Spring 2010 Business Law and the Legal Environment - Week 10

Spring 2010 Business Law and the Legal Environment - Week...

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Business Law and the Legal  Environment Week 10 Spring 2010
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Warranties A warranty is a contractual assurance that goods will meet certain standards. Express Warranties Implied Warranties Implied Warranty of Merchantability Implied Warranty of Fitness for a Particular Purpose
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Express Warranties An Express Warranty is a statement by the seller relating to the goods quality, capacity or other characteristic that caused the buyer to purchase the goods. Ex. “This exterior paint will not fade for 2 years;” “This cloth is all wool” Ex. “Toyota vehicles last forever”
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An Express Warranty is created in 3 ways: By affirmation of fact (representation) or promise Distinguish from the sellers Opinion and Puffery (Can the statement be proven true; Seller has greater experience; Defects are not obvious) Ex. 0 to 60 in 7 seconds; highest grade of commercial steel By a description of the goods Oral or written (labels, brochures, tags, etc.) By a sample or model
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Example Shandra, a rock singer, went to Stereo Shop to purchase recording equipment for her home studio. The sales clerk shows her a $10K unit that records, edits, and burns CDs. The clerk says that it is “a terrific unit,” and encourages Shandra to record a CD at the store, which she does and is pleased with the clarity. However, once the unit is set up at Shandra’s house, there is frequently static on the recording that requires Shandra to constantly rerecord. Did Stereo Shop breach an express warranty?
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Answer Yes. In allowing Shandra to try the unit at the store as a model, the clerk would have expected Shandra to rely on the demonstration. A seller who takes advantage of a model warrants that the merchandise sold will be just as good. However, the clerk’s statement would be mere puffery.
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Implied Warranty of Merchantability Unless excluded or modified, a warranty that the goods shall be merchantable (goods are fit for their normal purpose) is implied in a contract for their sale, if the seller is a merchant (one who routinely deals in these goods) with respect to goods of that kind. Ex. Manufacturer of scuba equipment ordered hoses from Supplier; Ladder
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Implied Warranty of Fitness for a Particular Purpose Where the seller at the time of contracting knows about a particular purpose for which the buyer wants the goods, and knows that the buyer is relying on the seller’s skill or judgment there is (unless excluded or modified) an implied warranty that the goods shall be fit for the purpose. Ex. Retailer orders from Manufacturer “300 mountain bikes, for racing.”
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Disclaiming and Limiting Warranties Oral Express Warranties can be disclaimed in a written disclaimer, but a Written Express Warranty in a sales contract cannot be contradicted by a disclaimer. Implied Warranty of Merchantability can be
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Spring 2010 Business Law and the Legal Environment - Week...

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