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In common law jurisdictions, an implied warranty is a contract law term for certain assurances that are presumed to be made in the sale of products or real property, due to the circumstances of the sale. These assurances are characterized as warranties irrespective of whether the seller has expressly promised them orally or in writing. They include an implied warranty of fitness for a particular purpose, an implied warranty of merchantability for products, implied warranty of workmanlike quality for services, and an implied warranty of habitability for a home.
The warranty of merchantability is implied, unless expressly disclaimed by name, or the sale is identified with the phrase "as is" or "with all faults". To be "merchantable", the goods must reasonably conform to an ordinary buyer's expectations, i.e., they are what they say they are. For example, a fruit that looks and smells good but has hidden defects would violate the implied warranty of merchantability if its quality does not meet the standards for such fruit "as passes ordinarily in the trade". In Massachusetts consumer protection law, it is illegal to disclaim this warranty on household goods sold to consumers.
The warranty of fitness for a particular purpose is implied when a buyer relies upon the seller to select the goods to fit a specific request. For example, this warranty is violated when a buyer asks a mechanic to provide snow tires and receives tires that are unsafe to use in snow. This implied warranty can also be expressly disclaimed by name, thereby shifting the risk of unfitness back to the buyer.
Another implied warranty is the warranty of title, which implies that the seller of goods has the right to sell them (e.g., they are not stolen, or patent infringements, or already sold to someone else). Theoretically, this saves a buyer from having to "pay twice" for a product, if it is confiscated by the rightful owner, but only if the seller can be found and makes restitution.
Fitness for a particular purpose
An implied warranty of fitness for a particular purpose is a warranty implied by law that if a seller knows or has reason to know of a particular purpose for which some item is being purchased by the buyer, the seller is guaranteeing that the item is fit for that particular purpose.
International sales law
In international sales law, the obligation is found in Article 35(2)(b) of the United Nations Convention on Contracts for the International Sale of Goods.
In Australia, the obligation is in section 55 of Schedule 2 ("The Australian Consumer Law") of the Competition and Consumer Act 2010 (Cth).
In the United States, the obligation is in Article 2, Section 315 of the Uniform Commercial Code. The warranty of fitness applies to all sellers, unlike warranty of merchantability which applies only to professional merchants. In the United States, this warranty is sometimes referred to simply as a warranty of fitness.
An implied warranty of merchantability is a warranty implied by law that goods are reasonably fit for the general purpose for which they are sold.
International sales law
In international sales law, merchantability forms part of the ordinary purpose of the goods. According to Article 35(2)(a) of the United Nations Convention on Contracts for the International Sale of Goods, a seller must provide goods fit for their ordinary purpose.
In Australia, the obligation is in section 54 of Schedule 2 ("The Australian Consumer Law") of the Competition and Consumer Act 2010 (Cth). Each State and Territory now applies the Australian Consumer Law (ACL) as the law of the state. This has created a uniform consumer protection law across the entire country.
The Sale of Goods Act 1979 states that in a contract for the sale of goods it is an implied condition that the goods supplied are of merchantable quality. The implied condition is excluded if any defects are drawn to the buyer's attention before the contract is concluded or if the buyer examines the goods before the contract is concluded and finds, or ought to have found, a defect.
In the United States, the obligation is in Article 2 of the Uniform Commercial Code (UCC). This warranty will apply to a merchant (that is, a person who makes an occupation of selling things) who regularly deals in the type of merchandise sold.
Under US law, goods are 'merchantable' if they meet the following conditions:
- The goods must conform to the standards of the trade as applicable to the contract for sale.
- They must be fit for the purposes such goods are ordinarily used, even if the buyer ordered them for use otherwise.
- They must be uniform as to quality and quantity, within tolerances of the contract for sale.
- They must be packed and labeled per the contract for sale.
- They must meet the specifications on the package labels, even if not so specified by the contract for sale.
If the merchandise is sold with an express "guarantee", the terms of the implied warranty of merchantability will fill the gaps left by that guarantee. If the terms of the express guarantee are not specified, they will be considered to be the terms of the implied warranty of merchantability. The UCC allows sellers to disclaim the implied warranty of merchantability, provided the disclaimer is made conspicuously and the disclaimer explicitly uses the term "merchantability" in the disclaimer. Some states, however, have implemented the UCC such that this can not be disclaimed.
An implied warranty of habitability, generally, is a warranty implied by law (in some states) that by leasing or buying a residential property, the lessor or seller is promising that the property is suitable to be lived in. The warranty of habitability can be breached if there is no heat, hot water, or other essential services. Safety issues like no smoke alarm or other fire code issues can also be considered to make a dwelling uninhabitable. In some cases, courts have ruled that the warranty also covers cracked walls, peeling paint, and leaks. If the municipality in which the property is located prohibits habitation without a certificate of occupancy, but has not issued such a certificate with respect to the property, the unlawfulness of that habitation renders the property uninhabitable as a matter of law. The breach of the implied warranty of habitability can be used to legally break a lease. If the factors have been created or are controllable by the landlord and he or she has not fixed them despite ample written notification, this situation can also be considered constructive eviction, which allows the tenant to break the lease, and may also allow the tenant to sue for damages in some jurisdictions.
Disclaimer of an implied warranty
In the United States, a disclaimer must be conspicuous in the contract, e.g., in a different kind of print or font that makes it stand out. On the other hand, express warranty, that is, any affirmation of fact or promise to the buyer, or description of the good, oral or written, can be negated or limited only if such disclaimers are not unreasonable. (Uniform Commercial Code, Section 2-316 (1)).
Some jurisdictions, however, limit the ability of sellers or manufacturers to disclaim the implied warranty of merchantability or fitness, such as Massachusetts. (Massachusetts General Laws, Chapter 106: Section 2-316A). Furthermore, the warranty of habitability is generally not able to be disclaimed.
Contractual language can also limit the remedies available for breach of an implied warranty - for example, capping recoverable damages or limiting the remedy to a replacement of a defective item. However, such a term can be found to be unconscionable. For example, if a defective product causes a personal injury, a contractual provision limiting recovery in such a case will be deemed prima facie unconscionable. (Uniform Commercial Code, §2-719(3).)
- Primack MA. (2009). Representations, Warranties and Covenants: Back to the Basics in Contracts. National Law Review.
- "Difference between a Guarantee and Warranty". Archived from the original on December 5, 2016. Retrieved December 5, 2016.
- Ferara LN, Philips J, Runnicles J. (2007). Some Differences in Law and Practice Between U.K. and U.S. Stock Purchase Agreements. Jones Day Publications.
- Sale of Goods Act 1979, sect. 14(2)
- U.C.C. § 2-316(2)
- Bolander, Donald O. (1990). The New Webster's Library of Practical Information: Family Legal Guide. Lexicon Publications. p. 45. ISBN 0-7172-4500-4.
- Dutenhaver, Katheryn M. (1978). "Non-Waiver of the Implied Warranty of Habitability in Residential Leases". Loyola University of Chicago Law Journal. 10: 41. Retrieved 15 December 2017.
- Powell, Frona M. (1989). "Disclaimers of Implied Warranty in the Sale of New Homes". Villanova Law Review. 34: 1132–1153. Retrieved 15 December 2017.
- The GNU Project's General Public License, a prominent free software license, includes the disclaimer: "Except when otherwise stated in writing the copyright holders and/or other parties provide the program 'as is' without warranty of any kind, expressed or implied, including, but not limited to, the implied warranties of merchantability and fitness for a particular purpose."