Warranties: express, merchantability and fitness

Long Beach, California, October nineteen seventy eight. A man walks through a boat show. He belongs to a yacht club in Waikiki, he has been to sailing school, he has joined the Coast Guard Auxiliary, and he has sailed on many yachts to learn what he likes. He has never owned one. He picks up brochures. One describes a forty one foot sailboat, the Island Trader, as a picture of sure-footed seaworthiness. Another calls it a carefully well-equipped, and very seaworthy live-aboard vessel.
He tells the salesman he wants a boat that is ocean-going and will cruise long distances. He asks a friend in the boat building business to look it over. The friend and an associate, both experienced with sailboats, say it will suit him. He pays seventy five thousand six hundred and ten dollars. After delivery, a dispute arises about whether the boat is seaworthy at all.
So here is the question. The seller never used the word warranty. The seller never promised anything in writing about keeping the boat working. The buyer had his own experts look. Did a sentence in an advertising brochure become a term of the contract, so that the seller is liable if the boat is not what the brochure said? Think about it before I go on.
And now the question I keep asking. What exactly did these people promise each other? A boat, for a price. But which boat? The one on the dock, or the one in the brochure? Today the Code's answer, in three warranties. The express warranty, made by what the seller says. The implied warranty of merchantability, made by what the seller is. And the implied warranty of fitness for a particular purpose, made by what the buyer relies on.
Here is the first line for the board, from section two dash three thirteen. Any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise. The same for any description of the goods, and for any sample or model.
And its limit. It is not necessary to the creation of an express warranty that the seller use formal words such as warrant or guarantee or that he have a specific intention to make a warranty, but an affirmation merely of the value of the goods or a statement purporting to be merely the seller's opinion or commendation of the goods does not create a warranty. Sales talk is not a warranty. A fact is.
Second line, section two dash three fourteen. Unless excluded or modified, a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind. Goods to be merchantable must be at least such as pass without objection in the trade under the contract description, and are fit for the ordinary purposes for which such goods are used. And note this.
Under this section the serving for value of food or drink to be consumed either on the premises or elsewhere is a sale.
Third line, section two dash three fifteen, and I will read all of it. Where the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller's skill or judgment to select or furnish suitable goods, there is unless excluded or modified under the next section an implied warranty that the goods shall be fit for such purpose.
Now the case. Keith against Buchanan, California Court of Appeal, nineteen eighty five, Justice Ochoa. The trial judge threw the buyer out at the close of his own case. No express warranty, because nothing in writing undertook to maintain the boat or pay if it failed, and the brochure statements were opinions or commendations. No fitness warranty, because the buyer relied on his own experts, not the seller.
The Court of Appeal reversed on the first and affirmed on the second, and the reasons are the lecture.
The court set out the three questions for any express warranty claim. First, the court must determine whether the seller's statement constitutes an affirmation of fact or promise or description of the goods, or whether it is rather merely the seller's opinion or commendation of the goods. Second, whether the statement was part of the basis of the bargain. Third, the court must determine whether the warranty was breached.
On the first question the court borrowed an image I want you to keep. Express warranties are chisels in the hands of buyers and sellers. With these tools, the parties to a sale sculpt a monument representing the goods. The seller is bound to deliver, and the buyer to accept, goods that match the sculpted form. Every factual statement chips the stone. The more the seller says, the more precisely he has described what he must deliver.
Then the presumption. Statements made by a seller during the course of negotiation over a contract are presumptively affirmations of fact unless it can be demonstrated that the buyer could only have reasonably considered the statement as a statement of the seller's opinion. And the marks of opinion. A lack of specificity in the statement made, a statement that is made in an equivocal manner, or a statement which reveals that the goods are experimental in nature.
Apply it. The statements in the brochure are specific and unequivocal in asserting that the vessel is seaworthy. Nothing in the negotiation indicates that the vessel is experimental in nature. In fact, one sales brochure assures prospective buyers that production of the vessel was commenced after years of careful testing. A brochure sent to the public to induce sales can create express warranties. Seaworthy was a fact.
The second question is the one that changed the law. The old rule required the buyer to prove that he acted in reliance upon the statement. The Code says only that the statement must become part of the basis of the bargain. And the court read the difference for all it was worth. A buyer need not show that he would not have entered into the agreement absent the warranty or even that it was a dominant factor inducing the agreement.
It is clear from the new language of this code section that the concept of reliance has been purposefully abandoned. So the burden moves. A warranty statement made by a seller is presumptively part of the basis of the bargain, and the burden is on the seller to prove that the resulting bargain does not rest at all on the representation.
