Does this "AS IS" / warranty-disclaimer clause validly exclude North Dakota's implied warranties?
Yes, by any of three routes under N.D.C.C. § 41-02-33, each of which answers to one limit the section states first. Route one, subsection 2: "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." Route two, subsection 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." Ward Farms Partnership v. Enerbase Cooperative Resources applied route two to a signed auction bill of sale reading "All items sold As-Is, Where-Is," holding: "We conclude the district court correctly determined the bill of sale fulfilled the requirements of N.D.C.C. § 41-02-33(3)(a)." Route three, subsection 3(c), needs no disclaimer language at all: "An implied warranty can also be excluded or modified by course of dealing or course of performance or usage of trade." The limit that runs against all three is subsection 1, which requires express-warranty words and negating words to be "construed whenever reasonable as consistent with each other" and makes a negation or limitation "inoperative to the extent that such construction is unreasonable," so an "as is" line cannot be read to cancel an express warranty given in the same deal where that reading is unreasonable. Two further things a reader needs with route one: "conspicuous" is defined for the whole Code by N.D.C.C. § 41-01-09 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," with the question made "a decision for the court"; and a disclaimer of warranty "must be part of the basis of the bargain to be enforceable," a requirement Construction Associates draws from Fleck v. Jacques Seed Co. and expressly does NOT apply to a limitation of remedies.
The trap
A disclaimer that fails route one's conspicuous-and-mentions-merchantability test has not necessarily failed to exclude the warranty: Ward Farms shows an "as is" clause can independently satisfy route two even where the buyer separately argued the clause was part of an unequal, adhesion-style bargain; the Supreme Court affirmed the denial of leave to add that unconscionability claim, and did not read the 'as is' language any differently for it. Two further, ND-specific limits sit in the same section and have nothing to do with how a disclaimer is worded: subsection 3(b) removes the implied warranty as to any defect the buyer's own pre-contract examination (or refused examination) "ought in the circumstances to have revealed"; and subsection 3(e) carves out a species-specific rule found in few other states' UCC text: there is no implied warranty that cattle, hogs, sheep, or horses are free from sickness or disease at the time of sale, conditioned on the seller's compliance with state and federal animal-health regulations. Remedies for a warranty that is NOT excluded are governed separately by §§ 41-02-97 and 41-02-98, which is what subsection 4 of this section says. Ward Farms is also worth reading for what actually persuaded the courts there, before assuming an auction "as is" line is an adhesion term: the district court "addressed the inequality of bargaining power issue by noting Michael Ward understood the tractor was being auctioned off 'as is,' he was an experienced farmer and attorney, and he was experienced in attending auctions and buying auction items," and the Supreme Court affirmed summary judgment for the seller because "Ward Farms did not raise an issue of material fact regarding its breach of warranty claims."
13 authorities
- statuteN.D.C.C. § 41-02-33enactment 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".
- statuteN.D.C.C. § 41-02-33enactment date not established
The words that state the rule
Notwithstanding subsection 2: - 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. - When the buyer before entering into the contract has examined the goods or the sample or model as fully as the buyer 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 the buyer. - An implied warranty can also be excluded or modified by course of dealing or course of performance or usage of trade. - The implied warranties of merchantability and fitness shall not be applicable to a contract for the sale of human blood, blood plasma, or other human tissue or organs from a blood bank or reservoir of such other tissues or organs. Such blood, blood plasma, or tissue or organs shall not for the purposes of this chapter be considered commodities subject to sale or barter, but shall be considered as medical services.
- statuteN.D.C.C. § 41-02-33enactment date not established
The words that state the rule
With respect to the sale of cattle, hogs, sheep, and horses, there shall be no implied warranty that cattle, hogs, sheep, and horses are free from sickness or disease at the time the sale is consummated, conditioned upon reasonable showing by the seller that all state and federal regulations pertaining to animal health were complied with. - 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 41-02-97 and 41-02-98).
