Themis Contracts Practice Exam

The key idea is that the implied warranty of merchantability automatically arises when the seller is a merchant who deals in goods of the kind sold. It promises the goods are fit for their ordinary purpose and meet the expectations of someone buying such goods, not defective in a way that would render them unusable. Disclaiming that warranty is allowed, but with limits. A disclaimer must clearly state that the warranty of merchantability does not apply and must be presented in a way that is conspicuous. If the disclaimer is in writing, it must be conspicuous; and it must use the term “merchantability” to be effective. Oral disclaimers can be used, but they should include the term “merchantability” to satisfy the requirement that the disclaimer clearly communicates the exclusion. So this correctly captures that the warranty is automatic when the seller is a merchant, and that the disclaimer can be oral, provided it uses the term and is conspicuous when written.