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Crossing the line: express warranty or mere sales talk?

ABSTRACT

The words used by sellers to describe their goods to induce buyers to purchase them can land the seller in court if the goods fail to measure up and the language is deemed to create an express warranty. Not all representations, however, create an enforceable express warranty. Sellers are given leeway to praise the value of their goods and to express opinions or commendations about them without exposure to liability. This freedom to praise is variously called "puffing", "shop talk", "salesmanship", and the like. The task of distinguishing sales talk from warranting is not an easy one and conflicting court decisions have resulted. Nevertheless, an actionable express warranty has structure and is comprised of the simultaneous existence of three elements. When these elements are applied to specific sales language a reasoned conclusion about whether the language is puffing or warranting can be determined. The purpose of this paper is to commend a process and identify the tests for distinguishing permissible salesmanship from actionable warranting. This paper also suggests an additional approach for determining whether warranty language fulfills one of the essential requirements that it be a part of the basis of the bargain.

INTRODUCTION

In the early 1990's Robbie Moore visited the Berry Sporting Goods store in Griffin, Georgia, to buy a tree-climbing stand. Mr. Berry and his sales clerk showed Mr. Moore a stand and said the model was "probably the safest one on the market" and there is "no way you can fall in this stand". Based in part on these statements, Mr. Moore purchased the stand. When put to use, the tree stand collapsed causing Mr. Moore to fall from a tree. Mr. Moore sued Berry Sporting Goods for his injuries. He alleged that the statements made to him by Mr. Berry and his clerk amounted to an actionable express warranty that the tree stand would conform to their representations. The trial court decided that the statements made by Mr. Berry were too vague, were mere sales talk or "puffing", and did not constitute an enforceable express warranty. The appellate court reversed the decision and observed: "We find the representations that the tree stand is "probably the safest one on the market" and "there is no way you can fall" from it, upon which Moore relied, sufficient to raise a jury question as to whether they were an intentional affirmation relating to the quality of the tree stand such that an express warranty was created." (Moore v. Berry, 1995). This case illustrates the uncertainty about express warranty liability for statements made by sellers in the sales arena. The trial court decided that the statements were mere salesmanship and were not actionable. The appellate court decided otherwise. How, then, does one distinguish innocent sales talk from actionable warranting?

DISCUSSION

In the context of contracts for the sale of goods, a warranty has been defined as a promise or an agreement by the seller that the article sold has certain qualities (Chanin v. Chevrolet Motor Co., 1935). Failure of the goods to conform to the promise or agreement subjects the seller to liability for damages proximately caused by the breach (Lindemann v. Eli Lilly and Company, 1987). Pursuant to the Uniform Commercial Code--Sales (U.C.C.), an express warranty is created when the seller makes an affirmation of fact or promise that relates to the goods and becomes a part of the basis of the bargain between the parties that the goods will conform to the affirmation or promise (Uniform Commercial Code 1978, [section] 2-313(1) (a); Royal Business Machines, Inc. v. Lorraine Corp., 1980). No special language like "guaranty" or "warranty" is required and even catalog descriptions and advertisements may create an express warranty (Overstreet v. Norden Laboratories, 1892). Not every representation made by a seller about his goods, however, creates an express warranty. The law provides sellers with a good deal of leeway to subjectively boast about their goods without exposure to liability. Cases interpreting the Uniform Commercial Code frequently find that certain kinds of statements made by sellers are mere "puffing" and that these kinds of general statements of salesmanship do not create enforceable express warranties (Omega Engineering, Inc. v. Eastman Kodak Company, 1998). Section 2-313(2) of the U.C.C. specifically provides that statements purporting to be merely the seller's opinion or commendations of the goods or relate only to the value of the goods do not create a warranty (Uniform Commercial Code 1978, [section] 2-313(2). In short, statements of salesmanship that are opinions, puffery and other similar language are not express warranties and are not actionable as such (Anderson v. Bungee International Manufacturing Corp., 1999). Making the distinction between statements about goods that are warranting because they constitute an affirmation of fact or promise that are part of the basis of the bargain from statements that are words of salesmanship is problematic (Meadows, Dessin, and Garvin, 2004). However, cases interpreting the U.C.C have provided a framework together with several factors that can be employed to reach reasoned conclusions about whether a seller's representations are actionable as express warranties. Curiously, the court opinions in this field seldom involve basic concepts of contract formation and a comment about this issue will follow the discussion of "settled law" below.

