What is an “Implied Warranty” and why disclaim it?

Summary: In professional or creative services, implied warranty issues arise in the context of disputes arising from a difference of opinion about whether the deliverables meet expectations. Courts have recognized claims of implied warranty in the context of “defective design services.”

An implied warranty is an assumption about the quality of the goods or services being purchased. An implied warranty can be either written or verbal and is generally considered effective upon the sale or purchase of the merchandise or services. Oftentimes with professional or creative services, disputes arise because there is difference in opinion about whether the deliverables meet expectations. That’s an issued of implied warranty.

In most cases, an implied warranty is verbal, especially in the case of buying something like merchandise from a store, as the assumption is that whatever it is that is being purchased will be in the expected condition. For example, when a client commissions an “award-winning” designer to develop a project, does the client exact the resulting design to be “award-winning” as well? Courts have recognized claims of implied warranty in the context of “defective design services” as a claim based on negligence.

The two most common types of implied warranty are the Warranty of Merchantability and the Warranty of Fitness.

Warranty of Merchantability. This is generally what most people think of as an implied warranty. Warranty of merchantability is unspoken or unwritten and allows the buyer to reasonably assume that what they are buying is going to meet or fit their standards. Note that this is subjective and depends on the view of the buyer. Warranty of merchantability additionally assumes that the seller is responsible for the conditions of the items they are selling.

Warranty of Fitness. This protects both buyer and seller in the sale of goods, when the item is being purchased for non-customary purposes. The warranty of fitness assumes that the seller will be made aware of the buyer’s intended purpose and use of an item.

Due to the existence of implied warranties, if a purchased product does not meet certain standards, the seller can be held liable. Implied warranties function to ensure that products are of adequate quality, and they protect the foreseeable expectations of the buyer. By specifically disclaiming both the Warranty of Merchantability and the Warranty of Fitness for a particular Purpose, a seller can avoid liability if a buyer later decides it is dissatisfied with quality, etc.

Because this is a relatively easy and effective way to reduce risk of liability, you should review contracts to make sure you have appropriate disclaimers.

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