1. Exclusion of warranty
2. Applicability of section
3. Implied warranty
1. Exclusion of warranty
The use of an "as is" clause to exclude the implied warranty of merchantability cannot be against the public policy of this state when it mirrors the statutory requirements specifically allowing for such exclusion. Wilke v. Woodhouse Ford, 278 Neb. 800, 774 N.W.2d 370 (2009).
Under Neb. U.C.C. section 2-316(3), all implied warranties are excluded by expressions like "as is", "with all faults", or other language which in common understanding calls the buyer's attention to the exclusion of warranties and makes plain that there is no implied warranty. Koperski v. Husker Dodge, Inc., 208 Neb. 29, 302 N.W.2d 655 (1981).
Disclaimers of warranty made at or after delivery of the goods by means of an invoice, receipt, or similar document are ineffective unless the buyer assents or is charged with knowledge as to the transaction. Pfizer Genetics, Inc. v. Williams Management Co., 204 Neb. 151, 281 N.W.2d 536 (1979).
This statute restricts the effect of language attempting to limit or negate an express warranty. Neville Const. Co. v. Cook Paint and Varnish Co., 671 F.2d 1107 (8th Cir. 1982).
2. Applicability of section
Discussed in opinion holding Uniform Commercial Code applicable rather than strict tort liability in case involving damage to all property. Hawkins Constr. Co. v. Matthews Co., Inc., 190 Neb. 546, 209 N.W.2d 643 (1973).
3. Implied warranty
Where seller had reason to know particular purpose for which goods were required and that buyer was relying on seller's skill to furnish suitable goods, there was an implied warranty unless excluded or modified under this section. Shotkoski v. Standard Chemical Manuf. Co., 195 Neb. 22, 237 N.W.2d 92 (1975).
Where seller at time of contracting has reason to know a particular purpose for which goods are required, and that buyer is relying on seller's skill or judgment to select or furish suitable goods, there is, unless excluded or modified under this section, an implied warranty that the goods shall be fit for such purpose. Ruskamp v. Hog Builders, Inc., 192 Neb. 168, 219 N.W.2d 750 (1974).
Where seller at time of contracting has reason to know particular purpose for which goods are required and that buyer is relying on seller's skill or judgment to select or furnish suitable goods there is, unless excluded or modified, an implied warranty that the goods shall be fit for such purpose. Larutan Corp. v. Magnolia Homes Manuf. Co., 190 Neb. 425, 209 N.W.2d 177 (1973).
Sewage processing plant constructed for sale to city's pollution control corporation by private company was subject to implied warranty of merchantability and of fitness for particular purpose for which it was to be used, and city could recover for breach. Omaha Pollution Control Corp. v. Carver-Greenfield Corp., 413 F.Supp. 1069 (D. Neb. 1976).
The party formulating a contract will not be permitted to so fashion it as to mislead the other party by setting forth a clearly apparent promise or representation in order to induce acceptance and then designedly burying elsewhere in the document, in fine print, provisions which purport to limit or take away the promise or preclude recovery for the failure to fulfill it. Hillcrest Country Club v. N.D. Judds Co., 236 Neb. 233, 461 N.W.2d 55 (1990).
Instruction allowing jury to find an exclusion of implied warranty of fitness of bull for breeding by trade usage held proper. Torstenson v. Melcher, 195 Neb. 764, 241 N.W.2d 103 (1976).
Prior Uniform Statutory Provision: None. See sections 15 and 71, Uniform Sales Act.
1. This section is designed principally to deal with those frequent clauses in sales contracts which seek to exclude "all warranties, express or implied". It seeks to protect a buyer from unexpected and unbargained language of disclaimer by denying effect to such language when inconsistent with language of express warranty and permitting the exclusion of implied warranties only by conspicuous language or other circumstances which protect the buyer from surprise.
2. The seller is protected under this article against false allegations of oral warranties by its provisions on parol and extrinsic evidence and against unauthorized representations by the customary "lack of authority" clauses. This article treats the limitation or avoidance of consequential damages as a matter of limiting remedies for breach, separate from the matter of creation of liability under a warranty. If no warranty exists, there is of course no problem of limiting remedies for breach of warranty. Under subsection (4) the question of limitation of remedy is governed by the sections referred to rather than by this section.
3. Disclaimer of the implied warranty of merchantability is permitted under subsection (2), but with the safeguard that such disclaimers must mention merchantability and in case of a writing must be conspicuous.
