Question

68. Define the Implied Warranty of Merchantability. Under what circumstances does a merchant make such a warranty? May the warranty be disclaimed?

69. Who is classified as a merchant under the UCC?

70. In your own words, define the shelter principle. Who does it benefit?

Business Law class. Please short answer

Answer 1

Implied Warranty of Merchantability: This warranty means that if you have purchased any product from a seller, that product will work properly when used for it's intended purpose. and the seller is responsible for ensuring the same. This warranty is implied which means that there is not need to mention the same on the product etc and that's the precise reason that a seller does not explicitly tell the buyer regarding this warrant as it is applicable in all cases.

The circumstances under which the merchant makes this warranty includes intended purpose i.e normal / ordinary course. And the warranty may be disclaimed if the product is not used for the intended purpose and this disclaimer has to be in writing and clear because the warranty is by default implied and to disclaim the same it needs to be in writing so that the buyer is aware.

Merchant under UCC:

The Uniform Commercial Code (UCC) defines a Merchant as under:

A merchant is a person who is regularly engaged in dealing of goods etc or providing service etc with the skills involved in the transaction.

Shelter Principle:

The shelter principle is for protection of a party who is not a holder in due course (HDC) or does not qualify as a HDC. In that case also that party can get the privileges and rights of a HDC if the instrument has been obtained from a HDC.

Therefore this benefits to a person who is a transferee and gets any notice for claims etc for instruments then it will have same rights as of a HDC.