What about the buyer's own experts? Where the buyer inspects the goods before purchase, he may be deemed to have waived the seller's express warranties. But an examination or inspection by the buyer of the goods does not necessarily discharge the seller from an express warranty if the defect was not actually discovered and waived. Here the boat builders looked at her on land. There was no testing of the vessel in the water.
Seaworthiness necessarily relates to the time when the vessel has been put to sea. Although he had other experts inspect the vessel, the inspection was limited and would not have indicated whether or not the vessel was seaworthy. It is clear that the seller has not overcome the presumption that the representations regarding seaworthiness were part of the basis of this bargain. Express warranty established. Breach to be tried on remand.
Now the fitness warranty, and the same buyer loses. The court listed four elements. The purchaser at the time of contracting intends to use the goods for a particular purpose. The seller at the time of contracting has reason to know of this particular purpose. The buyer relies on the seller's skill or judgment to select or furnish goods suitable for the particular purpose.
And the seller at the time of contracting has reason to know that the buyer is relying on such skill and judgment.
The third is the heart of it. The major question in determining the existence of an implied warranty of fitness for a particular purpose is the reliance by the buyer upon the skill and judgment of the seller to select an article suitable for his needs. This buyer had extensive experience with sailboats. He had developed precise specifications in regard to the type of boat he wanted to purchase. He looked at many boats. He brought his own experts. He chose.
The seller did not select the boat for him, so the seller did not warrant that the boat fit his purpose.
Hold those two results side by side. The seller's statement of fact bound the seller although the buyer investigated for himself. The seller's skill did not bind the seller, because the buyer did not rely on it. Different warranties, different sources, different answers.
Now a buyer who did rely. Cove, Arkansas. A man has run a sawmill since nineteen fifty six. In nineteen sixty three he converts to hydraulic equipment, and in November nineteen sixty four he installs it. He asks Frank Rowe, the local Mobil dealer he has bought from for years, for the proper hydraulic fluid to operate his machinery. Rowe said he didn't know what the proper lubricant for Lewis' machinery was, but would find out.
The only information given was that the pump was a gear-type pump. Rowe asked nothing more.
Rowe checked with Mobil and sold him Ambrex eight ten, a straight mineral oil with no chemical additives. Within days, the oil changed color, foamed over, and got hot. Six months later the whole system failed and was replaced. Over the next two years six new pumps broke down. The mill owner kept asking Rowe to be sure he was supplying the right oil. Ambrex kept coming.
In May nineteen sixty seven a Mobil engineer finally visits the mill. The system is flushed, and on his recommendation a new oil with additives goes in, principally a defoamant. Following these changes, plaintiff's system worked satisfactorily up until the time of trial, some two and one-half years later. The jury gave the mill owner eighty nine thousand two hundred and fifty dollars.
The Eighth Circuit, in Lewis against Mobil Oil, nineteen seventy one, Judge Gibson, affirmed the warranty. Under this provision of the Code, there are two requirements for an implied warranty of fitness. That the seller have reason to know of the use for which the goods are purchased, and that the buyer relies on the seller's expertise in supplying the proper product. Both of these requirements are amply met by the proof in this case.
Mobil argued that the buyer never said he needed additives and never gave enough information to work it out. The court answered with the statute's own comment. The buyer need not bring home to the seller actual knowledge of the particular purpose for which the goods are intended or of his reliance on the seller's skill and judgment, if the circumstances are such that the seller has reason to realize the purpose intended or that the reliance exists.
And then the sentence that decides these cases. Here Lewis made it clear that the oil was purchased for his system, that he didn't know what oil should be used, and that he was relying on Mobil to supply the proper product. If any further information was needed, it was incumbent upon Mobil to get it before making its recommendation. The seller who undertakes to choose must ask the questions. The buyer who says I do not know has done his part.
Mobil tried one more argument, that the mill's system was abnormal, with poor filtration and too much air. The court called that a causation question, not a warranty question, and added this. The whole point of an implied warranty of fitness is that a product be suitable for a specific purpose, and that a seller should not supply a product which is not so suited.
Now merchantability, and a bowl of chowder. Boston, Saturday, the twenty fifth of April, nineteen fifty nine, about one in the afternoon. A woman born and brought up in New England takes her sister and her aunt to lunch at the Blue Ship Tea Room, on the third floor of an old building on T Wharf which overlooks the ocean. She orders clam chowder. There is none. She orders a cup of fish chowder. A small bowl arrives, hot, milky, haddock and potatoes in chunks.
She stirs it in an up and under motion, for an even distribution of fish and potatoes. She eats three or four spoonfuls and stops. Something is lodged in her throat. Two esophagoscopies at the Massachusetts General Hospital later, a fish bone is found and removed. She sues the restaurant for breach of the implied warranty of merchantability. The jury finds for her.
