the quality and performance of the goods is with the buyer. (emphasis added).

Who Benefits from the warranty: Another way of limiting the impact of the warranty would be to limit its benefits to the buyer, and only the buyer. A pop bottle explodes and injures a guest at the home of the person who bought the bottle. What about arguing that the injured party may not recover, because she didn't buy the bottle, and therefore has no contract with the seller? We said we were going to stay away from personal injury issues, but the Minnesota version of the code contains this provision:

A seller's warranty whether express or implied extends to any person who may reasonably be expected to use, consume or be affected by the goods and who is injured by breach of the warranty. A seller may not exclude or limit the operation of this section.

There's a whole lot more to be said about warranty disclaimers.