4. Unlike the implied warranty of merchantability, implied warranties of fitness for a particular purpose may be excluded by general language, but only if it is in writing and conspicuous.
5. Subsection (2) presupposes that the implied warranty in question exists unless excluded or modified. Whether or not language of disclaimer satisfies the requirements of this section, such language may be relevant under other sections to the question whether the warranty was ever in fact created. Thus, unless the provisions of this article on parol and extrinsic evidence prevent, oral language of disclaimer may raise issues of fact as to whether reliance by the buyer occurred and whether the seller had "reason to know" under the section on implied warranty of fitness for a particular purpose.
6. The exceptions to the general rule set forth in paragraphs (a), (b), and (c) of subsection (3) are common factual situations in which the circumstances surrounding the transaction are in themselves sufficient to call the buyer's attention to the fact that no implied warranties are made or that a certain implied warranty is being excluded.
7. Paragraph (a) of subsection (3) deals with general terms such as "as is", "as they stand", "with all faults", and the like. Such terms in ordinary commercial usage are understood to mean that the buyer takes the entire risk as to the quality of the goods involved. The terms covered by paragraph (a) are in fact merely a particularization of paragraph (c) which provides for exclusion or modification of implied warranties by usage of trade.
8. Under paragraph (b) of subsection (3) warranties may be excluded or modified by the circumstances where the buyer examines the goods or a sample or model of them before entering into the contract. "Examination" as used in this paragraph is not synonymous with inspection before acceptance or at any other time after the contract has been made. It goes rather to the nature of the responsibility assumed by the seller at the time of the making of the contract. Of course if the buyer discovers the defect and uses the goods anyway, or if he or she unreasonably fails to examine the goods before he or she uses them, resulting injuries may be found to result from his or her own action rather than proximately from a breach of warranty. See sections 2-314 and 2-715 and comments thereto.
In order to bring the transaction within the scope of "refused to examine" in paragraph (b), it is not sufficient that the goods are available for inspection. There must in addition be a demand by the seller that the buyer examine the goods fully. The seller by the demand puts the buyer on notice that he or she is assuming the risk of defects which the examination ought to reveal. The language "refused to examine" in this paragraph is intended to make clear the necessity for such demand.
Application of the doctrine of "caveat emptor" in all cases where the buyer examines the goods regardless of statements made by the seller is, however, rejected by this article. Thus, if the offer of examination is accompanied by words as to their merchantability or specific attributes and the buyer indicates clearly that he or she is relying on those words rather than on his or her examination, they give rise to an "express" warranty. In such cases the question is one of fact as to whether a warranty of merchantability has been expressly incorporated in the agreement. Disclaimer of such an express warranty is governed by subsection (1) of the present section.
The particular buyer's skill and the normal method of examining goods in the circumstances determine what defects are excluded by the examination. A failure to notice defects which are obvious cannot excuse the buyer. However, an examination under circumstances which do not permit chemical or other testing of the goods would not exclude defects which could be ascertained only by such testing. Nor can latent defects be excluded by a simple examination. A professional buyer examining a product in his or her field will be held to have assumed the risk as to all defects which a professional in the field ought to observe, while a nonprofessional buyer will be held to have assumed the risk only for such defects as a layperson might be expected to observe.
9. The situation in which the buyer gives precise and complete specifications to the seller is not explicitly covered in this section, but this is a frequent circumstance by which the implied warranties may be excluded. The warranty of fitness for a particular purpose would not normally arise since in such a situation there is usually no reliance on the seller by the buyer. The warranty of merchantability in such a transaction, however, must be considered in connection with the next section on the cumulation and conflict of warranties. Under paragraph (c) of that section in case of such an inconsistency the implied warranty of merchantability is displaced by the express warranty that the goods will comply with the specifications. Thus, where the buyer gives detailed specifications as to the goods, neither of the implied warranties as to quality will normally apply to the transaction unless consistent with the specifications.
Point 2: Sections 2-202, 2-718, and 2-719.
Point 7: Sections 1-205 and 2-208.
Definitional Cross References:
"Agreement". Section 1-201.
"Buyer". Section 2-103.
"Contract". Section 1-201.
"Course of dealing". Section 1-205.
"Goods". Section 2-105.
"Remedy". Section 1-201.
"Seller". Section 2-103.
"Usage of trade". Section 1-205.