Risk of Loss
Warranties VI--Disclaiming the Warranties
Just when you think you understand how warranties work, or at least the basic principles of warranty law under the UCC, you discover that a merchant can disclaim the warranties that we took so much time to try to understand. It is almost as if the left hand is now taking away what the right hand has given. But, as you probably suspected, it is not as simple as that. Disclaiming warranties must be done in proper ways, and not all warranties may be disclaimed. Furthermore, disclaimer of warranties cannot run afoul of other remedy provisions in Article 2, especiall 2-718 and 2-719. With this in mind, let's turn to 2-316, on "Exclusion or Modification of Warranties."
Express Warranties. The Code apparently provides for the possibility of this type of disclaimer in 2-316(1), but a close reading of the language suggests that such a disclaimer will rarely if ever be operative. That is, if an express warranty is given and an attempted disclaimer follows, the two provisions "shall be construed wherever reasonable as consistent with each other." Hm. A disclaimer, by its very nature, takes away. How can they be construed "as consistent?" Furthermore, if the construction becomes "unreasonable," the negation or limitation is inoperative. Remember also that 2-313 has a very broad definition of warranty. Thus, if you are representing a plaintiff, construe as much as you can from the transaction as express warranty.
Implied Warranties. 2-316(2) provides that to disclaim the IWM one needs to use the magic word "merchantability" and, if in a writing, the disclaimer must be conspicuous. Recall that you need to learn the definition of conspicuous (1-201(10)) and use words from that definition when analyzing whether a particular disclaimer is conspicuous. The IWF, however, can be disclaimed with more general words, even though an IWF disclaimer must be in a writing. No reason for different treatment is given, but I suppose that because the IWF is a more specific warranty, the drafters wanted to make sure that a tangible thing (a writing) was used for disclaiming it.
Almost every legal rule has its exceptions, and 2-316(3) is the limitation or exception to (2). Unless the circumstances indicate otherwise [and this is a big unless, for here one can refer to the implied warranty created by course of dealing or usage of trade...2-314(3)], implied warranties may be disclaimed by expressions such as "as is," and "with all faults." The Code never says whether these disclaimers must be conspicuous, but the reasoning of Gindy is persuasive to me that such a requirement is implied. Thus, one needs to examine the type size of the disclaimer, its location in the document and its clarity, among other things.
Limitations on Remedies. One has to read 2-316 in connection with 2-718 and 2-719, because a first reading of 2-316 may lead to the conclusion that all liabilty or responsibility of the seller for the product can be excluded. This reading is incorrect for two reasons. First, Article 2 recognizes that the Code does not eliminate or curtail remedies through other statutes (such as consumer protection laws...note the very important last words of 2-102). Then, Article 2 provides that remedies may only be disclaimed to the extent that it is "reasonable" (2-718). The doctrines of unconscionability and "failure of essential purpose" are expressly mentioned in 2-719(2) and (3) as limitations on the seemingly unlimited power of sellers to limit implied warranties. Note Comment 1 to 2-719, "[I]t is of the very essence of a sales contract that at least minimum adequate remedies be available."