Express Warranty: The Elements

An express warranty is comprised of three elements. The elements are: (1) an affirmation of fact or a promise; (2) which relates to the goods; (3) and becomes a part of the basis of the bargain (Royal Business Machines, Inc. v. Lorraine Corp., 1980). When each of these elements is present, an enforceable express warranty is created that the goods will conform to the affirmation of fact or to the promise. However, an express warranty cannot be formed if any one of the three elements is lacking. Therefore, a reasoned approach for distinguishing warranting language from mere sales talk is to apply each element to the questioned sales language in the order enumerated.

Element One: Affirmation of Fact or Promise

When confronted with incidences involving statements that are claimed to be express warranties by the buyer and defended as mere sales talk by the seller the initial focus must be upon the first element. If the sales language is not an affirmation of fact or promise then no express warranty can exist. The courts have employed several tests in making this initial determination. The tests include the Ignorant Buyer Test; the Inducement Test; Factors Tests; and Precedent.

Ignorant Buyer Test

While the existence of an express warranty depends upon the particular circumstances in which the language is used, one test applied by some courts for determining whether a given representation is an affirmation of fact or a promise is "whether the seller assumes to assert a fact of which the buyer is ignorant or whether he merely states an opinion or expresses a judgment about a thing as to which they may each be expected to have an opinion and exercise a judgment." (Overstreet v. Norden Laboratories, Inc., 1982, emphasis supplied). General statements to the effect that goods are "the best" or are "of good quality" or will "last a lifetime" and be "in perfect condition" are generally regarded as expressions of the seller's opinion because both the buyer and the seller would presumably be expected to have an opinion or exercise a judgment concerning the import of such phrases (Royal Business Machines, Inc. v. Lorraine Corp., 1980). However, the generality of the statement is not always conclusive. For example, where the salesman told the buyer that a motor camper was "in excellent condition" the statement was held to be an affirmation of fact or promise and therefore an express warranty because the seller's knowledge about the condition of the goods coupled with the buyer's relative ignorance concerning same elevated the statement from mere praise to a fact (Valley Datsun v. Martinez, 1979). Generally, when the sales statements relate to certain performance capabilities of the goods about which the seller has superior knowledge and where the buyer is comparatively less informed, such statements will likely be deemed affirmations of fact and not mere opinions (Tralon Corporation, Soil Remediation Service, Inc. v. Cedarapids, Inc., 1997). The key inquiry here is whether the sales language contained statements about which the buyer was uninformed, or whether the statements were something about which both the buyer and the seller could have an opinion (Mazzuocola v. Thunderbird Products Corp., 1995 U.S. Dist LEXIS 6883, 1995). In the latter case no affirmation of fact or promise will be found to exist.

Inducement Test

The affirmation of fact or promise can also be distinguished from mere opinion by determining if the natural tendency of the statement is to induce a reasonable buyer to purchase (Daley v. Mc Neil Consumer Products Co., 2001). For instance, in a case holding that "Made in the U.S.A." and "premium quality" were not affirmations of fact the court held that at a minimum the buyer must show that there was an affirmation of fact or promise by the seller, the natural tendency of which was to induce the buyer to purchase (Anderson v. Bungee International Manufacturing Corp., 1999). The court reasoned that the phrases "Premium Quality" and "Made in the U.S.A." to the extent that they connoted superior quality were not descriptions or characteristics of the goods upon which a reasonable consumer would rely as statements of fact inducing him to buy. Therefore, statements of the type that are generalized and exaggerated upon which a reasonable consumer would not rely as factual like "popular", "most dependable" and "Like a Rock" will not be deemed to be affirmations or promises (Hubbard v. General Motors Corporation, 1996). The inducement test focuses on whether it is apparent from the sales language that the claim made by the seller was in the mind of the buyer and that the buyer contemplated the claim and reasonably accepted it as true in making the decision to purchase (Spiegel v. Saks 34th Street, 1964).

