implied warranty

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An implied warranty is a guarantee that is not written down or explicitly spoken. Article 2 of the Uniform Commercial Code ("UCC") governs the sale of goods. An implied warranty is automatically presumed regarding the sale of goods or real property, which prevents a risk from transferring to the buyer. An implied warranty is different from an express warranty, where the seller has expressly promised by words (i.e. orally or in writing) or conduct (e.g., sample or model).

There are many types of implied warranties including an implied warranty of merchantability,  an implied warranty of fitness, an implied warranty of habitability (for a lease), and an implied warranty of marketability (for the sale of real property, also known as a marketable title).

An implied warranty of merchantability applies when someone buys goods from a merchant. To be merchantable, goods must be fit for their ordinary purpose and pass without objection in the trade under the description; see U.C.C. § 2-314. Unless the circumstances indicate otherwise, the implied warranty can be disclaimed by use of “as is,” “with all faults,” or similar language that makes plain that there is no implied warranty. While the warranty disclaimer may be communicated verbally, if in writing, the term “merchantability” must be conspicuous per U.C.C. § 2-316 (2) - the Exclusion or Modification of Warranties. If the buyer fully examines the goods or a sample or model, or if they refused to examine the goods prior to purchase - then there is no implied warranty with respect to defects, as an examination ought to have revealed them to the buyer; see U.C.C. § 2-316 (3).

An implied warranty of fitness for a particular purpose is presumed whenever the seller (the seller need not be a merchant for it to apply) has a reason to know that the buyer has a particular use for the goods and they are relying on the seller’s skill to select suitable goods. It also can be disclaimed by general language, but the disclaimer must be in writing and be conspicuous; see U.C.C § 2-315.

In short, merchantability means that the goods are generally acceptable, while fitness for a particular purpose means goods are specifically suitable.

An implied warranty of habitability is the landlord’s obligation to residential leases.

The landlord is to maintain the property suitable for residential use (minimal living requirements must be met), particularly with regard to circumstances that substantially threaten the tenant’s health and safety.  This warranty generally cannot be waived by the tenant, either by express language in the lease or by taking possession of the property with knowledge of the conditions, because. If the premises are not habitable, If the warranty is breached, the tenant is entitled to one of four options (a) move out and terminate the lease, (b)remedy the defect and offset the cost against the rent, (c) reduced rent or withhold all the rent until the court determines fair rental value, (d) remain in possession and pay rent and affirmatively sue the landlord for money damages. But the tenant must first notify the landlord of the problem and give the landlord a reasonable opportunity to correct the problem (See example: N.Y Real Prop. Acts. L. § 235.

A real property sale contract contains no implied warranties of fitness or habitability unless it’s new construction by a builder. This exception is called the warranty of housing merchants, and may vary by state. If the construction of a new house is defective, the responsible builder should bear the repair costs as the latent defect is presumed created by them. Usually, privity of contract is not required, thus both the original and subsequent buyers may recover damages. But suits for breach of this warranty must be brought within a reasonable time; see N.Y. Gen. Bus. § 777 for the New York State law. 

A marketable title is the warranty of good title against infringement, which implies no liens or encumbrances. If there is a title defect that impairs the title's marketability, the buyer can rescind the contract or sue the seller for breach of contract. However, when the buyer accepts the deed of real property, a waiver will occur, as the contract merges into the deed at closing.

[Last updated in March of 2022 by the Wex Definitions Team]