Supply Contract Warranties

Much like the warranties expressed and implied in contracts to perform work, the terms of a supply contract bind materialmen to perform to a certain degree of quality.  Pursuant to the Uniform Commercial Code, which governs the sale of all goods, unless it is otherwise specified in a supply contract, all goods sold are covered by implied and express warranties.

Unless the supply contract provides otherwise, a warranty that goods sold must be merchantable is implied in a contract for their sale if the seller is a merchant of those specific kind of goods.  The standard of merchantability requires that the goods not be objectionable within the trade, that the goods be of fair average quality within the contractual description, that the goods be fit for the ordinary purposes they are used for, that the goods be of even quality and quantity among the units purchased, that the goods be adequately packaged and labeled, and that the goods conform to the label’s promises.  [1]

Another warranty that is implied in a supply contract is one of course or dealing or usage of trade, by which the appropriate quality of the goods can be inferred by the usual quality and type of goods exchanged by the parties, or what is found to be acceptable within the trade.  [2]  Additionally, an implied warranty of fitness for a particular purpose exists in supply contracts.  Goods are fit for a particular purpose if the seller, at the time of contract, has reason to know of any particular purpose for which the goods are required and the buyer relies on the seller’s skill or judgment to select or furnish suitable goods for that purpose.  [3]

In addition to implied warranties, express warranties may arise with regard to the sale of goods by the materialman to the immediate buyer, even if a materialman does not necessarily intend to grant such warranties.  On such express warranty by the materialman is any promise made to the buyer which relates to the goods and becomes a part of the bargain for their purchase, meaning the materialman must adhere to such promise.  Another express warranty by the materialman is a description of the goods which is made a part of the bargain, in which case the goods must conform to such description.  Lastly, any sample or model that is made a part of the basis of the bargain for the supply contract creates an express warranty and requires the materialman to ensure that the whole of the goods conform to said sample or model.

The parties to a supply contract are free to limit or expand the warranties outlined by the Uniform Commercial Code, but must be clear in their intent to do so.  To exclude U.C.C. warranties, for example, the contract must conspicuously indicate a disclaimer of the parties’ intent to offer respective express and/or implied warranties.  [4]  Likewise, the inclusion of any additional warranties agreed to by the parties must be clearly defined in the contract.

 


[1] N.Y. U.C.C. § 2-314

[2] N.Y. U.C.C. § 2-314(3)

[3] N.Y. U.C.C. § 2-315

[4]  N.Y. U.C.C. § 2-316(2)

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