Factors Tests

In drawing distinctions between shop talk and affirmations of fact or promises the courts have established some factors that are deemed helpful. Because the line between puffing and warranting is often difficult to draw it has been held that the more specific the statement the more likely it will be deemed to constitute an affirmation of fact (Downie v. Abex Corporation, 1984). In his article, Beyond Puffery (1995), Shapiro points out that vague or highly subjective claims about the superiority of a product rather than detailed factual assertions are more likely to result in a finding that such statements are puffery rather than affirmations of fact or promises. For example, the term "rock-solid" used to describe a fiberglass tractor roof that was crushed in a roll-over accident was held not to be an affirmation of fact because "consumers know that vehicles that are 'rock-solid' will be dented by an impact that would not dent a rock." (Jordan v. Paccar, Inc., 1994). By contrast, the phrase "fail-safe" in reference to a ball-screw assembly used to support an airplane passenger loading bridge was held to be an affirmation of fact when the ball-screw assembly failed causing the bridge to collapse because the seller specifically emphasized that the assembly would prevent the collapse of the bridge (Downie v. Abex Corporation, 1984). In addition, courts also consider whether the sales statement was written or oral the latter being more likely to be considered puffing (Omega Engineering v. Eastman Kodak Company, 1998). On this same point, the Supreme Court of Washington delineated the factors it wanted a trial court to consider in determining if the words "built tough for long lasting, reliable performance" and "will stay ready and roadworthy in all kinds of weather and work environments" were affirmations of fact or promises. That court enumerated the following factors to consider in making this decision: (a) the specificity or generality of the statement; (b) the statement's relation to the quality of the goods; (c) whether the seller hedged in the statement; (d) whether the product was experimental; (e) whether the buyer had actual or imputed knowledge of the true condition of the goods; and (f) whether the goods were, in fact, defective (Federal Signal Corporation v. Safety Factors, Inc., 1994)

Precedent

It is probably fair to say that courts are most comfortable with citing precedent involving the same or similar sales language in support of their conclusion that the language at bar is or is not an affirmation of fact sufficient to create an express warranty. The difficulty with this approach is that courts have reached decisions that are inapposite when determining the legal effect of sales statements that involve similar language. This topic is so fact intensive that each side will probably be able to find cases supporting their claim. General statements to the effect that goods are "the best" of are "of good quality" or will "last a lifetime" and be "in perfect condition" are usually determined to be expressions of the seller's opinion or "the puffing of his wares" (Royal Business Machines, Inc. v. Lorrane Corp., 1980). However, precedent can be cited in which those same or similar phrases were deemed to have crossed the line and were found to be affirmations of fact that created enforceable warranties (Pierson, 1998). Therefore, while the use of precedent to compare, analogize and make distinctions between puffery and warranting is a common practice it is also a method fraught with ambiguity.

Element Two: Relates to the Goods

If, after using one or a combination of the tests listed above, the sales statement at issue is found to be words of salesmanship involving the seller's opinion or commendation of the goods then the inquiry ends and no express warranty can be imposed because the statement was not an affirmation of fact or promise. For example, the phrase "You meet the nicest people on a Honda" would likely not meet the tests of warranty language discussed above (Federal Signal Corporation v. Safety Factors, Inc., 1994). If, on the other hand, the statement is found to be an affirmation of fact then the second element must be satisfied. That is, did the statement relate to the goods? For example, where a boat seller furnished the buyer with speed data for one type of boat which data did not relate to the particular type of boat ultimately purchased by the buyer the court held that the speed data did not create an express warranty because the data did not relate to the goods at issue (Bayliner Marine Corporation v. Crow, 1999). Generally, the "relates to the goods" element is not often contested in cases where express warranty is claimed. It is usually conceded that the statements related to the goods but that such statements were puffing and not warranting. However, a caveat should be noted that statements that discuss the future performance of goods are not actionable as express warranties. It has been held that sales statements that refer to some future time that goods will conform to particular characteristics without clearly specifying when the goods will conform then such statements will be deemed not to relate to the goods (Cuthbertson v. Clark Equipment Company, 1982).

