Implied warranties are assurances presumed to be made by sellers in a transaction of materials or equipment, based on the circumstances of the sale. They are interpreted by courts and arbitration boards, and are initially covered in the version of the Uniform Commercial Code (UCC) in effect in the project’s jurisdiction.
An implied warranty of merchantability warrants the:
- materials and equipment (‘goods’) are acceptable in the trade;
- uniformity of the goods (in other words two items that are supposed to be identical are, in fact, identical);
- goods’ packaging; and
- truthful labeling of the goods.
To be merchantable, the goods must conform to an ordinary buyer’s expectations. Terms of purchase such as “as-is” or “with all faults” disclaim (negate) an implied warranty of merchantability. Many sellers seek to expressly disclaim furnishing implied warranties of merchantability, arguing such warranties are subjective.
Implied warranties of fitness-for-use arise where the seller, at the time of the contract, has reason to know the particular purpose for which the goods are required, and the buyer is relying on the seller’s skill and judgment in selecting goods appropriate for the intended use or purpose.
For example, if the buyer of an equipment item advises the seller at the time of purchase the intended application is in a corrosive environment, without further specifying the desired materials, the seller is obligated under the fitness-for-purpose implied warranty to advise the buyer of the appropriate item to purchase, based on the seller’s knowledge of the item. However, because larger equipment items are often specified with detailed, descriptive requirements for a specific application (‘purpose’) selected by the design professional or owner, understandably suppliers often seek to disclaim any implied warranties of fitness-for-use.
Implied warranty of title assures the buyer of the seller’s right to sell the goods, and that such goods are not otherwise subject to patents held by others, or other intellectual property rights that might infringe on the buyer’s right to purchase.
Specifiers should understand, in many jurisdictions, implied warranties may be unintentionally disclaimed by conspicuous contract language. At times, the parties may elect to specifically exclude implied warranties (particularly for fitness-for-use); reasons for explicitly excluding certain implied warranties may arise due to negotiation between the buyer and seller.
Conversely, when the owner and design professional desire that such warranties fully apply, careful attention should be paid to drafting the contract language, particularly in the specifications. While implied warranties are not specifically written into the contract documents (if they were, they would be express warranties), certain specifications language can result in the nullification of an implied warranty.