Contracts · Implied Warranty of Merchantability

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Official Scope

12. Implied Warranty of Merchantability

In a contract governed by the UCC, 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 and the warranty is not disclaimed. §§ 2- 314, 2-316.

Scope of tested knowledge

The implied warranty of merchantability applies only to sellers of goods who qualify as “merchants with respect to goods of that kind” under the UCC.
A merchant for this rule is “one who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the . . . goods involved in the transaction.” UCC § 2–104(1). Test-takers need not memorize this language but should understand the meaning of “merchant” under the UCC.
Three common aspects of merchantability are that merchantable goods must:
pass without objection in the trade under the contract description;
be fit for the ordinary purpose for which such goods are used; and
[conform to any promises or affirmations of fact made on the container or label].
The implied warranty of merchantability applies to all contracts for the sale of goods, whether oral or in a record.
There are several ways to exclude or modify the implied warranty of merchantability under the UCC:
The general rule is that the language of exclusion or modification must explicitly mention merchantability and, in the case of a record, must be conspicuous.
Despite that general rule, the warranty of merchantability may be excluded by expressions like “as is” or “with all faults.”
The warranty of merchantability may also be excluded with respect to defects that examination of the goods ought to have revealed, [if the buyer examined the goods before entering into the contract or refused to examine them].

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Plain Language

Bottom line

In a UCC contract for the sale of goods, a warranty that the goods shall be merchantable is implied if the seller is a merchant with respect to goods of that kind and the warranty has not been disclaimed.

This warranty is UCC territory, so the first thing to fix in your mind is the governing-law frame: the implied warranty of merchantability exists only in a contract governed by the UCC, a contract for the sale of goods. In such a contract, a warranty that the goods shall be merchantable is implied if two things are true: the seller is a merchant with respect to goods of that kind, and the warranty has not been disclaimed. That merchant gate is the headline. The warranty applies only to sellers who qualify as merchants with respect to goods of that kind. A merchant for this rule is one who deals in goods of the kind, or who by occupation holds himself out as having knowledge or skill peculiar to those goods. A casual seller, someone selling outside their line, is not a merchant of that kind, and no merchantability warranty is implied.

Three common aspects of merchantable goods

1They pass without objection in the trade under the contract description.
2They are fit for the ordinary purpose for which such goods are used. This is the workhorse.
3They conform to any promises or affirmations of fact made on the container or label.

Note the reach: the warranty applies to all contracts for the sale of goods, whether oral or in a record. It does not depend on a writing. Finally, disclaimer. The warranty can be excluded or modified several ways. The general rule is that the exclusion or modification must explicitly mention merchantability and, in a record, must be conspicuous. Despite that, the warranty may be excluded by expressions like "as is" or "with all faults," which do not have to say the word merchantability. And it may be excluded as to defects an examination ought to have revealed, if the buyer examined the goods before contracting or refused to examine them. So a buyer who inspects, or refuses to inspect, gives up the warranty for defects the inspection would have shown.

Watch out

The standard is fitness for the ordinary purpose for which such goods are used. A buyer's intended unusual use does not control; ordinary purpose does.

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Make it Stick

Memory hook

"UCC goods, merchant of that kind, not disclaimed."

The warranty is implied only when the seller deals in goods of that kind; a casual or out-of-line seller gives no merchantability warranty.

Merchantable means, above all, fit for the ordinary purpose.

Applies to oral or written sales alike.

Disclaimer: must mention merchantability and be conspicuous in a record, but "as is" or "with all faults" works without the magic word, and inspecting or refusing to inspect waives the warranty for defects the look would have revealed.

Throwaway: the buyer's intended unusual use does not control; ordinary purpose does.

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Rule in Action

The facts

A buyer purchases a chain saw from a hardware store that regularly sells chain saws and similar power tools. Nothing in the deal disclaims any warranty. The saw's motor seizes the first time it is used to cut ordinary firewood, a routine job for a chain saw.

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UCC and goods?YesA chain saw is goods and the sale is governed by the UCC.

2

Merchant with respect to goods of that kind?YesA hardware store that regularly sells chain saws deals in goods of that kind, so it is a merchant for this rule.

3

Merchantable?NoThe saw was not fit for the ordinary purpose for which such goods are used; cutting firewood is exactly that ordinary purpose, and it failed at once.

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Disclaimed?NoNothing excluded the warranty. The implied warranty of merchantability was made and breached.

Change the seller

Suppose instead the buyer bought the same saw from a neighbor having a yard sale, a person who does not deal in tools. No merchantability warranty is implied at all, because the neighbor is not a merchant with respect to goods of that kind.