Element Three: Basis of the Bargain

The third element, that the affirmation or promise must become part of the basis of the bargain, has been said to be difficult to ascertain but is an essential and required element in order to create an express warranty. The mere existence of warranty language is insufficient to sustain an action for breach of an express warranty unless the warranty is "part of the basis of the bargain" between the parties (Overstreet v. Norden Laboratories, Inc., 1982). In the mainstream, it has been held that in order for the seller's statements to become part of the basis of the bargain the statements must be relied upon by the buyer as one of the inducements for purchasing the goods (Overstreet v. Norden Laboratories, Inc., 1982). Under the former Uniform Sales Act, the seller's statement was required to induce the buyer to purchase the goods so the element of reliance was specifically included (Uniform Sales Act [section] 12, 1943). But, under the current U.C.C., while there is no requirement that the buyer rely upon the seller's representations, many courts continue to require reliance to establish that the statement was part of the basis of the bargain (Compaq Computer Corporation v. Lapray, 2004). For example, in the introductory case, Moore v. Berry (1995), the court said that "the decisive test" in determining whether sales language is a mere expression of opinion or a warranty is whether the sales statement "purported to state a fact upon which it may fairly be presumed the seller expected the buyer to rely and upon which a buyer would ordinarily rely". In short, the traditional rule is that there exists little difference between "basis of the bargain" and a finding that the buyer relied upon the seller's statements in making the decision to purchase (Royal Business Machines, Inc. v. Lorraine Corp., 1980). This mainstream treatment of the issue continues despite the apparent intention of the drafters of the U.C.C. not to require a strong showing of reliance. In fact, a split of authority has arisen about whether an official comment to U.C.C. 2-313 dispensed with the requirement that a buyer rely on the sellers statements in order to create an enforceable express warranty (McManus v. Fleetwood Enterprises, Inc., 2003). This split occurred because Comment 3 to U.C.C. 2-313 provides: "In actual practice affirmations of fact made by the seller about the goods during a bargain are regarded as part of the description of those goods; hence no particular reliance on such statements need be shown in order to weave them into the fabric of the agreement" (Uniform Commercial Code 1988, [section] 2-313 cmt. 3). Notwithstanding this language, courts have continued to hold that a buyer's reliance upon the seller's statement to some extent is required in order for the statement to be part of the basis of the bargain and fulfill the third element for enforceable express warranty (Henry Schein, Inc. v. Stromboe, 2003).

Basis of the Bargain: Mutual Assent

In light of the foregoing, perhaps another approach to finding "basis of the bargain" is in order. There seems to be a sense that the process of finding the existence or non-existence of express warranties is a matter which is ancillary to the substantive contract for the purchase of the goods. Should the express warranty be considered a separate covenant or should it be considered as a full partner with the other terms of the sales agreement? If an express warranty is deemed to be a very part of the formation of the entire sales contract then disputes about its existence and questions about whether it is part of the basis of the bargain would be determined in the same way that other contractual terms are treated.

