CPA Exam — REG (Regulation)Business LawHard
A consumer purchases a new refrigerator from a department store. The sales contract includes a prominent clause stating, 'SELLER MAKES NO WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.' The refrigerator fails to cool properly within a week of purchase. Can the consumer successfully sue the store for breach of implied warranty of merchantability?
- ANo, because the refrigerator failing to cool is not a breach of merchantability.
- BNo, because the store effectively disclaimed the implied warranty of merchantability.
- CYes, because implied warranties cannot be disclaimed in consumer sales.
- DYes, because the disclaimer was not conspicuous enough to be effective.
Show answer & explanationAnswer & explanation
Correct answer: B. No, because the store effectively disclaimed the implied warranty of merchantability.
Under UCC Article 2, the implied warranty of merchantability can be disclaimed. For 'merchantability,' the disclaimer must mention 'merchantability' and, if in writing, must be conspicuous. The clause stated in the question mentions 'merchantability' and is described as 'prominent,' which implies it is conspicuous. Thus, the store likely effectively disclaimed the warranty.
Why the other options are wrong
- A. A refrigerator failing to cool properly within a week would indeed be considered a breach of the implied warranty of merchantability, as it fails to perform its ordinary function.
- C. This is incorrect. Implied warranties can generally be disclaimed in consumer sales under the UCC, provided specific requirements are met.
- D. The question states the clause was 'prominent,' implying it was conspicuous. If it were not conspicuous, then the consumer might succeed, but based on the prompt, it was.
UCC Implied Warranty Disclaimer
Rules under the Uniform Commercial Code (UCC) governing how sellers can disclaim or modify implied warranties, such as the warranty of merchantability or fitness for a particular purpose.
- For merchantability, disclaimer must mention 'merchantability' and be conspicuous (if written).
- For fitness for a particular purpose, disclaimer must be in writing and conspicuous.
- Can also be disclaimed by 'as is,' 'with all faults,' or by buyer's examination of goods.
Memory trick: Merchantability needs Mention and Conspicuousness.