In common law jurisdictions, an implied warranty is a contract law term for certain assurances that are presumed to be made in the sale of products or real property, due to the circumstances of the sale. These assurances are characterized as warranties irrespective of whether the seller has expressly promised them orally or in writing. They include an implied warranty of fitness for a particular purpose, an implied warranty of merchantability for products, implied warranty of workmanlike quality for services, and an implied warranty of habitability for a home.
The warranty of merchantability is implied, unless expressly disclaimed by name, or the sale is identified with the phrase "as is" or "with all faults." To be "merchantable", the goods must reasonably conform to an ordinary buyer's expectations, i.e., they are what they say they are. For example, a fruit that looks and smells good but has hidden defects would violate the implied warranty of merchantability if its quality does not meet the standards for such fruit "as passes ordinarily in the trade". In Massachusetts consumer protection law, it is illegal to disclaim this warranty on household goods sold to consumers etc.
The warranty of fitness for a particular purpose is implied when a buyer relies upon the seller to select the goods to fit a specific request. For example, this warranty is violated when a buyer asks a mechanic to provide snow tires and receives tires that are unsafe to use in snow. This implied warranty can also be expressly disclaimed by name, thereby shifting the risk of unfitness back to the buyer.
Another implied warranty is the warranty of title, which implies that the seller of goods has the right to sell them (e.g., they are not stolen, or patent infringements, or already sold to someone else). This theoretically saves a buyer from having to "pay twice" for a product, if it is confiscated by the rightful owner, but only if the seller can be found and makes restitution.
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An implied warranty of fitness for a particular purpose is a warranty implied by law that if a seller knows or has reason to know of a particular purpose for which some item is being purchased by the buyer, the seller is guaranteeing that the item is fit for that particular purpose.
In international sales law, the obligation is found in Article 35(2)(b) of the United Nations Convention on Contracts for the International Sale of Goods.
In Australia, the obligation is in section 55 of Schedule 2 ("The Australian Consumer Law") of the Competition and Consumer Act 2010 (Cth).
In the United States, the obligation is in Article 2, Section 315 of the Uniform Commercial Code. The warranty of fitness differs from a warranty of merchantability in that it applies to all sellers, not only professional merchants. In the United States, this warranty is sometimes referred to simply as a warranty of fitness.
An implied warranty of merchantability is a warranty implied by law that goods are reasonably fit for the general purpose for which they are sold.
In international sales law, merchantability forms part of the ordinary purpose of the goods. According to Article 35(2)(a) of the United Nations Convention on Contracts for the International Sale of Goods, a seller must provide goods fit for their ordinary purpose.
In Australia, the obligation is in section 54 of Schedule 2 ("The Australian Consumer Law") of the Competition and Consumer Act 2010 (Cth). Each State and Territory now applies the Australian Consumer Law (ACL) as the law of the state. This has created a uniform consumer protection law across the entire country.
In the United States, the obligation is in Article 2 of the Uniform Commercial Code (UCC). This warranty will apply to a merchant (that is, a person who makes an occupation of selling things) who regularly deals in the type of merchandise sold.
Under US law, goods are 'merchantable' if they meet the following conditions:
If the merchandise is sold with an express "guarantee", the terms of the implied warranty of merchantability will fill the gaps left by that guarantee. If the terms of the express guarantee are not specified, they will be considered to be the terms of the implied warranty of merchantability. The UCC allows sellers to disclaim the implied warranty of merchantability, provided the disclaimer is made conspicuously and the disclaimer explicitly uses the term "merchantability" in the disclaimer.[1] Some states, however, have implemented the UCC such that this can not be disclaimed.
An implied warranty of habitability, generally, is a warranty implied by law that by leasing or buying a residential property, the lessor or seller is promising that the property is suitable to be lived in. The warrant of habitability can be breached if there is no heat, hot water, or other essential services. Also, safety issues like no smoke alarm or other fire code issues can be considered to make a dwelling uninhabitable. Also, if the municipality has not issued a certificate of occupancy, it is not legal and is thus uninhabitable. The breach of the implied warrant of habitability can be used to legally break a lease. If the factors have been created or are controllable by the landlord and he has not fixed them despite ample written notification, this situation can also be considered constructive eviction, which allows the tenant to break the lease, but also may allow the tenant to sue for damages in some jursidictions.
In some jurisdictions, an implied warranty in a sales contract can be expressly disclaimed by the use of specific language, such as the words, "as is" or "with all faults".
In the United States, a disclaimer must be conspicuous in the contract, e.g., in a different kind of print or font that makes it stand out. On the other hand, express warranty, that is, any affirmation of fact or promise to the buyer, or description of the good, oral or written, can be negated or limited only if such disclaimers are not unreasonable. (Uniform Commercial Code, Section 2-316 (1)).
Some jurisdictions, however, limit the ability of sellers or manufacturers to disclaim the implied warranty of merchantability or fitness, such as Massachusetts. (Massachusetts General Laws, Chapter 106: Section 2-316A).
Contractual language can also limit the remedies available for breach of an implied warranty - for example, capping recoverable damages or limiting the remedy to a replacement of a defective item. However, such a term can be found to be unconscionable. For example, if a defective product causes a personal injury, a contractual provision limiting recovery in such a case will be deemed prima facie unconscionable. (Uniform Commercial Code, §2-719(3).)