Texas Implied Warranties – Sale of Goods

Many contracts related to the sale of goods have express warranties. For example, when you buy an appliance you typically get an express warranty for parts and labor for a specific period of time after the sale – i.e. a 1 year warranty. Additionally, in Texas, two implied warranties apply to the sale through operation of Texas common law – the Implied Warranty of Merchantability and the Implied Warranty of Fitness for a Particular Purpose.

Implied Warranty of Merchantability

The Implied Warranty of Merchantability protects consumers against defective or grossly inferior products. There are number of elements to a breach of Implied Warranty of Merchantability claim. First, the defendant generally must be either the merchant seller or the merchant lessor of the goods and the plaintiff generally must be either the buyer or the lessee of the goods. A subsequent purchaser of goods can maintain a cause of action against an upstream manufacturer who has not disclaimed implied warranties. MAN Engines & Components, Inc. v. Shows, 434 S.W.3d 132, 137 (Tex.2014). Second, the plaintiff must show the transaction involved a sale or lease. Food and beverage sales constitute a “sale” for purposes of the Implied Warranty of Merchantability (i.e. food poisoning cases). Lastly, the plaintiff must show the transaction involved goods.

For goods to be merchantable under Texas common law they must:

1.       Pass without objection. For goods to be merchantable, they must pass without objection in the trade. To pass without objection, goods must be of a quality comparable to other goods that are sold in that line of trade under the contract description. E.g., Harris Packaging Corp. v. Baker Concrete Constr. Co., 982 S.W.2d 62, 65-66 (Tex.App.—Houston [1st Dist.] 1998, pet. denied) (P did not show that other manufacturers of similar goods placed warning labels on their products), disapproved on other grounds, Medical City Dallas, Ltd. v. Carlisle Corp., 251 S.W.3d 55 (Tex.2008); Fitzgerald v. Caterpillar Tractor Co., 683 S.W.2d 162, 163-64 (Tex.App.—Fort Worth 1985, writ ref’d n.r.e.) (D established that design of forklift sold to P was same design used by all manufacturers). In other words, the goods must meet a relative industry standard.

2.       If fungible, the goods must be of fair average quality. For fungible goods to be merchantable, they must be of “fair average” quality. Fungible goods are goods which can be replaced by another equal part or quantity. For example, corn, wheat, and lumber are all fungible goods.

3.       Be fit for ordinary purposes. For goods to be merchantable, they must be fit for ordinary purposes. Mott v. Red’s Safe & Lock Servs., 249 S.W.3d 90, 98 (Tex.App.—Houston [1st Dist.] 2007, no pet.); Elliott v. Kraft Foods N. Am., Inc., 118 S.W.3d 50, 56 (Tex.App.—Houston [14th Dist.] 2003, no pet.). This means the goods must be free of defects.

4.       Be of the bargained for quality and quantity. Unless common trade usage allows for variations, merchantable goods must meet the requirements of the parties’ agreement and must be of even kind, quality, and quantity within each unit of goods and among all units of goods.

5.       Be adequately packaged. For goods to be merchantable, they must be adequately contained, packaged, and labeled as required by the parties’ agreement. This form of merchantability arises only when the nature of the goods and the transaction require a certain type of container, package, or label.

6.       Conform to promises. For goods to be merchantable, they must conform to the promises or affirmations of fact on the goods’ container or label. Under this section, an obligation is imposed on all sellers not to mislabel goods.  The obligation not to mislabel applies to all goods sold, even if the original contract, either by its express terms or by trade usage, did not require the labeling or the representations.

Disclaiming the Warranty of Merchantability

The Implied Warranty of Merchantability may be disclaimed in Texas, but such a disclaimer requires specific actions on the part of the seller. Specifically, the disclaimer must:

1.       Use the word “merchantability.”

2.       Be written or oral for the sale of goods. However, leases must have a written disclaimer of the Warranty of Merchantability.

3.       Be communicated before sale.

4.       Be conspicuous.  A term or clause is conspicuous if it is written so that a reasonable person against whom it is to operate should have noticed it. Language is “conspicuous” if it is (1) in a heading in capitals equal or greater in size than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same or lesser size, or (2) in the body of a record or display in larger type than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same size, or set off from the surrounding text of the same size by symbols or other marks that call attention to the language.

Implied Warranty of Fitness for a Particular Purpose

The Implied Warranty of Fitness for a Particular Purpose arises when a buyer communicates to the seller that the goods will be used for a specific purpose. Proving a claim for breach of this implied warranty is similar to the Warranty of Merchantability. A plaintiff must show:

1.       The seller was a seller or lessor of goods.

2.       The buyer purchased or leased the goods.

3.       There was an actual sale or lease of the goods.

4.       The seller had knowledge of the buyer’s particular purpose and the buyer was relying on the seller’s skill or judgment to select the appropriate goods.

5.       The buyer had a particular purpose for buying or leasing the goods.

6.       The buyer actually relied on seller’s expertise. However, if the buyer can show the seller was educated or a “sophisticated” buyer, buyer may not be able to show reliance.

7.       The good were unfit for the particular purpose.

Knowledge of Purpose

The seller must have had had reason to know of the buyer’s particular purpose for using the goods before the time of contracting. Lester v. Logan, 893 S.W.2d 570, 574-75 (Tex.App.—Corpus Christi 1994) (P’s testimony that he had consulted with and relied on D’s expertise was sufficient to support jury’s finding that D breached warranty), writ denied, 907 S.W.2d 452 (Tex.1995).

Particular Purpose

Goods have a particular purpose when they have a use that is specific to the seller’s business. Crosbyton Seed Co. v. Mechura Farms, 875 S.W.2d 353, 365 (Tex.App.—Corpus Christi 1994, no writ). The particular purpose must not be ordinary; the purpose must be something other than what the goods are customarily used for. E.g., JCW Elecs., Inc. v. Garza, 176 S.W.3d 618, 630-31 (Tex.App.—Corpus Christi 2005) (P had particular purpose for phones he installed in jail cells; phones not designed for unattended use by inmates), rev’d on other grounds, 257 S.W.3d 701 (Tex.2008); Sipes v. General Motors Corp., 946 S.W.2d 143, 158-59 (Tex.App.—Texarkana 1997, writ denied) (P used airbag for its ordinary purpose); ASAI v. Vanco Insulation Abatement, Inc., 932 S.W.2d 118, 122 (Tex.App.—El Paso 1996, no writ) (P used vacuum equipment for its ordinary purpose); Miles v. Ford Motor Co., 922 S.W.2d 572, 587 (Tex.App.—Texarkana 1996) (P used vehicle for its ordinary purpose), rev’d in part on other grounds, 967 S.W.2d 377 (Tex.1998). Only the implied warranty of merchantability protects the plaintiff against defective goods that are used for an ordinary purpose. See Crosbyton Seed, 875 S.W.2d at 365.

Disclaimer of Implied Warranty of Fitness for a Particular Purpose

The elements for disclaiming the Warranty of Fitness are very similar to disclaiming the Warranty of Merchantability. The differences are that the Warranty of Fitness may be disclaimed using general language and it cannot be disclaimed orally. It is sufficient if the disclaimer states something substantially similar to “there is no warranty that the goods will be fit for a particular purpose.”