- case863 N.W.2d 868Ward Farms Partnership v. Enerbase Cooperative ResourcesN.D.decided 2015read it at the source ↗
The words that state the rule
The bill of sale, signed by Michael Ward, states in clear, conspicuous language: “The undersigned, as purchaser, states that he has purchased at public auction the above listed items and therefore understands that they do not carry any warranty. All items sold As-Is, Where-Is_ The undersigned acknowledges that he/she has read the foregoing statement ... ALL SALES ARE FINAL.”
- case863 N.W.2d 868Ward Farms Partnership v. Enerbase Cooperative ResourcesN.D.decided 2015read it at the source ↗
The words that state the rule
We conclude the district court correctly determined the bill of sale fulfilled the requirements of N.D.C.C. § 41-02-33(3)(a).
- case863 N.W.2d 868Ward Farms Partnership v. Enerbase Cooperative ResourcesN.D.decided 2015read it at the source ↗
The words that state the rule
Ward Farms also argues either the bill of sale or the bidder contract amounts to an adhesion contract as it was offered on a “take it or leave it” basis, and the “as is” language is unconscionable and against public policy.
- case863 N.W.2d 868Ward Farms Partnership v. Enerbase Cooperative ResourcesN.D.decided 2015read it at the source ↗
The words that state the rule
We conclude the district court did not abuse its discretion in *876 denying Ward Farms’ motion to amend because it was untimely, and the proposed amendment was futile; the new claim would not survive a summary judgment motion.
- statuteN.D.C.C. § 41-02-33enactment 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 whenever reasonable as consistent with each other; but subject to the provisions of this chapter on parol or extrinsic evidence (section 41-02-09), negation or limitation is inoperative to the extent that such construction is unreasonable.
- statuteN.D.C.C. § 41-01-09enactment 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.
- case863 N.W.2d 868Ward Farms Partnership v. Enerbase Cooperative ResourcesN.D.decided 2015read it at the source ↗
The words that state the rule
An expression regarding the value of the goods or a seller’s opinion or commendation of the goods does not create a warranty. N.D.C.C. § 41-02-30(2). However, “[u]nless excluded or modified ... a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind.” N.D.C.C. § 41-02-31(1). “[A]ll 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.” N.D.C.C. § 41-02-33(3)(a). An official comment to the statute discusses terms like “as is” or “with all faults,” stating, “[s]uch terms in ordinary commercial usage are understood to mean that the buyer takes the entire risk as to the quality of the goods involved.”
- case863 N.W.2d 868Ward Farms Partnership v. Enerbase Cooperative ResourcesN.D.decided 2015read it at the source ↗
The words that state the rule
Both the bidder contract and the bill of sale contained clear and conspicuous language disclaiming any warranties and stating all items are sold “as is,” and Michael Ward admitted signing both documents. Ward Farms did not raise an issue of material fact regarding its breach of warranty claims. We conclude the district court did not err in granting Enerbase’s summary judgment motion.
- case863 N.W.2d 868Ward Farms Partnership v. Enerbase Cooperative ResourcesN.D.decided 2015read it at the source ↗
The words that state the rule
The district court addressed the inequality of bargaining power issue by noting Michael Ward understood the tractor was being auctioned off “as is,” he was an experienced farmer and attorney, and he was experienced in attending auctions and buying auction items.
- case446 N.W.2d 237Construction Associates, Inc. v. Fargo Water Equipment Co.N.D.decided 1989read it at the source ↗
The words that state the rule
[7] Construction Associates and Fargo Water argue that Scientific Application, Inc. v. Delkamp, 303 N.W.2d 71 (N.D.1981), and Eichenberger v. Wilhelm, 244 N.W.2d 691 (N.D.1976), require that limitations of remedies or exclusions of damages be part of the basis of the bargain of the contract of sale in order to be enforceable. Those cases involved disclaimers of warranties, not limitation of remedies or exclusion of damages. In Fleck v. Jacques Seed Co., 445 N.W.2d 649, 654 (N.D.1989) we have reiterated that a disclaimer of warranty must be part of the basis of the bargain to be enforceable.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.