An implied warranty cannot be modified or disclaimed unless certain prerequisites are met. [Com C §2316.]
- First, the seller must clearly and explicitly do so at the time of contracting by using words that communicate the risks that fall on the buyer.
- To exclude the implied warranty of merchantability, the language of the disclaimer must mention “merchantability” and, if written, must be conspicuous. [Com C §2316(2).]
- To exclude the implied warranty of fitness, the exclusion must be in writing and be conspicuous. [Com C §2316(2).] Thus, fine print disclaimer may be inoperative.
- If an express warranty is also given, words or conduct relevant to its creation and words or conduct tending to negate or limit a warranty must be construed whenever reasonable as consistent with each other. [Com C §2316(1).]
- Unless the circumstances indicate otherwise, words such as “as is” and “with all faults” or “there are no warranties beyond those described” are sufficient to disclaim implied warranties if the buyer had an opportunity to inspect the goods before contracting. [Com C §2316(3).]
- Any words of disclaimer or modification of warranty should be strictly construed against the seller. [See, e.g., Hauter v Zogarts (1975) 14 C3d 104, 119.] In general, words or conduct tending to negate or limit a warranty are inoperative to the extent that construction is unreasonable. [Com C §2316(1).]
Only if these prerequisites are met can the legislatively established implied warranty provisions be modified or eliminated. The section seeks to protect a buyer from unexpected and unbargained language of disclaimer by denying effect to such language when inconsistent with language of express warranty and permitting the exclusion of implied warranties only by conspicuous language or other circumstances that protect the buyer from surprise. [Appalachian Ins. Co. v McDonnell Douglas Corp. (1989) 214 CA3d 1, 34, quoting Official Comment to Com C §2316.]
An “as is” clause or other disclaimer is ineffective if the circumstances indicate otherwise. [Com C §2316(3)(a).] In effect, this means that the disclaimer must be bargained for; a disclaimer given to the buyer after he or she signs the contract is not binding. [Dorman v International Harvester (1975) 46 CA3d 11, 19–20].
A warranty disclaimer is also subject to the doctrine of unconscionability. You should decline to enforce an “as is” clause or other term that purports to disclaim implied warranties, despite compliance with the prerequisites of Com C §2316, if the term is part of a contract of adhesion and, when the term is considered in its context, you conclude that its enforcement would be unconscionable. [CC §1670.5(a); A&M Produce Co. v FMC Corp. (1982) 135 CA3d 473, 493; but see American Software, Inc. v Ali (1996) 46 CA4th 1386, 1391 (to be unconscionable terms must shock the conscience, not just be unreasonable).]