Implied Warranty of Merchantability

Implied warranties come in two general types: merchantability and fitness. An implied warranty of merchantability is an unwritten and unspoken guarantee to the buyer that goods purchased conform to ordinary standards of care and that they are of the same average grade, quality, and value as similar goods sold under similar circumstances. In other words, merchantable goods are goods fit for the ordinary purposes for which they are to be used. The Uniform Commercial Code (UCC), adopted by most states, provides that courts may imply a Warranty of merchantability when (1) the seller is the merchant of such goods, and (2) the buyer uses the goods for the ordinary purposes for which such goods are sold (§ 2-314). Thus, a buyer can sue a seller for breaching the implied warranty by selling goods unfit for their ordinary purpose.

There is rarely any question as to whether the seller is the merchant of the goods sold. Nevertheless, in Huprich v. Bitto, 667 So.2d 685 (Ala. 1995), a farmer who sold defective horse feed was found not to be a merchant of horse feed. The court stated that the farmer did not hold himself out as having knowledge or skill peculiar to the sale of corn as horse feed, and therefore was not a merchant of horse feed for purposes of determining a breach of implied warranty of merchantability.

The question of whether goods are fit for their ordinary purpose is much more frequently litigated. Thomas Coffer sued the manufacturer of a jar of mixed nuts after he bit down on an unshelled filbert, believing it to have been shelled, and damaged a tooth. Coffer argued in part that the presence of the unshelled nut among shelled nuts was a breach of the implied warranty of merchantability. Unquestionably, Coffer was using the nuts for their ordinary purpose when he ate them, and unquestionably, he suffered a dental injury when he bit the filbert's hard shell. But the North Carolina appellate court held that the jar of mixed nuts was nonetheless fit for the ordinary purpose for which jars of mixed nuts are used (Coffer v. Standard Brands, 30 N.C. App. 134, 226 S.E.2d 534 [1976]). The court consulted the state agriculture board's regulations and noted that the peanut industry allows a small amount of unshelled nuts to be included with shelled nuts without rendering the shelled nuts inedible or adulterated. The court also noted that shells are a natural incident to nuts.

The policy behind the implied warranty of merchantability is basic: sellers are generally better suited than buyers to determine whether a product will perform properly. Holding the seller liable for a product that is not fit for its ordinary purpose shifts the costs of nonperformance from the buyer to the seller. This motivates the seller to ensure the product's proper performance before placing it on the market. The seller is better able to absorb the costs of a product's nonperformance, usually by spreading the risk to consumers in the form of increased prices.

The policy behind limiting the implied warranty of merchantability to the goods' ordinary use is also straightforward: a seller may not have sufficient expertise or control over a product to ensure that it will perform properly when used for nonstandard purposes.