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Consumer Warranty Law: 11.4.5 Concealment or Nondisclosure

Fraud by silence is a species of fraud. The Florida Supreme Court has stated that “the law appears to be working toward the ultimate conclusion that full disclosure of all material facts must be made whenever elementary fair conduct demands it.”247

A Maryland decision summarizes the elements of this tort as follows:

Consumer Warranty Law: 11.4.6 Justifiable Reliance and the Buyer’s Opportunity to Inspect

Regardless of whether the claim asserts intentional, negligent, or innocent misrepresentation, a plaintiff must show reliance on the representation and that such reliance was reasonable.259 Reliance that might otherwise be justifiable may be deemed unjustifiable if contradictory information is present but the consumer fails to investigate it.260 Whether a buyer had a reasonable opportunity to inspect the property or whether a seller prevented a buyer from fully inspecting it should generally be

Consumer Warranty Law: 11.4.7 Remedies

Many jurisdictions permit plaintiffs who prove intentional misrepresentation or fraud to obtain benefit of the bargain damages.262 The Restatement (Second) of Torts measures damages for negligent misrepresentation as (1) the difference between the purchase price and the value of what the buyer received, plus (2) other pecuniary loss suffered as a consequence of the buyer’s reliance on the misrepresentation.263 For innocent misrepresentation, the Restatement limits damages to th

Consumer Warranty Law: 11.4.8 Pleading and Practice Tips

The count or counts in a complaint or counterclaim alleging misrepresentation should include each element of the tort in a separate paragraph. Plead as many different types of misrepresentation as the known facts will permit, and move to amend to include more as the facts are developed. The same fact pattern may well give rise to a complaint for intentional, negligent, and innocent misrepresentation.

Consumer Warranty Law: 4.2.2.2 “Merchants”

Because the implied warranty of merchantability protects a buyer’s reasonable expectations of quality when buying from a professional seller, the warranty arises only when the seller is a merchant with respect to goods of the kind sold in the transaction. Merchant is defined in section 2-104(1) as:

Consumer Warranty Law: 4.2.2.3 Merchant Must Be a Merchant with Respect to Goods of That Kind

A seller may be a merchant and yet not be a merchant with respect to goods of that kind, if the sale is an “isolated” sale that is incidental to the seller’s main business.50 A bank that routinely sells repossessed cars is a merchant with respect to cars, but may not be a merchant with respect to the isolated sale of a large truck, because the sale of trucks is not the bank’s business.51 An air-conditioning installer who sold one pump in six years is a merchant, but not a merchant with respect to th

Consumer Warranty Law: 4.2.3.1 General

Merchantability is a standard of quality and, as such, the concept of merchantability eludes precise definition. The Code does not define merchantable. Instead, section 2-314(2) provides that, to be merchantable, goods must at least meet six criteria:

Goods to be merchantable must be at least such as:

Consumer Warranty Law: 4.2.3.2.1 Ordinary purposes

Whether goods are fit for their ordinary purposes depends on what the “ordinary” purposes are and whether the goods are “fit” for those purposes. These determinations are questions of fact.62 The ordinary purposes of goods are determined by the function the goods were designed to perform, their normal use, and their unusual but foreseeable uses.63 In most cases, the issue is straightforward.

Consumer Warranty Law: 4.2.3.2.2 General meaning of fitness

To be fit for their ordinary purposes, goods must be of an adequate quality appropriate for those purposes. The words “adequate,” “quality,” and “appropriate” contain the same inherent definitional limitations as the word “merchantability.” Judicial precedent and common sense ideas of reasonableness yield some principles which form a framework for the fitness concept. The basic concept is that the goods must satisfy reasonable consumer expectations.72 Two general principles of fitness for the ordinary purpose are discussed below.

