Some of the most important terms in any contract for the sale of
goods are the warranties that apply to the goods. In addition
to any express warranties made by the seller, the law implies
certain warranties in some contracts unless the seller expressly
disclaims them, which may be trickier than expected. One such
warranty—the implied warranty of
merchantability—applies in all sales of goods by a
"merchant" with respect to the goods. (Courts
broadly interpret the term "merchant.") In such
sales, section 2-314 of the Uniform Commercial Code
("UCC") provides that the seller impliedly warrants that
the goods are "merchantable." That concept could
affect, for example, the number of allowable improperly stitched
T-shirts in a batch or the required tensile strength of a polymer.
As a result, manufacturers often want to exclude or disclaim the
implied warranty of merchantability in favor of specific warranties
or representations made in the sales contract or purchase
agreement. But, excluding the implied warranty of
merchantability requires more than a standard provision stating
that the seller makes no warranties other than those set forth in
UCC Requirements To Exclude Implied Warranty Of
Section 2-316 of the UCC sets forth the requirements under which
the implied warranty of merchantability may be excluded from a
contract for the sale of goods. To disclaim the warranty of
merchantability in the relevant agreement, the written contract
must contain a conspicuous disclaimer that either: (1)
expressly identifies "merchantability" or (2)
includes an expression stating that the goods are sold "as
is" or "with all faults."
According to the UCC, a disclaimer is conspicuous if it is
written, displayed, or presented in such a way that a reasonable
person should have noticed. While these rules and the
entirety of Article 2 of the UCC have been adopted by all 50
states, except Louisiana, these rules have not been interpreted in
the same way by each state's courts.
Varying Interpretations of the Requirements
In practice, courts from different jurisdictions have adopted
different standards for determining whether a disclaimer is
sufficiently conspicuous. Thus, an identically worded provision
disclaiming the warranty of merchantability may be effective in one
jurisdictions but not in another. Rather than depending on
the substance of the provisions, the difference may be in whether
the heading, font, color, or style of the provision was
sufficiently distinct from the rest of the contractual terms.
Consider the following examples of different interpretations.
Some jurisdictions require provisions excluding the implied
warranty of merchantability be printed in larger or differing font
or color. Other jurisdictions allow other methods of distinguishing
the provision, such as bolding, italicizing, or indenting the
Some jurisdictions will consider the buyer's experience in
determining whether a particular provision excluding the warranty
of merchantability is conspicuous. In others, the buyer's level
of sophistication is irrelevant.
When drafting a contract, any seller that wishes to disclaim the
implied warranty of merchantability must carefully consider what is
required under the laws of the relevant jurisdiction. This
highlights the importance of forum-selection and choice-of-law
provisions, which determine where a lawsuit would be filed and what
law the court must apply. Many sellers use a form
contract. However, some buyers will insist on using their own
terms of purchase or may otherwise request that the applicable law
be changed. Additionally, sellers should be mindful of
integration clauses, which provide that the agreement evidences the
entire contract and supersedes all previous writings and oral
representations. Where contracts contain such provisions,
sellers should be careful not to rely on previous communications to
establish that the implied warranty of merchantability should not
apply to the sale. Instead, disclaimers must be
"conspicuously" included in the final written
Failing to properly disclaim the implied warranty of
merchantability may create unexpected liability. Accordingly,
please consult legal counsel when contracting with other parties,
and be sure to ask if any exclusion or waiver of the warranty of
merchantability would be effective in the particular jurisdiction
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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