Understanding Breach of Warranty in Product and Contract Law

Key Takeaways

• A breach of warranty occurs when a product or service fails to meet promised standards under express or implied terms.
• Express warranties are explicitly stated, while implied warranties are legally assumed based on the nature of the transaction.
• Common defenses against breach of warranty claims include disclaimers, failure to notify the seller, or misuse of the product.
• Damages may include repair, replacement, or monetary compensation, depending on the case and type of warranty breached.
• Distinctions exist between breach of warranty and breach of contract, each with different legal implications and remedies.
• Statutes like the Uniform Commercial Code (UCC) and Magnuson-Moss Warranty Act guide warranty enforcement in the U.S.
• Breach of warranty claims may also arise in real estate, services, and business-to-business contracts, not just consumer goods.

Breach of Warranty

Breach of warranty occurs when a seller, manufacturer, or distributor fails to guarantee that the product being sold is not of proper quality, or simply no longer works in the way it was expected to work. The period of the warranty is generally a period of one year, particularly for products like appliances, both large and small.

There are 3 main kinds of warranties – an express warranty, implied warranty of merchantability, and implied warranty of fitness for a particular purpose. These warranties all fall under the Uniform Commercial Code (UCC), which all states have adopted in some part.

Types of Damages in a Breach of Warranty Case

When a breach of warranty occurs, the injured party may be entitled to several forms of legal remedy. The most common types of damages include:

• Compensatory Damages: Reimbursement for the financial losses incurred due to the faulty product or service.
• Consequential Damages: Losses that go beyond the direct scope of the product defect—such as lost profits or additional business costs—if these were foreseeable at the time of contract.
• Repair or Replacement: The buyer may be entitled to a product repair or a like-for-like replacement at no cost.
• Rescission: The buyer can return the item and get a full refund, effectively canceling the contract.
• Incidental Damages: Reasonable costs incurred due to the breach, like shipping or inspection expenses.

Courts generally aim to place the injured party in the position they would have been in had the warranty been fulfilled.

How to Create an Express Warranty

You can create an express warranty in several ways:

1. An affirmation of fact that the goods will work as expected
2. A description of the goods, as the purchaser can expect the description to match the actual product
3. Offering a sample, as the purchaser can rely on that sample for what to expect when using the actual product

The express warranty could be either oral or written. Therefore, any of the above can be done so orally. With that said, it could be much harder for a purchaser to prove a verbal express warranty, particularly if the seller denies that such a verbal promise was made.

The most common type of express warranty is given in the instruction manual that is provided to the purchaser in the box that comes with the product itself. Quite often, the warranty provided will be for a period of one year from the date of the purchase. Furthermore, some express warranties also provide that in order for the express warranty to take effect, the purchaser must register the product on the company’s website.

When is an Implied Warranty Created?

Implied warranties are imposed by law. Specifically, the implied warranty of merchantability only takes effect if certain criterion is met. According to the UCC, the product and its packaging must meet certain standards of quality.

The implied warranty of fitness for a particular purpose comes with the same type of requirements for those products with sellers who know that there is a specific way in which the goods are to be used. Moreover, the buyer must show reliance on the person or business selling the goods with an expectation that the goods being sold can be properly used for its intended purpose.

For example, let’s assume that you own a business, and need to purchase several laptops from a computer supplier. You tell the supplier that you need computers that will be able to work at a certain speed since you have several processes that might be used on the laptop at once. When the seller provides you with a type of laptop to purchase, he or she is now making an implied warranty of fitness. Thereafter, when you begin using the laptop, if it doesn’t do what you wanted it to do in terms of speed, you can contact the computer supplier (seller) and indicate that you expect a new product to be supplied at no additional cost. If the seller refuses, you can bring a legal suit for implied warranty of fitness.

If a legal suit does arise, the purchaser doesn’t have to prove negligence or fault since a breach of warranty comes with strict liability for the manufacturer, seller, and/or distributor. However, the defendant will be able to bring its own defense, particularly in the terms of contract-related defenses. This can include any one of the following:

1. The seller might require that the purchaser immediately bring a notice of breach to the seller’s attention, giving the seller an opportunity to rectify the problem
2. The seller might require that the buyer prove that he or she relies on the warranty
3. The seller can limit or disclaim the implied warranty entirely

Common Defenses to a Breach of Warranty Claim

Defendants in breach of warranty lawsuits often raise defenses to reduce or eliminate liability. Common defenses include:

• Disclaimers or Limitations: If the seller has clearly disclaimed or limited certain warranties in writing and the disclaimer meets legal standards, this can bar the claim.
• Lack of Timely Notice: Under the UCC, the buyer must notify the seller of the breach within a reasonable time.
• Misuse or Alteration of the Product: If the buyer used the product in a way not intended or altered it, this could void the warranty.
• Buyer’s Failure to Inspect: If the defect was obvious and the buyer failed to inspect the product, this could weaken the claim.
• Lack of Privity: In some jurisdictions, if there was no direct contract between the buyer and the seller, the buyer may not be able to sue under warranty.

These defenses vary depending on state law and the specific facts of the case.

Strict Liability

In terms of strict liability, it is important to note that the seller could be entirely responsible for all defective items that unreasonably threaten the buyer’s own personal safety when using the product. Therefore, the seller will be liable if it typically sold such products, i.e. company that sells only appliances. The seller could still be liable even if it exercised care in handling the product before it reached the buyer, and even if the buyer had no direct dealing with the seller.

Industries Where Breach of Warranty Commonly Arises

Breach of warranty issues can occur in various industries, including:

• Consumer Products: Electronics, appliances, and vehicles often have express and implied warranties.
• Real Estate: New homes may carry implied warranties of habitability or workmanship.
• Commercial Equipment: Businesses rely on warranties when purchasing machinery, software, or IT systems.
• Professional Services: Though less common, service agreements can include performance warranties that, if unmet, trigger legal claims.

Regardless of the industry, businesses and individuals should clearly understand warranty terms before entering a transaction.

Relevant Laws Governing Warranty Claims

Several key statutes govern breach of warranty claims in the United States:

• Uniform Commercial Code (UCC): Governs commercial transactions and sets the framework for express and implied warranties in goods sales.
• Magnuson-Moss Warranty Act: A federal law applying to written warranties on consumer products, requiring clear and conspicuous warranty terms and outlining dispute resolution requirements.
• State Consumer Protection Laws: Many states have additional laws protecting consumers from deceptive warranty practices.

Legal requirements vary depending on the jurisdiction and the nature of the product or service involved.

Breach of Warranty vs. Breach of Contract

While both breach of warranty and breach of contract involve failures to meet agreed terms, there are key distinctions:

Understanding this distinction is critical for choosing the correct legal claim and remedy.

Frequently Asked Questions

1. What is considered a breach of warranty? A breach of warranty occurs when a product or service fails to meet the terms of a written or implied guarantee regarding its quality, performance, or suitability.

2. Can you sue for breach of warranty without a written contract? Yes. Implied warranties arise by operation of law, so a written contract is not always necessary to pursue a claim.

3. What’s the statute of limitations for a breach of warranty claim? Under the UCC, the general statute of limitations is four years from the date the breach occurred, but this can vary based on jurisdiction and contract terms.

4. Can a seller limit or disclaim a warranty? Yes, but limitations or disclaimers must meet specific legal standards to be enforceable, such as being clear, conspicuous, and not unconscionable.

5. How do I prove a breach of warranty in court? You must typically show that a warranty existed, it was breached, and that the breach caused financial harm. Documentation, communications, and product inspection results are often key evidence.

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