Consumer Warranty Law: 4.2.3.2.3 Able to do ordinary job

The first and most elementary principle of fitness is that the goods must be good enough to be able to do the ordinary job—that is, they cannot be so defective that they cannot do the job.74 A car must be substantially free of defects.75 A manufactured home must be sufficiently free of defects that it can serve as a modern, comfortable dwelling in which to reside and entertain guests without discomfort or embarrassment.76 Inconsistent or erratic performa

Consumer Warranty Law: 4.2.3.2.4 Reasonable safety, efficiency, and comfort

The second principle of fitness is that the goods must be able to do the ordinary job with reasonable safety, efficiency, and comfort.87 Cars must be able to operate with reasonable safety on the roads or they are not fit for the ordinary purpose of driving on the road.88 A vehicle’s defective air conditioning system makes the vehicle unmerchantable because of the safety risks of fog forming on the vehicle’s windows and drivers’ potential difficulties breathing.

Consumer Warranty Law: 4.2.3.2.5 Standards for used goods

Used goods are held to the same standard as new goods regarding essential qualities.102 Comment 3 to section 2-314 states that “[a] contract for the sale of second-hand goods, however, involves only such obligation as is appropriate to such goods for that is their contract description.” For used goods, then, one must determine what obligation is “appropriate” for those goods.

Consumer Warranty Law: 4.2.3.2.7 Price

Price is relevant to the fitness of the goods. Comment 7 to section 2-314 states: “In cases of doubt as to what quality is intended, the price at which a merchant closes a contract is an excellent index of the nature and scope of his obligation under the present section.” For example, a used car sold with a number of defects may be unmerchantable if the price charged was $14,000, but merchantable if sold for $4000.113

Consumer Warranty Law: 4.2.3.2.8 Government or industry standards

Government and industry standards can be especially valuable to buyers for determining fitness for ordinary purposes.114 Government and industry standards of performance, manufacture, health, and safety are adopted to provide basic protection to buyers and society, and/or to set levels of quality and uniformity for an industry. Goods that do not meet these standards do not provide the basic quality that buyers can reasonably expect.115

Consumer Warranty Law: 4.2.3.4 Passing Without Objection in the Trade

Another element of merchantability is that the goods must pass without objection in the trade under the contract description.138 This criterion may offer some proof advantages, in that it focuses less on how the product functions and more on how it is received or perceived by the buying public.139 One way of expressing the test is whether a significant segment of the buying public would object to buying the goods.140 In making this determination, t

Consumer Warranty Law: 4.3.1 Introduction

The implied warranty of fitness for a particular purpose, established by UCC § 2-315, requires the goods to be fit for the buyer’s particular purpose in buying them. This warranty is quite different from the section 2-314 implied warranty of merchantability, although both can and often do exist in the same transaction.149 Each of these UCC implied warranties has a different scope and each provides the buyer with cumulative protection of different interests.

Consumer Warranty Law: 4.3.2.1 General

As with the implied warranty of merchantability, the implied warranty of fitness for a particular purpose arises from the strong public policy of protecting reasonable buyer expectations. A seller who has reason to know that the buyer is relying on the seller’s judgment in choosing a product appropriate for the buyer’s needs should be responsible if the product is unsuitable for the job. The warranty protects the buyer’s justifiable reliance on the seller’s conduct.

Consumer Warranty Law: 4.3.2.2 “The Seller”

Because section 2-315 uses the word seller rather than the word merchant, an isolated sale by a private party can give rise to the implied particular purpose warranty.153 Comment 4 to section 2-315 expressly recognizes this: “Although normally the warranty will arise only where the seller is a merchant with the appropriate ‘skill or judgment,’ it can arise as to non-merchants where this is justified by the particular circumstances.” As comment 4 also recognizes, a non-merchant is less likely to have the skill or judgment on which a buyer can

Consumer Warranty Law: 4.3.2.3 “At the Time of Contracting Has Reason to Know”

The seller must have reason to know two things at the time of contracting: the buyer’s particular purpose, and that the buyer is relying on the seller to choose goods to satisfy that purpose. The seller will have reason to know when the buyer directly informs the seller of the buyer’s need, and asks the seller to select a product or agrees to buy the product recommended by the seller.

Consumer Warranty Law: 4.3.2.4.1 General

The implied particular purpose warranty most clearly applies when the buyer tells the seller that the buyer needs a product for a specific purpose or to satisfy a specific quality or characteristic. A classic example is Catania v. Brown,170 in which the buyer told the seller that the stucco on the exterior walls of his house was in a “chalky” or “powdery” condition and asked the seller to recommend a paint for the walls.