In California, as in all other states, the legal rules applicable to contracts are typically found in case law, not statutes. Not so with contracts for the sale of goods. They are governed by the Uniform Commercial Code, a model statute adopted by all 50 states, with little or no changes from state to state.
California’s Commercial Code governs all aspects of the law relating to the purchase and sale of “goods.” It does not apply to contracts for the purchase and sale of real property, or contracts for the provision of services, or contracts for the purchase and sale of securities or “things in action.” “Goods” are defined in relevant part in the Commercial Code as “all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities . . . and things in action.” Com. Code §2105(1).
Warranty of Title
Contracts for the purchase and sale of goods usually contain warranties concerning the goods sold. One such warranty is a warranty of title. This warranty is generally implied in all contracts for the sale of goods. It is a warranty that the seller owns the goods sold, i.e., has title to the goods, and that the goods are being transferred to the buyer free from any security interest or any other form of lien or encumbrance in favor of a third party. This warranty may be excluded or modified by specific language in the contract to that effect, or “by circumstances which give the buyer reason to know that the person selling does not claim title in himself or that he is purporting to sell only such right or title as he or a third person may have.” Com. Code §2312(2).
Some contracts for the sale of goods provide the buyer with an express warranty. An express warranty is often provided in the form of an “affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain.” Com. Code §2313(1)(a). The express warranty in such case is a warranty that “the good shall conform to the affirmation or promise.”
However, in the absence of any such affirmation or promise, the contract will contain an express warranty if it contains “a description of the goods which is made part of the basis of the bargain [between the buyer and seller.” Com. Code §2313(1)(b). In that event, there is an express warranty that the goods shall conform to the description.
A third way in which an express warranty may be created is if the seller provides the buyer with a “sample or model which is made part of the basis of the bargain [between the buyer and seller].” Com. Code §In that event, and express warranties created that the good shall conform to the sample model.” Com. Code §2313(1)(c).
No formal words, such as “warranty” or guarantee” are necessary to create an express warranty. Conversely, an affirmation as to the value of the goods sold is considered simply an opinion and does not rise to the level of an express warranty.
Implied Warranty of Merchantability
If a contract for the sale of goods does not contain an express warranty, it may nevertheless contain an implied warranty. One such implied warranty is the warranty of title discussed above. Another is the implied warranty of merchantability. This warranty applies only to contracts as to which the seller is a “merchant.” A “merchant” is defined as one “who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction . . . .” Com. Code §2104(1).
The implied warranty of merchantability is a warranty that the goods “pass without objection in the trade under the contract description;” if the goods are fungible, “are of average quality within the description;” “are fit for the ordinary purposes for which such goods are used;” are “of even kind, quality and quantity within each unit and among all units involved;” “are adequately contained, packaged, and labeled as the agreement may require;” and “conform to the promises or affirmations of fact made on the container or label, if any.” Com. Code §2314 (2).
However, the implied warranty of merchantability may be excluded by language making it clear that it is excluded and, generally speaking, by specific reference to the word “merchantability.” The exclusion of this implied warranty in writing must also be conspicuous and not hidden in small print. The requirement that the word “merchantability” be specifically referenced does not apply if words such as “with all faults” or “as is” or other similar language is used which makes it clear to the buyer that there are no implied warranties. Com. Code §2316(3)(a).
When a buyer examines the goods or a model or sample of the goods or declines the opportunity to do so prior to the sale, there is no warranty of merchantability if such an examination would have revealed that the goods were not merchantable.
Implied Warranty of Fitness for a Particular Purpose.
Yet another implied warranty is the implied warranty of fitness for a particular purpose. This is a warranty that the goods are fit for the purpose for which the buyer is purchasing them. This warranty applies only if “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.” Com. Code §2315.
Like the implied warranty of merchantability, however, the implied warranty of fitness for a particular purpose may be excluded. To be excluded, this warranty must be in writing and must be conspicuous. As with the warranty of merchantability, it may also be excluded by words such as “with all faults” or “as is,” or such other language making it clear to the buyer that there are no implied warranties. Com. Code §2316(3)(a).
For further information, feel free to contact The Law Office of William J. Tucker.