In each of Parts 1, 2, and 3 of this series on implied warranties, we urged you to disclaim your implied warranties, and promised that we would soon tell you how. In this post, we make good on that promise.
Before we begin, however, we want to respond to a common objection from (usually small) manufacturers: “I make a good product that I stand behind, why do I need to disclaim warranties?” The reason is risk control. By disclaiming the implied warranties and standing behind your product with express warranties, you can ensure that the warranty you’re giving is the one you intend to give, not one that a judge thinks your industry, or your product, or your customer dealings compels. So by all means, stand behind your product – but be deliberate about it.
Now, how to disclaim the implied warranties? The short answer is that you include a provision in your terms and conditions that you are disclaiming all implied warranties. But here are a few traps for the unwary.
- The implied warranty of merchantability must typically be disclaimed by name. In other words, if your disclaimer doesn’t say “merchantability” in it somewhere, it still needs some work.
- If your disclaimer is in writing – and, seriously, it had better be – your disclaimer must be “conspicuous” to be effective to disclaim the warranties of merchantability and fitness for purpose. States are all over the board on what “conspicuous” means, and giving a “conspicuous” disclaimer only gets more difficult as you add intermediaries between you and the end user of the product. Two steps you can take to help your cause, however, are to highlight the language and put it on the front of your terms and conditions.
- Remember the unenumerated implied warranties! Specify that your disclaimer includes warranties imposed by course of dealing or usage of trade.
- Don’t confuse a disclaimer of warranties with a limitation of remedies. They are dealt with separately in the UCC, and should be treated separately in your terms. If you fail to disclaim warranties and rely instead on a limitation of remedies, you run a risk of complete exposure if your limitation of remedies gets tossed by a court as being unconscionable or failing of its intended purpose.
- Remember to give the document containing your disclaimer to your customerbefore closing the sale. Car companies used to get burned for this when they would put their disclaimers in the operator’s manual in the glovebox of the car, and the customer would not see it until after the sale. If you’ve bought a car recently, you know the salespeople are trained to show that disclaimer to you before you sign the paperwork. This is why.
- Your disclaimer of the warranty of merchantability will be written (and your disclaimer of the warranty of fitness for purpose must be written). But, if you decide that you want to roll the dice and rely on a verbal disclaimer, be sure your purchaser is an American for purposes of the UN Convention on Contracts for the International Sale of Goods. If your buyer is from another signatory country such that the CISG applies, your verbal disclaimer will be ineffective no matter how clear it was. On that note, just be aware of CISG generally. We’ll do a post on that soon.
We’re nearly to the end of our series on implied warranties. We’ll wrap it up with a post on how damages are calculated. But stick around, because we have a lot more issues that you need to think about as you reexamine your standard terms and conditions.