Article 2 of the Uniform Commercial Code is comprehensive and governs all aspects of contracts for the sale of goods. U.C.C 2-204 provides in part that a contract for sale of goods may be made in any manner sufficient to show agreement (Uniform Commercial Code 1978, [section] 2-204). A case arising under the U.C.C. teaches that a basic element for a sales contract is that both parties assent to the same thing in the same sense and that their minds meet on the essential terms and conditions of the agreement (Interstate Industries Inc. v. Barclay Industries, Inc., 1976). This case provides that the first step toward mutual assent is an offer by one of the parties and that mutual assent occurs when that offer has been accepted by the other party. An offer is a promise. A promise is also an express warranty if it relates to the goods and is part of the basis of the bargain. A "meeting of the minds" is proved when the evidence shows "with reasonable definiteness that the minds of the parties met upon the same matter and agreed upon the terms of the contract (Steele Benders, Inc. v. H.R. Braner Engineering, Inc., 1988). Therefore, it is submitted that the "basis of the bargain" inquiry should involve whether the minds of the seller and buyer met upon the affirmations or promises made by the seller and, if so, then such affirmations or promises would be a part of the basis of the bargain. In support of this kind of analysis, reference is made to comment one to U.C.C.2-313 which provides in part that: "Express' warranties rest on 'dickered' aspects of the individual bargain." (Uniform Commercial Code 1988, [section] 2-313 cmt. 1). "Dickered" connotes that the parties engaged in negotiations and the offer/acceptance process in forming the sales contract. Thus, where the parties negotiated over the seller's sales message and reached a meeting of the minds about it then the sales language should be deemed to be part of the basis of the bargain. For example, in McLaughlin v. Denharco (2001), McLaughlin purchased a tree delimbing machine manufactured by Denharco. Denharco provided certain promotional literature and videos which were examined by McLaughlin. The promotional material stated that "maintenance is reduced to a minimum and lubrication is no longer necessary" and that the machine was ideal for the "challenges of large diameter stems, softwood even hardwood". The delimbing machine failed to conform to these representations and McLaughlin sued for breach of express warranty. Denharco claimed the language contained in its promotional material was puffery. In response, McLaughlin showed that he read the literature and viewed the video and that the parties "dickered over" the promotional claims. The court determined that a jury could find that the statements created an express warranty. The court observed that there was evidence that the statements were "dickered" over and this fact supplied proof that the seller's representations became a part of the basis of the bargain.

SUMMARY AND IMPLICATIONS

The language selected and used to induce the purchase of products can result in liability if the goods fail to measure up to the claims. It makes no difference if the sales language is verbal and takes place on the sales floor or is found in written or media materials, liability will be imposed if the language is found to create an express warranty. The U.C.C. plainly establishes a seller's liability for language that is deemed to be an affirmation of fact or a promise when that language is part of the basis of the bargain. The U.C.C. also provides that no liability shall exist for sales language that relates only to the value of the goods or constitutes the mere opinion or commendations of the goods by the seller. The problem is that despite this statutory law the line between puffing and warranting is difficult to draw. There are simply too many variables to assure absolute predictability. A sophisticated buyer could help his warranty case if he insisted that the seller write on the back of the bill-of-sale: "Seller acknowledges that he told the buyer that this product is in A-1 condition, the parties negotiated this matter, and the buyer relied somewhat on this statement as an inducement to buy it". A sophisticated seller, wishing to avoid express warranty liability, could change the language ever so slightly to read: "In seller's opinion this product is in A-1 condition ..." and the balance would be tipped in seller's favor.

Nevertheless, business professionals, both sellers and buyers, wishing to manage express warranty and practitioners wrestling with the import of specific sales language after an express warranty claim is made, can profit from analyzing the given sales language against the framework and factors identified above. The elements for express warranty suggest that three questions be posed about the sales representation at issue. One: Does the sales message contain performance claims or include specific product characteristics about which the seller has superior knowledge that would induce an ordinarily prudent consumer to buy? Two: Does the sales message relate to the specific product? Three: Is the sales message believable so that it would reasonably induce consumer assent and will consumers rely in some measure on the message in making a decision to buy? An affirmative response to all three questions will be an indication that the sales language under review will likely be deemed an express warranty.

From a pragmatic standpoint the elements analysis teaches sellers wishing to reduce express warranty liability to train sales staff to present product attributes as opinions or to the best of their knowledge rather than making bold statements of fact or expressing firm promises. The express warranty elements analysis can also help advertisers and writers of advertising promotional literature determine in advance whether the proposed sales language is an affirmation of fact or words that merely commend the value of the goods. On the other hand, buyers seeking the protection of the express warranty law can employ the elements analysis and insist on specificity; can document the negotiations and the seller's language; question and dicker over the claims; and show some element of reliance on seller's statements as an inducement to purchase. In the final analysis, the objectives of either buyer or seller concerning express warranty can be furthered by use of the framework and factors analysis posited here. It is submitted that the foregoing template can provide a useful and reasoned approach to determining whether specific sales language has or will cross the line between puffing and warranting.

