Does this "AS IS" / warranty-disclaimer clause validly exclude Idaho's implied warranties?
Yes, and Idaho Code § 28-2-316 offers more than one way to get there; a drafter needs only one of them. Route one, § 28-2-316(2): to exclude the implied warranty of merchantability, "the language must mention merchantability and in case of a writing must be conspicuous," and to exclude the implied warranty of fitness, "the exclusion must be by a writing and conspicuous." For the fitness warranty the subsection even supplies a form of words, saying language excluding all implied warranties of fitness is sufficient if it states, for example, "There are no warranties which extend beyond the description on the face hereof." Route two, § 28-2-316(3)(a), works WITHOUT mentioning merchantability at all: "unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like 'as is,' 'with all faults' or other language which in common understanding calls the buyer's attention to the exclusion of warranties and makes plain that there is no implied warranty." Subsection (3) opens "Notwithstanding subsection (2)", which is why route two does not have to satisfy route one, and it holds two further routes that have nothing to do with the clause's wording at all: (3)(b)'s examination rule, and (3)(c), under which "an implied warranty can also be excluded or modified by course of dealing or course of performance or usage of trade." Haight v. Dale's Used Cars, Inc. confirms the first two routes operate independently: "Although a warranty exclusion clause must be conspicuous and must contain a specific reference to 'merchantability' in order to exclude the warranty of merchantability under I.C. § 28-2-316(2), the warranty may also be excluded under I.C. § 28-2-316(3)(a) without mentioning merchantability."
The trap
Do not assume a disclaimer that fails the conspicuous-and-mentions-merchantability test of subsection (2) has failed to exclude the warranty: Haight affirmed a judgment for the dealer over a trial court that had made exactly that mistake. The trial court held the merchantability warranty not excluded because the word "merchantability" was not conspicuous; the Court of Appeals disagreed on conspicuousness ("we reach a contrary conclusion": the installment contract said, in bold capitals above the signature, that the Jeep was "sold as is, with all defects, and without any warranty of fitness or merchantability") and held that in any event, "[e]ven if the implied warranties of merchantability and fitness had not been effectively excluded under I.C. § 28-2-316(2), they were nonetheless excluded under subsection 28-2-316(3)(a) by the 'as is' language on the buyer's guide." The converse trap also exists: subsection (3)(a)'s own text is qualified, "unless the circumstances indicate otherwise", so an "as is" clause can still be defeated by surrounding circumstances the statute does not further define. One limit sits in front of all of this and is easy to miss because it is in subsection (1), not (2) or (3): words creating an express warranty and words negating or limiting warranty "shall be construed wherever reasonable as consistent with each other", and where that construction is unreasonable the negation or limitation "is inoperative to the extent that such construction is unreasonable", so an as-is clause bolted onto a document that also makes an express promise about the goods can be read out instead of enforced. Subsection (3)(b) is then a separate route that has nothing to do with clause drafting at all: if the buyer examined the goods (or a sample) as fully as desired, or refused an offered examination, there is no implied warranty as to defects the examination ought to have revealed: a fact-driven route independent of any disclaimer language. Finally, remedies for breach of warranty are capped separately under §§ 28-2-718 and 28-2-719, not by § 28-2-316 itself: a disclaimer that successfully excludes the warranty answers a different question than a limitation-of-remedy clause that assumes the warranty exists but caps the buyer's recovery.
10 authorities
- statuteIdaho Code § 28-2-316enactment date not established
The words that state the rule
(1) Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit warranty shall be construed wherever reasonable as consistent with each other; but subject to the provisions of this chapter on parol or extrinsic evidence (section 28-2-202) negation or limitation is inoperative to the extent that such construction is unreasonable.
- statuteIdaho Code § 28-2-316enactment date not established
The words that state the rule
Subject to subsection (3), to exclude or modify the implied warranty of merchantability or any part of it the language must mention merchantability and in case of a writing must be conspicuous, and to exclude or modify any implied warranty of fitness the exclusion must be by a writing and conspicuous. Language to exclude all implied warranties of fitness is sufficient if it states, for example, that "There are no warranties which extend beyond the description on the face hereof."
- statuteIdaho Code § 28-2-316enactment date not established
The words that state the rule
(3) Notwithstanding subsection (2) (a) unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like "as is," "with all faults" or other language which in common understanding calls the buyer’s attention to the exclusion of warranties and makes plain that there is no implied warranty; and
- statuteIdaho Code § 28-2-316enactment date not established
The words that state the rule
(b) when the buyer before entering into the contract has examined the goods or the sample or model as fully as he desired or has refused to examine the goods there is no implied warranty with regard to defects which an examination ought in the circumstances to have revealed to him; and
- statuteIdaho Code § 28-2-316enactment date not established
The words that state the rule
(c) an implied warranty can also be excluded or modified by course of dealing or course of performance or usage of trade.
- statuteIdaho Code § 28-2-316enactment date not established
The words that state the rule
Remedies for breach of warranty can be limited in accordance with the provisions of this chapter on liquidation or limitation of damages and on contractual modification of remedy (sections 28-2-718 and 28-2-719).
The words that state the rule
Although a warranty exclusion clause must be conspicuous and must contain a specific reference to “merchantability” in order to exclude the warranty of merchantability under I.C. § 28-2-316(2), the warranty may also be excluded under I.C. § 28-2-316(3)(a) without mentioning merchantability.
The words that state the rule
In this case, the retail order, which was read and signed by Haight at the time of the sale, stated: “This unit sold as is. No warranty or guarantee stated or implied.” Additionally, the buyer’s guide contained two boxes that Dale’s could mark to indicate to the buyer whether any warranty was made with regard to the Jeep or whether the Jeep was sold as is with no warranty. The district court found that Dale’s had, in a manner sufficient to exclude the warranty' of fitness, marked next to the “as is” box on the buyer’s guide. In bold capital lettering above Haight’s signature, the installment sale contract stated that the Jeep was being “sold as is, with all defects, and without any warranty of fitness or merchantability.” Although the district court found that the warranty exclusion language using the term “merchantability” was not conspicuous, we reach a contrary conclusion. *857 The use of bold lettering and the placement of the warranty disclaimer close to the signature line makes it qualify as “conspicuous.” It, therefore, satisfied the requirements of I.C. § 28-2-316(2) with respect to the implied warranty of merchantability.
The words that state the rule
Even if the implied warranties of merchantability and fitness had not been effectively excluded under I.C. § 28-2-316(2), they were nonetheless excluded under subsection 28-2-316(3)(a) by the “as is” language on the buyer’s guide.
The words that state the rule
The district court’s judgment entered in favor of Dale’s and the Zooks in this action for revocation of acceptance is affirmed.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.