We've spoken frequently in this course about promises and the conditions under which promises are and are not enforceable. Indeed, we usually think of contract laws primarily concerning promises. Today, we're going to talk about related but slightly different concerns that are also integral to contract law. These are representations and warranties. What's a representation? Representation concerns facts or circumstances related to proposed transaction. They are not the same as promises. One helpful way to distinguish between the two is to remember that while promises are forward looking, representations generally involve past or present facts about the world. Consider a potential agreement to sell a used car. The seller's promise is that she will deliver the car. She may make many factual representations about the car in the process. She might say, it is blue, it has 50,000 miles on it, it has a small dent on the rear door. Those examples are all likely express representation. The seller expressly or explicitly informs the buyer of those facts about the car. But just as we saw with promises, representations can be either expressed or implied. Most sellers implicitly represent, for instance, that they own the things they're selling. And that those things are of reasonable quality. Moreover, it's possible for explicit promises to throw off implicit representations. When I promise to deliver a car, I implicitly represent that I presently intend to perform that promise. That's how the doctorental promissory fraud is possible. Conversely, explicit representations can throw off implicit promises. When I represent that my car was only driven to church on Sunday, I implicitly promise or warrant that my representation is true. Explicit promises or explicit representations can throw off a host of implicit representation or promises. And part of the task of being trained in contracts law is being able to hear these implicit utterances. We can think of warranties, on the other hand, as a special kind of promise, a warranty promises that a person's representations are true. Judge Learned Hand explained in a second circuit case for 1946, Metropolitan Coal versus Howard, that a warranty quotes amounts to a promise to indemnify the promisee for any loss if the fact warranted proves untrue. For obviously, the promoiser can not control what is already in the past. In other words, if a representations proves false, the party who made it has breached his or her warranty that all representations of fact are true. The representation of fact in question however, must become a term of the contract in order for the warranting party to be liable. In sum then, a warranty is made by one party to another about existing or past facts that are knowable. But not necessarily known and that become a term in the contract. Now, sadly people use the word warranty at times, as a synonym for forward looking promise. Hyundai has a warranty that it's transmission will not break for a 100,000 miles. One could try to fit this warranty talk into the traditional definition of Learned Hand and others, saying that Hyundai has represented that it's selling the type of car that has a transmission that will last for 100,000 miles. But it's easier to distinguish between warranties that promise that representations are true, and warranties that promise that goods will not break in specified ways in the future Warranties are very important because they allocate risk, the party who makes a representation bears the risk that the representation made will prove quote, not in accord with the facts, unquote. How does this allocation of risk compare to the mistake doctrines we've earlier discussed? Well, mistake doctrines tend to let sellers out of contracts where there are basic mistakes that increase the value of the thing traded. Think of Sherwood versus Walker. And the mistake doctrines let buyers out of contracts where there are basic mistakes that decrease the value of the thing traded. Think of the Lenowee case. That is, you're let out, the buyer or the seller unless a contract allocates the risk to the other side. A seller making a representation Is one of the ways the parties can allocate a risk to the seller or to the buyer. Warranties, unsurprisingly, can also be expressed or implied. The UCC section § 2-313 establishes three ways sellers of goods can create express warranties. First, any affirmation of fact the seller makes that relates to the goods being sold, and becomes part of the basis of the bargain, creates an express warranty that the goods will conform to that affirmation. Second, any description of the goods that becomes part of the basis of the bargain creates an express warranty that the good will conform to that description. And third, any sample or model of the goods, which is made part of the basis of the bargain, creates an express warranty that the whole of the goods will conform to the sample or to the model. The UCC emphasizes further that sellers do not have to specifically intend to make a warranty or need use words like warranty or guarantee in order to create an express warranty. Indeed, because any agreement must involve some minimum description of the goods being transacted in, in order to be specific enough to be forcible, every contract will necessarily entail some express warranty. If you're trying to have a contract to buy a bicycle, its very hard to not have it at least a description that what is being purchased is a bicycle. But the UCC section 2-313 also specifies certain statements that don't create express warranties, affirmations of the value of the goods or statements that only purport to be the seller's opinion or commendation of the goods. These statements regarding opinion or commendation are, in effect, just puffing. But I find it annoyingly ambiguous that the UCC provision says that, quote, an affirmation merely of the value of the goods, unquote, does not create an express warranty. An affirmation about the value of the goods to my mind is not mere. It seems to go to the central basis of the bargain. If a seller says that a baseball card has a market value of $45, that should create an express warranty