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Uniform Commercial Code: Warranties Under Tennessee Law

If you do business in Nashville, or anywhere else in Tennessee, you might be wise to know something about the warranty provisions of the Uniform Commercial Code (“UCC”). Those warranty provisions are contained in Chapter Two of the UCC, which deals with sales.

When do the warranty provisions of the UCC apply to a sale? They apply only to transactions for the sale of goods. “Goods” are defined, generally, as anything that is movable. What warranties does the UCC create? There are three UCC warranties which potentially could apply to any sale of goods in Tennessee.

EXPRESS WARRANTIES

Under the UCC, a seller can make an express warranty by doing any of these three things: (1) Making an affirmation of fact or promise about the goods (it has to be more than an opinion or sales puffery); (2) giving a description of the goods (which is a warranty that the goods will conform to the description); or (3) providing a sample or model (which creates a warranty that the goods ordered will conform to the sample or model).

An express warranty does NOT have to be in writing. It can be made orally. To create an express warranty, a seller does not necessarily have to use formal legal words like “guarantee” or “warranty.”

In one breach of warranty case in Tennessee, the seller was held liable because it represented that it was selling a 15-20 ton crane (an express warranty), but the crane, it turned out, would only lift ten tons. In another case, the seller was held liable for breaching an express warranty when it told the buyer that the water pump it sold would do the work required by the buyer “satisfactorily” when it would not.

IMPLIED WARRANTY OF MERCHANTABILITY

This warranty is one of two warranties that can be implied by the UCC in a sale even where the seller has not made a single express warranty. Unless it has been excluded or modified (very often the case in my experience), this warranty requires that the seller’s goods meet several requirements including that the (1) goods “pass without objection in the trade”; and (2) that they are “fit for the ordinary purposes” for which they are used. A refrigeration unit for a restaurant that was unable to maintain consistently an adequate temperature would not comply with the implied warranty of merchantability, even if no express warranty about it was ever made.

IMPLIED WARRANTY OF FITNESS FOR PARTICULAR PURPOSE

This warranty is the second warranty that the UCC will imply even if no express warranty has been made (unless it has been excluded or modified). It is a close cousin of the warranty of merchantability, but it is different because it applies where goods are purchased for a particular, unique use. The key to determining whether it might apply is to look at two factors: (1) Did the seller know, or have reason to know, of a particular purpose for which the buyer needed the goods; and (2) did the seller know, or have reason to know, that the buyer was depending on the seller to provide goods that would be suitable for that purpose?

The UCC warranties provide some very effective ammunition for buyers with defective or non-conforming goods. In my experience handling breach of contract cases in Tennessee, however, many sales contracts have provisions that effectively disclaim, or severely limit, all of the above warranties.

The UCC has a provision which permits a seller to exclude or to modify all of the UCC warranties under certain conditions, and thus, to avoid any liability even when its goods do not comply with the UCC warranties. In many circumstances, a seller cannot rely on an exclusion or modification of a UCC warranty if it was not in writing and conspicuous. Although formal legal language is often used, a seller does not necessarily have to use it to exclude the UCC implied warranties. For example, words like “sold as is” may be sufficient to exclude implied UCC warranties.