Key Takeaways

  • A disclaimer of warranty must be clear, conspicuous, and in writing to be enforceable.
  • Sellers can disclaim express and implied warranties, but must follow specific language and formatting rules, particularly under the UCC.
  • Terms like “as is” or “with all faults” are commonly used to limit or exclude implied warranties.
  • A disclaimer cannot protect sellers from liability for defective or dangerous products.
  • Disclaimers in online terms of use or purchase agreements should be tailored to the nature of goods/services and audience expectations.

Requirements for disclaiming a warranty must be clearly understood by both businesses and consumers. There are different methods for disclaiming warranties, depending on whether they are express or implied. Sellers are required to comply with certain rules when disclaiming warranties. Failure to do so can lead to costly consequences.

How Can a Warranty Be Disclaimed?

Generally, parties who have entered into a commercial contract have the freedom to disclaim all warranties for the products being sold. Nonetheless, there are rules pertaining to the method of disclaiming warranties in relation to the type of warranties, which can be express or implied.

Express warranties are found in statements made by sellers. Examples of this type of warranties include:

  • Promises or affirmations of fact that relate to products.
  • Descriptions of products.
  • Samples or models used in transactions.

Any statement describing a product or influencing a buyer's decision to complete the transaction can be considered a form of warranty, even if the creation of the warranty is not intentional. A seller can easily disclaim express warranties by including statements in brochures, samples, and models stating that no warranty exists. In addition, salesmen should be cautious not to make verbal promises without a disclaimer. In a sales contract, an express warranty can be disclaimed by a statement that excludes an express warranty.

An implied warranty, on the other hand, is a form of warranty that is implied by law. Basically, there are two kinds of implied warranty.

  • An implied warranty of merchantability assures buyers that a certain product is fit for the normal purposes they intend to use it for.
  • An implied warranty of fitness for a specific purpose occurs when buyers intend to use a certain product for a particular purpose and depend on the seller's expertise to select a product for that use.

In most places, implied warranties can be disclaimed. However, there are federal and state laws that impose restrictions on disclaimers on consumer goods. In order to disclaim implied warranties, sellers must inform buyers in writing that they will not be liable if their products are defective or fail to perform according to the buyers' expectations.

They can label their products as being sold “with all faults” or “as is” to disclaim implied warranties, but such labels will not provide protection against liability for dangerous or defective products. In some states, certain restrictions apply to the sale of “as is” products.

Requirements for Effective Warranty Disclaimers

For a disclaimer of warranty to be enforceable, it must meet certain legal standards. Courts require that warranty disclaimers be conspicuous, meaning they must stand out within a contract. This typically includes using all capital letters, bold font, or contrasting colors to ensure visibility.

To effectively disclaim express warranties, sellers must ensure that any descriptions, affirmations, or samples that could be interpreted as promises are accompanied by clear language stating that no warranty is being made. For example, language such as “no warranty is made with respect to the product described” can reduce liability.

When disclaiming implied warranties, such as the warranty of merchantability or fitness for a particular purpose, the disclaimer must be in writing and conspicuously presented. Under the UCC, a disclaimer of the warranty of merchantability must specifically mention the term "merchantability" and be prominent within the document.

Additionally, sellers should be mindful of consumer protection laws, especially in transactions involving consumer goods. Some states restrict or prohibit the use of certain disclaimers in consumer sales, even if they are properly formatted. For instance, “as is” disclaimers may not always be enforceable if the product is found to be unreasonably dangerous or if the consumer lacked a meaningful opportunity to understand the disclaimer.

Rules of Disclaimers

In Illinois, courts are in favor of disclaimers that are highlighted with a heading and separated from the rest of the document. A disclaimer that is lost or buried in the fine print or the terms and conditions section of a contract is not legally enforceable. Additionally, the disclaimer must be printed in capital letters, dark or bold letters, a larger font than the text around it, and perhaps in a different color.

If a contract requires the buyer's signature, there should be a space next to the disclaimer where the buyer can sign or leave his or her initials, so there will be no question that he or she saw the disclaimer.

According to the Uniform Commercial Code (UCC), sellers can use expressions such as “with all faults,” “as is,” or other language that informs buyers of the exclusion of warranties and clarifies that implied warranties do not exist. Nevertheless, if they wish to disclaim warranties of merchantability, they must have a disclaimer that conspicuously mentions merchantability.

Also, the UCC permits sellers to alter, limit, or disclaim their exposure to recoverable damages or breach of warranties. For instance, it allows sellers to expressly state in a sales agreement that the buyers' remedy is limited to repayment of the prices of the products, return of the products, or replacement or repair of the non-conforming goods or components.

Prudent sellers will try to prevent all consequential damages by having disclaimers in all their contracts. The UCC states that consequential damages can be excluded or limited unless the exclusion or limitation is unconscionable. In the case of consumer products, limiting consequential damages for injury to a person is prima facie conscionable, but limiting damages when the loss is commercial is not.

Online Warranty Disclaimers and Website Terms

In the context of online transactions, a disclaimer of warranty is typically embedded in the terms of service or purchase agreements on websites. These disclaimers should explicitly state that the goods or services are provided “as is” and “with all faults,” and clarify that the seller disclaims all warranties, both express and implied.

Website disclaimers should be customized based on the nature of the product or service and the expectations of the audience. Simply copying standard templates may not provide adequate protection. The disclaimer should be easy to locate—ideally presented before purchase or acceptance—and written in plain, understandable language.

Enforceability depends on factors like whether the user had notice of the disclaimer and gave affirmative assent, such as by checking a box or clicking an “I agree” button. Courts are more likely to uphold online disclaimers when users are required to take a clear action acknowledging the terms.

Legal Challenges to Warranty Disclaimers

While disclaimers can limit a seller's liability, they are not immune from legal scrutiny. A buyer may challenge a disclaimer of warranty if it is deemed unconscionable, hidden in fine print, or if the buyer was misled. Courts examine whether the buyer had a reasonable opportunity to understand the disclaimer before agreeing to the purchase.

A disclaimer may also be invalidated if it contradicts other statements made by the seller, especially verbal assurances that amount to express warranties. In some cases, even a well-drafted disclaimer will be unenforceable if the seller engaged in deceptive or unfair trade practices.

Consumer protection statutes, like the federal Magnuson-Moss Warranty Act, place additional restrictions on disclaiming implied warranties when a written warranty is offered. This law mandates that any attempt to disclaim implied warranties must be done in compliance with specific labeling and disclosure requirements.

To minimize risk, businesses should tailor their disclaimers to the specific goods or services they provide, review applicable state and federal laws, and avoid relying solely on boilerplate language.

Frequently Asked Questions

  1. What is a disclaimer of warranty?
    A disclaimer of warranty is a legal statement that limits or eliminates a seller’s liability for product defects or failure to meet buyer expectations.
  2. Can implied warranties be disclaimed?
    Yes, but the disclaimer must be in writing, conspicuous, and mention “merchantability” for the disclaimer to be enforceable under the UCC.
  3. Is it legal to sell a product “as is”?
    Generally, yes—“as is” indicates no implied warranties—but consumer protection laws in some states may limit how such disclaimers can be used.
  4. Are verbal disclaimers of warranty valid?
    Usually not. Courts require warranty disclaimers, especially for implied warranties, to be in writing to be legally enforceable.
  5. Can a consumer challenge a warranty disclaimer?
    Yes, particularly if the disclaimer is hidden, misleading, or if the seller made contradictory promises that could be seen as express warranties.

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