REFERENCES

Anderson v. Bungee International Manufacturing Corp., 44 F.Supp.2d 534 (S.D.N.Y.1999).

Bayliner Marine Corporation v. Crow, 257 Va. 121, 509 S.E.2d 499 (Va. 1999).

Chanin v. Chevrolet Motor Co., 15 F.Supp. 57 (N.D. Ill. 1935).

Compaq Computer Corporation v. Lapray, 47 Tex. Sup. J. 522, 135 S.W.3d 657 (Tex. 2004).

Cuthbertson v. Clark Equipment Company, 448 A.2d 315 (Me. 1982).

Daley v. Mc Neil Consumer Products Co., 164 F.Supp.2d 367 (S.D.N.Y. 2001).

Downie v. Abex Corporation, 741 F.2d 1235 (10th Cir. 1984).

Federal Signal Corporation v. Safety Factors, Inc., 125 Wn.2d 413; 886 P.2d 172 (Wash.1994).

Henry Schein, Inc. v. Stromboe, 46 Tex. Sup. J. 103, 102 S.W.3d 675 (Tex. 2003).

Hubbard v. General Motors Corporation, 1996 U.S. Dist. LEXIS 6974 (S.D.N.Y. 1996).

Interstate Industries, Inc. v. Barclay Industries, Inc., 540 F.2d 868 (7th Cir. 1976).

Jordan v. Paccar, Inc., 37 F.3d 1181 (6th Cir. 1994).

Lindemann v. Eli Lilly and Company, 816 F.2d 199 (5th Cir. 1987).

Mazzuocola v. Thunderbird Products Corp., 1995 U.S. Dist LEXIS 6883 (E.D.N.Y. 1995).

Meadows, R.L., Dessin, C.L. & Garvin, L.T. (2004). Survey--Uniform Commercial Code. The Business Lawyer, 59, 1557.

McManus v. Fleetwood Enterprises, Inc, 320 F.3d 545 (5th Cir. 2003).

McLaughlin v. Denharco, Inc., 129 F.Supp.2d 32 (D. Me. 2001).

Moore v. Berry, 217 Ga. App. 697; 458 S.E.2d 879 (Ga.App. 1995).

Overstreet v. Norden Laboratories, Inc., 669 F.2d 1286 (6th Cir. 1982).

Omega Engineering, Inc. v. Eastman Kodak Company, 30 F.Supp.2d 226 (D. Ct. 1998).

Pierson, C. (1998). Does "puff" create an express warranty of merchantability? Where the hornbooks go wrong. Duquesne University Law Review 36, 887-915.

Royal Business Machines, Inc. v. Lorraine Corp., 633 F.2d 34 (7th Cir. 1980).

Spiegel v. Saks 34th Street, 43 Misc.2d 1065, 252 N.Y.S.2d 852 (N.Y. SupCt. App.Term 1964).

Shapiro, B.R. (1995). Beyond puffery. Marketing Management 4(3), 60-62.

Steel Benders, Inc. v. H.R. Braner Engineering, Inc., 1998 U.S. Dist. LEXIS 711 (D. Kan. 1988).

Tralon Corporation, Soil Remediation Service, Inc. v. Cedarapids, Inc., 966 F.Supp. 812 (D.C. N.D. Iowa 1997).

Uniform Commercial Code 1978, [section] 2-204.

Uniform Commercial Code 1978, [section] 2-313(1)(a).

Uniform Commercial Code 1978, [section] 2-313(2).

Uniform Commercial Code 1988, [section] 2-313 cmt.1.

Uniform Commercial Code 1988, [section] 2-313 cmt. 3.

Uniform Sales Act 1943, [section] 12.

Valley Datsun v. Martinez, 578 S.W.2d 485 (Tex.App.1979).

John Hoft, Columbus State University
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Title Annotation:management , influence of laws, regulaions and rules of warranty on sales of the company
Author:Hoft, John
Publication:Entrepreneurial Executive
Article Type:Report
Geographic Code:1USA
Date:Jan 1, 2005
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