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.

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.

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