Is our 'AS IS, NO WARRANTIES' disclaimer effective in North Carolina?
Yes, if it satisfies one of the routes N.C.G.S. § 25-2-316 provides, and for a fitness disclaimer the section supplies a form of words of its own. Under subsection (b), which is itself expressly 'Subject to subsection (c)', to exclude or modify the implied warranty of merchantability the language must mention merchantability and, in case of a writing, must be conspicuous; to exclude or modify any implied warranty of fitness the exclusion must be by a writing and conspicuous. Subsection (b) then adds a statutory sufficiency rule the boilerplate usually misses: '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."' Subsection (c)(1) is the alternative route and begins 'Notwithstanding subsection (b)': 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. Two further exclusions sit in the same subsection and do not depend on any language in your document: (c)(2), where the buyer before entering the contract has examined the goods, sample or model as fully as desired or has refused to examine them, there is no implied warranty as to defects an examination ought to have revealed; and (c)(3), an implied warranty can also be excluded or modified by course of dealing, course of performance or usage of trade.
The trap
North Carolina's conspicuousness test is not a typography rule, and the one safe harbour the section does give is not the one drafters reach for. Section 25-1-201(b)(10) defines 'conspicuous', with reference to a term, as 'so written, displayed, or presented that, based on the totality of the circumstances, a reasonable person against which it is to operate ought to have noticed it', and adds that whether a term is conspicuous 'is a decision for the court', so putting the paragraph in capitals is evidence going to the totality, not a rule that wins, and the judge decides rather than the jury. What IS a stated sufficiency rule is § 25-2-316(b)'s own second sentence, and it reaches FITNESS ONLY: a clause saying there are no warranties beyond the description on the face of the document is declared sufficient to exclude all implied warranties of fitness, and says nothing about merchantability, which still needs the word 'merchantability' and still needs to be conspicuous. A disclaimer drafted only to that example therefore leaves merchantability in place. The definitions matter too: 'conspicuous' is defined with reference to a 'term', and § 25-1-201(b)(40) defines a term as 'a portion of an agreement that relates to a particular matter', so the test is applied to the clause in its setting rather than to the document as a whole; and § 25-1-201(b)(43) defines 'writing' as including 'printing, typewriting, or any other intentional reduction to tangible form', which is the requirement subsection (b) imposes twice. Two further points from the section itself. Subsection (a) subordinates the whole disclaimer to the parol evidence section: words or conduct creating an express warranty and words or conduct tending to negate or limit warranty are construed wherever reasonable as consistent, but 'subject to the provisions of this article on parol or extrinsic evidence (G.S. 25-2-202) negation or limitation is inoperative to the extent that such construction is unreasonable', so a disclaimer cannot take back an express warranty the same document gives. And subsection (d) sends limits on the REMEDY for breach of warranty to §§ 25-2-718 and 25-2-719 rather than to this section, which is where a consequential-damages exclusion is judged. NOT ESTABLISHED HERE: whether a disclaimer the buyer could not have seen before the sale is ineffective, whether a post-sale disclaimer in a manual or shrink-wrap is effective, and whether North Carolina has a consumer-specific limit on disclaimers. On the last of those, no such provision was found in the North Carolina statutes checked for this rule; on all three, 52 published North Carolina decisions mention § 25-2-316 and 100 mention § 25-1-201, and the one examined for this rule does not construe either, so no view is offered on what the rest of them say.
7 authorities
- statuteN.C.G.S. § 25-2-316enactment date not established
The words that state the rule
Subject to subsection (c) [of this section], 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."
- statuteN.C.G.S. § 25-2-316enactment date not established
The words that state the rule
(c) Notwithstanding subsection (b) [of this section] (1) 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 (2) 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 (3) an implied warranty can also be excluded or modified by course of dealing or course of performance or usage of trade.
- statuteN.C.G.S. § 25-1-201enactment date not established
The words that state the rule
Conspicuous. - With reference to a term, means so written, displayed, or presented that, based on the totality of the circumstances, a reasonable person against which it is to operate ought to have noticed it. Whether a term is "conspicuous" or not is a decision for the court.
- statuteN.C.G.S. § 25-1-201enactment date not established
The words that state the rule
(40) Term. - A portion of an agreement that relates to a particular matter. (41) Unauthorized signature. - A signature made without actual, implied, or apparent authority.
- statuteN.C.G.S. § 25-1-201enactment date not established
The words that state the rule
(43) Writing. - Includes printing, typewriting, or any other intentional reduction to tangible form. "Written" has a corresponding meaning.
- statuteN.C.G.S. § 25-2-316enactment date not established
The words that state the rule
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 article on parol or extrinsic evidence (G.S. 25-2-202) negation or limitation is inoperative to the extent that such construction is unreasonable.
- statuteN.C.G.S. § 25-2-316enactment date not established
The words that state the rule
Remedies for breach of warranty can be limited in accordance with the provisions of this article on liquidation or limitation of damages and on contractual modification of remedy (G.S. 25-2-718 and 25-2-719).
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.