Draw the Law, People Issues XII: Customers and Warranties, Part II

Last week, I discussed express warranties. Today’s discussion follows that up with implied warranties. To bring some perspective to this topic I am focused on warranties as they tend to come up in the context of selling goods and breach of warranty claims when the product does not live up to the customer's expectations.

What are Implied Warranties?

Implied warranties are ones that are not spoken or written. In fact, they are simply imputed as a warranty from the seller to the buyer because it is based on reasonable customer expectations.

As for implied warranties, there are two that a seller of goods should always been keenly aware about. They are the implied warranty of merchantability and the implied warranty of fitness for a particular purpose.

Merchantability

For goods to be merchantable they must meet at least this level of standard:

    (a)   Pass without objection in the trade under the contract description; and

(b)   In the case of fungible goods, are of fair average quality within the description; and

(c)   Are fit for the ordinary purposes for which such goods are used; and

(d)   Run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved; and

(e)   Are adequately contained, packaged, and labeled as the agreement may require; and

(f)   Conform to the promises or affirmations of fact made on the container or label if any.

See HRS §490:2-314

Basically, a merchant warrants that the goods sold by them are fit to be sold for what they are going to used for. Another key thing about merchantability is that you (as the seller) have to be a merchant.  I realize that it may seem obvious, but people get caught up in the legalese.  So if you like to use Craigslist or Ebay to sell your stuff (not as a merchant) there is no warranty of merchantability. So how does this work?

Example 1: This is the most common example, Uncle buys a used car from Duke. Duke is a merchant. As soon as Uncle drives the car off the lot the engine falls out. Duke has breached the implied warranty of merchantability, as the car clearly was not fit for the ordinary purpose of a car, which is driving.

Example 2: If someone buys pork or chicken from the local neighborhood butcher, that customer does not cook the meat item thoroughly and gets sick. So long as the butcher did not do anything else to the product, and he sells the meat as it is supposed to be, he has NOT breached his warranty of merchantability. He sold the meat in the common condition that requires thorough cooking my the customer.

Fitness for a Particular Purpose

Fitness for a particular purpose on the other hand IS applied to both merchants and non-merchants. This is how it is defined:

Where the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller's skill or judgment to select or furnish suitable goods, there is unless excluded or modified under the next section an implied warranty that the goods shall be fit for such purpose.

See HRS  §490:2-315

What does that mean? Basically, something you sell ought to do what is supposed to for a particular reason. The best way to think about this is how the problem usually arises. This warranty is problematic for a seller is when the customer or person asks, “Can item X do this?” or “Or I am looking for a particular widget that does A, B, and C things, can you recommend one?” The salesperson then recommends something to the customer, they buy it, and then it does not do as expected to what was warranted. I’ll use a ridiculous example first, and then show how it becomes nuanced with a second one.

First example: A customer comes in to a toilet store. He asks, “Do you have a bidet that plays techno music when I turn it on?” The store clerk says, “Sure. This is the model you want,” giving the customer a bidet that does not in fact play techno music, but classical thinking that the customer is crazy to want a techno-playing bidet. The problem comes when the customer installs the product, uses it, and discovers that it does not do the particular purpose he asked about.

Second example: A customer comes into a shoe store. She states to the sales clerk, “I do a lot of walking and hiking. I’m thinking of walking to Manoa Falls for a hike this weekend. I need hiking boots.” The clerk responds by presenting a pair of shoes he thinks are perfectly suited for hiking, but are made for walking. He is warranting the fact that the shoes he selected would meet her purposes. The problem comes when she attempts to hike with those shoes, then slips and falls. She would claim he warranted that they would be good enough for hiking. Then the legal fight would ensue, and now you can see the problem of implicitly warranting that you did not intend.

Breach of Warranty and Other Claims

In general, when your products fail to live up to expectations and your salespeople have overstated or overpromised what can be delivered you will probably see a breach of warranty claim. In addition, depending on their injury your now upset customer will likely also claim negligence, misrepresentation, and strict liability. The way to deal with the problem of overhyping is to train sales force to know what they are selling and to watch how they phrase things. Finally, you want to do internal testing and research to make sure your product does what supposed to do.

Next week, I will be discussing the Magnuson-Moss Act, which is a federal law covering written warranties for consumer goods and the difference between full and limited warranties! Also don’t forget to “Subscribe” to this blawg!

*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.  No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.  Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.