Courts sometimes have trouble determining whether a warranty explicitly extends to future performance. A recent case provides refreshing clarity on the issue.
Uniform Commercial Code
If you’re like many manufacturers who sell internationally, your standard terms and conditions provide that the UN Convention on Contracts for the International Sale of Goods (“CISG”) does not apply to your transaction. But, maybe they don’t, or maybe your disclaimer is ineffective (it happens a lot). In those instances, it’s important to understand where CISG differs from Article 2 of the Uniform Commercial Code, which typically covers sales of goods within the United States.
Today’s column is prompted by a recent decision by the Supreme Court of Missouri, in which the Court denied a Missouri manufacturer a sales tax refund.
If you review the terms and conditions given by many manufacturers in their invoices (including, probably, yours), you likely will find a provision that says something to the effect of “we agree to sell you this product if, and only if, you agree to each of these terms and conditions.” It’s a common term, and there’s a good reason for it: it can counteract standard form language in the buyer’s purchase order that you don’t like.
File this one under “does your warranty really say what you think it says?”
If you’re like many manufacturers, you have no dealings with the end user of your product. Rather, you sell to a distributor or other intermediate seller, who then sells your product to the end user. We have previously discussed disclaiming your implied warranties against your intermediate buyer and whether that disclaimer travels “downstream” to the end user, but we haven’t addressed whether a disclaimer made by the intermediary can protect you in a suit by the end user if, say, you failed to disclaim your implied warranties yourself or if for some reason they are not effective against the end user.
I previously have urged you to limit the remedies available under your express warranty (e.g. to repair or replacement), and to disclaim liability for incidental and consequential damages. Here, we’ll discuss a common argument made by people who want to render your efforts meaningless.
For this installment, we turn to an aspect of the implied warranty of merchantability that has not gotten its fair share of attention here: what is “the ordinary purpose” for which your product is used? It seems like a simple question, but it can be deceptively tricky.
If you read this column with any regularity, it will not surprise you that I was thrilled to read this introduction to a recent court opinion: “The motions to dismiss in this case present a difficult legal issue, as if a civil procedure professor and a Uniform Commercial Code professor conspired on a law school exam question[.]”
As I’ve noted before in these columns, an implied warranty disclaimer is an essential part of your terms and conditions. But giving an effective disclaimer is sometimes easier said than done, especially when you do not sell your product directly to the end user, but rather through a wholesaler, retailer, or other intermediary.