Spencer Fane LLP Logo

Manufacturer’s Corner: Warranty Disclaimers By Intermediate Sellers

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.[1]

So, if the intermediary disclaims implied warranties, does that afford you protection against the end user?  As so often is the case, the answer is “it depends.”

The general rule is deceptively simple: an intermediary’s disclaimer does not protect you.[2]  I say it is deceptively simple, because there are important exceptions, some of which, you have correctly guessed, will be the topic of this post.

The first exception, and the one you have the most control over, is where the intermediary’s disclaimer states not only that the intermediary disclaims implied warranties, but also that you do too.[3]  This was not always obvious – buyers sometimes said a remote manufacturer couldn’t use a disclaimer between the seller and buyer to shield itself from warranty liability – but the cases uniformly[4] hold that this is permissible, so long as it is made clear that the disclaimer is made by both the seller and the manufacturer.

You have less control over the second exception – if it applies to you, it probably is only by luck of the circumstances – but it can be important.  Some courts hold that manufacturers of components that are included in a finished product are not liable to buyers of that product where the party that finished and sold the product disclaimed its implied warranties, whether the disclaimer references the component manufacturer or not.[5]  This is not the sort of thing I would rely on (the case law is sparse), but it may prove an important defense to component manufacturers who might otherwise throw their hands up believing the general rule applies equally to them.[6]

What’s the uptake from this?  The first point is obvious: don’t rely on your immediate buyer to do your disclaimer work for you.[7]  The second point is related but perhaps less obvious: to the extent you can, be sure your immediate buyer disclaims not only its implied warranties, but also yours when it resells the product (or, alternatively, disclaim your implied warranties directly to the end user, though that can be hard).  The third point is that component manufacturers may have some additional protection, but again, they shouldn’t rely on it.

Finally, some housekeeping.  About a year ago, I did a six-part series on implied warranties.  Most of the installments in that series were numbered, but the second was not (I have no good explanation, only apologies).  I still get questions about where the second one is. It’s here.

[1] This assumes the applicable substantive law permits breach of warranty claims even in the absence of contractual privity.  If not, you just don’t have a problem.  It would be nice if the Uniform Commercial Code could get uniform on that, but I’m not holding my breath, and I’m not sure I’d like the direction the Committee took even if it did.

[2] See, e.g., Holden Farms, Inc. v. Hog Slat, Inc., 347 F.3d 1055 (8th Cir. 2003) (applying, I think, Minnesota law, but I’m not entirely sure to be honest; really it relies on the Hunter case I cite below, without reference to any state law).

[3] See, e.g., Hunter v. Texas Instruments, Inc., 798 F.2d 299 (8th Cir. 1986) (relying on Texas and Missouri law to predict Arkansas law).

[4] I should say, I haven’t run across any cases holding otherwise.  They could be out there.  This isn’t legal advice, but you knew that, because this is the internet and you shouldn’t believe or rely on anything you read on the internet (which: also not legal advice!). 

Separately, I wonder how a court would deal with a sale contract that includes a remote manufacturer’s disclaimer and also a “no third-party beneficiaries” clause.  That sounds fun.

[5] Moore v. Coachmen Insus., Inc., 499 S.E.2d 772 (N.C. App. 1998) is a well-reasoned example.

[6] It should be noted that component manufacturers may have a separate but related defense: even in states where privity of contract is no longer an element of an implied warranty claim, it may be that the component manufacturer makes no implied warranty to the end user.  See, e.g., Hininger v. Case Corp., 23 F.3d 124 (5th Cir. 1994) (predicting Texas law), but if you’re see, e.g.ing that, you might also want to see e.g. Metro Nat. Corp. v. Dunham-Bush, Inc., 984 F. Supp. 538 (S.D. Tex. 1997), in which the Court put a pretty significant limitation on the Hiniger holding.  The Tenth Circuit applied a similar limitation in Patty Precision Prods. Co. v. Browne & Sharpe Mfg. Co., 846 F.2d 1247 (10th Cir. 1988), though the facts there were worse for the component manufacturer.

Also, if the component is a unique good, it may be that no warranty of merchantability extends at all (because there’s no ordinary purpose, or you’re not a merchant in goods of the kind, or for some other reason).  But, even in that case you still have the warranty of fitness for particular purpose to contend with.  What if the component is unique but the end product is a totally mundane thing?  Haha, I don’t know.  No more questions.  (I feel like you’re probably good though?)

[7] Related: if you find this discussion relevant because you failed to disclaim your implied warranties to your immediate buyer, that’s on you.  You should have done that.  I mean, do you even read this column?