8.2
Warranties and Sales Contracts
Figure 8.3
The law provides remedies for breach of sales contracts. (Credit: rawpixel/ pexels/ License: CC0)
Warranties
A warranty is a guarantee on the good that comes as part of the sales contract, but contract law treats
warranties as an additional form of contract that binds the selling party to undertake a certain action.
Typically, the selling party has an obligation to provide a product that achieves a specified task, or to deliver a
service that meets certain minimal standards. Warranties are offered for a range of different goods and
services, from manufactured goods to real estate to plumbing services. The warranty assures the buyer that
the good or service is free from defects, and it is a legally binding commitment. In the event that the product
or service fails to meet the standards set out in the warranty, then the contract provides a specific remedy,
such as a replacement or repair.
According to UCC 1-203, the performance and execution of all contracts must be undertaken in good faith.
Good faith means honesty in fact and the observance of reasonable commercial standards of fair dealing. If
the parties in the contract are merchants, the UCC also requires that the contract be undertaken in accordance
with commercial reasonableness. This requirement means that the transaction should be undertaken in a
sensible and prudent way.
Express and Implied Warranties
Warranties can be express, implied, or both. Both express and implied warranties provide legal relief for the
purchaser in the event of a breach of contract.
An express warranty is one in which the seller explicitly guarantees the quality of the good or service sold.
Typically, the vendor provides a statement, or other binding document, as part of the sales contract. What this
means in practice is that the buyer has engaged in the contract on the reasonable assumption that the quality,
nature, character, purpose, performance, state, use, or capacity of the goods or services are the same as those
Chapter 8 Sales Contracts
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