Change the deal terms

If the hardware store had sold the saw "as is," that expression would exclude the merchantability warranty even though it never used the word merchantability.

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Common Distractors

Misstated standard

An answer that implies the warranty against a non-merchant seller, treats every seller as covered, or says a disclaimer must always name merchantability.

The warranty applies only to merchants with respect to goods of that kind, and 'as is' / 'with all faults' disclaims it without naming merchantability.

Timing / threshold

An answer keyed to the buyer's particular intended use rather than the ordinary purpose, or that revives coverage for a defect a pre-sale examination should have caught.

Merchantability turns on fitness for the ordinary purpose, and examination excludes only defects it ought to have revealed.

True but irrelevant

A 'no warranty' answer resting on the sale being oral rather than in a record, or on later breakage despite a valid disclaimer.

The warranty applies to oral and written sales alike, and a valid disclaimer (like 'as is') controls regardless of later failure.

Right result, wrong reason

A correct outcome reached through a consequence the rule does not turn on, such as ordinary-use failure when no warranty ever arose.

Name the operative reason: the merchant gate or the ordinary-purpose standard, not a downstream fact.

Overstatement

An absolute: a merchant warrants against every defect, a written contract waives all implied warranties, or any inaccurate statement anywhere makes goods unmerchantable.

Each overstates a bounded rule; the warranty is limited by disclaimer, the examination carve-out, and the listed aspects (including affirmations on the container or label).

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How It's Tested

When you see

a buyer gets goods that fail, and the stem foregrounds who the seller is (a dealer in this kind of item, or a casual/one-off seller), what the goods were used for (an ordinary use or a quirky one the buyer had in mind), and any disclaimer language ("as is," a conspicuous clause, or a pre-sale inspection).

Run the analysis

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confirm the UCC/goods frame.

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Then run the merchant gate: did the seller deal in goods of that kind?

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If not, stop, no warranty.

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If yes and not disclaimed, ask whether the goods were fit for the ordinary purpose.

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Then check disclaimer: mention-merchantability-and-conspicuous, or the shortcut "as is"/"with all faults," or the examination carve-out for defects an inspection should have caught.

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The casual seller and the buyer's odd intended use are the two facts the exam dangles to pull you off the ordinary-purpose, merchant-of-that-kind core.

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Practice

Question 1 of 5

A homeowner sold his used riding lawn mower to a neighbor at a yard sale. The homeowner works as an accountant, has never dealt in lawn equipment, and sold the mower simply because he no longer needed it. Shortly after the sale the mower's engine failed during ordinary mowing, and the neighbor sued, claiming the sale carried an implied warranty that the mower was merchantable.

Is the neighbor likely to succeed on the implied warranty of merchantability claim?

Question 2 of 5

A restaurant supply company that regularly sells commercial ovens sold a standard commercial oven to a bakery. The bakery wanted to use the oven for an unusual ceramic-glazing process that ovens of this type are not designed or ordinarily used for, and it did not tell the seller about that plan. The oven worked perfectly for ordinary baking but could not maintain the special temperatures the glazing process required. The bakery sued, claiming the oven was not merchantable.

Is the bakery likely to succeed on the implied warranty of merchantability claim?

Question 3 of 5

An appliance store that regularly sells refrigerators sold one to a customer under a written contract. The contract included a conspicuous clause stating that the refrigerator was sold "as is, with all faults," though the clause did not use the word merchantability. The refrigerator stopped cooling within a week of ordinary household use, and the customer sued, arguing that because the disclaimer never mentioned merchantability, the implied warranty survived.

Is the customer likely to succeed on the implied warranty of merchantability claim?

Question 4 of 5

A tool dealer that regularly sells power drills sold a drill to a contractor. Before agreeing to buy, the contractor fully examined the drill, and a crack in the casing was plainly visible to anyone who looked. The contractor bought the drill anyway, and it later broke at exactly that visible crack. The contractor sued, claiming the implied warranty of merchantability covered the cracked casing.

Is the contractor likely to recover for the visible crack under the implied warranty of merchantability?

Question 5 of 5

A garden center that regularly sells bagged soil and fertilizer sold several bags of potting soil to a customer. The label on each bag affirmed as a matter of fact that the soil was "free of weed seeds." The soil was usable for ordinary potting in every other respect, but it was in fact full of weed seeds, contrary to the label. The customer sued, claiming the soil was not merchantable because it did not match the factual affirmation on the bag.

Is the customer likely to succeed on the implied warranty of merchantability claim?