The Supreme Judicial Court of Massachusetts, in Webster against Blue Ship Tea Room, nineteen sixty four, Justice Reardon, reversed, and did it with a whole cookbook. We must decide whether a fish bone lurking in a fish chowder, about the ingredients of which there is no other complaint, constitutes a breach of implied warranty under applicable provisions of the Uniform Commercial Code.
The court traced chowder from the cauldrons of Brittany through Newfoundland to New England, quoted a recipe from Daniel Webster in which the removal of fish bones is not mentioned at all, and quoted Fannie Farmer, who boils the head, tail and backbone and adds the liquor to the pot. In the construction of chowders in these parts in other years, worries about fish bones played no role whatsoever.
Then the holding. It is not too much to say that a person sitting down in New England to consume a good New England fish chowder embarks on a gustatory adventure which may entail the removal of some fish bones from his bowl as he proceeds.
We should be prepared to cope with the hazards of fish bones, the occasional presence of which in chowders is, it seems to us, to be anticipated, and which, in the light of a hallowed tradition, do not impair their fitness or merchantability.
Notice what the court did and did not decide. It drew a line. We sense a strong distinction between them and those relative to unwholesomeness of the food itself, and it named tainted mackerel on the other side. Stones in beans, trichinae in pork, a foreign substance, those breach the warranty. A bone that belongs to the fish in a fish dish does not. The court borrowed an Ohio case on oyster shell.
The possible presence of a piece of oyster shell in or attached to an oyster is so well known to anyone who eats oysters that we can say as a matter of law that one who eats oysters can reasonably anticipate and guard against eating such a piece of shell. The test is what the ordinary buyer of these goods reasonably expects. Fit for the ordinary purposes for which such goods are used, and the ordinary purpose of chowder includes fishing for bones.
Put the three side by side. Keith, a specific factual statement in a brochure, an express warranty, and reliance is presumed. Lewis, a buyer who said I do not know and a seller who said I will find out, a fitness warranty, and the seller had to ask the questions. Webster, a restaurant that is a merchant in chowder, a merchantability warranty, and no breach because the hazard was one the ordinary eater anticipates. One question runs through all three.
What did the seller undertake, by his words, by his trade, or by his choice?
Now let's change one fact. The brochure had said only that the Island Trader is the finest cruising yacht on the market today. Choose an answer before I go on.
Then there is no express warranty. That is an affirmation merely of the value of the goods, a statement of opinion or commendation. It lacks specificity, it asserts no fact about the boat that can be true or false, and no reasonable buyer treats it as anything but sales talk. The Keith court found a warranty because seaworthy is a condition of the vessel, specific and unequivocal. Finest on the market is a chisel that cuts nothing.
Change one fact again. The mill owner had walked into the dealer's office and asked for Ambrex eight ten by name, because a magazine had recommended it. Choose.
Now the fitness warranty fails, for the reason the boat buyer's failed. The buyer selected the product himself. The seller had no reason to know that he was being relied upon, and the buyer did not in fact rely on the seller's skill or judgment. The merchantability warranty may remain, if the oil is unfit for the ordinary purposes of a hydraulic oil, but fitness for this mill's particular system was never undertaken by Mobil. Reliance is the hinge of section two dash three fifteen.
Change one fact a third time. What lodged in her throat was not a fish bone but a fragment of glass from a broken bowl. Choose.
Then the warranty is breached. The Webster court was explicit that it was deciding about a bone that belongs in a fish dish, and that there is a strong distinction between such cases and those of foreign substances and unwholesome food. Glass is not a hazard the ordinary eater of chowder anticipates, and no hallowed tradition puts it there. The goods were not fit for the ordinary purposes for which such goods are used. The chowder was unmerchantable.
Here is what people get wrong here, and why it is tempting. The first mistake is to demand proof of reliance for an express warranty. The old law did. The Code does not, and Keith says the concept has been purposefully abandoned. The seller must prove the bargain did not rest on the statement at all. The second mistake is to confuse the two implied warranties. Merchantability asks whether the goods do what such goods ordinarily do.
Fitness asks whether they do what this buyer needed, and it arises only where the seller knew the need and the buyer relied.
The third mistake is to think that any inspection by the buyer wipes out the seller's express words. It does not, unless the defect was actually discovered and waived, and an inspection that could not have revealed the defect waives nothing.
Here is the rule, in one breath. A seller's affirmation of fact, promise, description or sample that becomes part of the basis of the bargain is an express warranty, presumed part of the bargain without proof of reliance, but mere opinion, commendation or value is not. A merchant in goods of the kind impliedly warrants that they are merchantable, fit for their ordinary purposes as buyers of such goods reasonably expect.
And any seller who has reason to know the buyer's particular purpose and that the buyer is relying on the seller's skill or judgment to select suitable goods impliedly warrants that they are fit for that purpose. Now, five questions.