Whether You Know it or Not You Gave a Warranty

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Whether You Know it or Not You Gave a Warranty

Copyright(C)2003 Stephen Bucaro

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.

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