because market value is falsifiable. Even saying that a baseball card has a value of $45 should in my mind create or express warranty that would be violated if the market value is substantially lower. Saying that a painting has a high value on the other hand might be mere puffing. The section doesn't distinguish between these two scenarios. Luckily, comment eight to the sections says with regard to false statements of value, quote, the possibility is left open that a remedy may be provided by the law relating to fraud or misrepresentation. The UCC also establishes, in three separate provisions, three important, implied or default warranties. The first of these, section 2-312, is the implied warranty of title, which applies to all sales. The second of these, 2-314, is the implied warranty of merchantability, which applies only to merchants. This provision states that in the contract for the sale of goods, the seller, as if a merchant, impliedly warrants those good will be merchantable with respect to the goods of that kind. The core meaning of merchantability is basically that the goods are fit for the ordinary purposes for which such goods are used. The third of these default warranties is section 2-315. And it's the implied warranty of fitness for a particular purpose. This comes up with buyers who disclose that they need goods for a particular purpose. The particular purpose is distinct from the ordinary purpose we just mentioned with respect to merchantability. It concerns a specific use by the buyer that is peculiar to the nature of the buyers business or use of the goods and not just the ordinary use of the goods. Section 2.3.15 explains that there is an implied warranty that goods will be fit for that particular purpose where the seller at the time of contracting has reason to know any particular purpose for which the goods are required. And that buyer is relying on the seller's skill or judgement to select or furnish suitable goods. 2-315 is another circumstance where making a representation may impose duties on the other contractor. We already discussed how making a representation may create a duty on the other contractor to correct your mistake. But with section 2-315, making a representation as to why you require a good created duty on skilled sellers at least to provide goods that conform to that requirement. These three provisions are default rules. Parties can contract around them if they wish. But the UCC in section 2-316 also lays out altering rules. The second order of legal rules regulating the ways in which parties can disclaim or limit the warranties or remedies for breach of these warranties. Subsection 2, for instance, says that in order to exclude or Modify the Implied Warranty of Merchantability, the contractual language must mention merchantability. And in the case of a writing, it must be a conspicuous statement. Similarly, to exclude or modify the Implied Warranty of Fitness for a Particular Purpose, the exclusion must be a writing and be conspicuous. But subsection two is subject to [LAUGH] subsection three, which states more broadly that all implied warranties can be excluded by expression such as, as is, or with all faults, or other language which in common understanding calls buyers attention to the exclusion of warranties. And makes plain that there is no implied warranty. So even though subsection 2 says that waiver of the warranty of merchantability must mention merchantability, subsection 3 says that such mentions of merchantability are not necessary if the contract includes as is or similar waiver language. Further and importantly, the UCC denies buyers protection of implied warranties if goods have defects, about which the buyer knew or should have known. When the buyer, beforehand has examined the goods, or the sample or model, as fully as he desires or has refused to examine the goods there is no implied warranty with rewarded defects which in examination odd in the circumstances to rebuild them. You've probably noticed warranty provisions in the agreements for purchases you've made for hard goods, like your computer or smartphone. These clauses have become quite standard across the various industries. These clauses generally disclaim implied and expressly warrant the goods against defects and material and workmanship. Further, they usually limit the remedies for breach of the warranties to just repairing or replacing the product. That is, that they promise to either repair the defective good or replace the defective parts. And also these provisions tend to set a limit on the amount of time in which claims under the warranties can be made. And they exclude liability for contractual damages. But the capacity of companies to contract around liability in this manner is at least a little circumscribed. Imagine you purchase a product that becomes defective. And after several attempts by the manufacturer to repair or replace, the product still doesn't work. Even though the agreement for the product states that your remedies are limited to repair or replacement of defective parts, the UCC Section 2-719 provides that when a remedy quote fails of its essential purpose unquote, a buyer may seek damages for the defective product using the default remedies of the UCC. So if you attempt repair and replacement time and time again, and it continues to fail to put the product back into working condition, you might be able to recover full UCC damages. So what have we learned? We've learned about the important role of representations of fact in contract law. And we won't forget that representations of fact are distinct from promises. We've learned that representation in contracts throw off implied warranties. And that because all contracts must contain some representations, all contacts entails some kinds of at least implied warranties. We've learned this warranties allocate risk to the representing party, and so sellers can be liable when their representation turn out to be false. We talked about the express warranty and implied warranties that the UCC sets out and about the UCC altering rules. The provisions that limit the ways to contract around those default rules.
