Warranty Disclaimers in Business-to-Business Sales

Between businesses, a seller can usually exclude the implied warranties that the law would otherwise read into a sale of goods — but only by following the specific method the code lays down. To exclude the implied warranty of merchantability, the language has to mention merchantability, and if it is written it has to be conspicuous. To exclude the implied warranty of fitness for a particular purpose, the exclusion has to be in writing and conspicuous. Those rules come from section 2-316 of the Uniform Commercial Code, which is a uniform act adopted state by state with variations, so the governing state's enacted version and its case law always control.

1.The warranties being excluded

Two implied warranties do most of the work in commercial sales. The warranty of merchantability applies when the seller is a merchant with respect to goods of that kind, and it promises, in substance, that the goods are fit for the ordinary purposes such goods are used for and pass without objection in the trade. It is not a promise of excellence; it is a floor.

The warranty of fitness for a particular purpose is narrower and arises only in specific circumstances: the seller has reason to know the buyer's particular purpose and that the buyer is relying on the seller's skill or judgment to select suitable goods. Sellers create this warranty more often than they realize, usually by giving application advice during the sales process rather than by writing anything down.

2.The method the code requires

Section 2-316 does not simply ask whether the parties intended to exclude warranties. It prescribes how. The provision is available at UCC 2-316, within Article 2 as published in model form.

Conspicuousness is the requirement that fails most often. A disclaimer buried in dense body text, in the same size and weight as everything around it, on the reverse of an acknowledgment nobody reads, is the standard fact pattern for a court holding the exclusion ineffective. The usual fixes are capital letters, bold type, a contrasting color, a bordered box, or a heading signaling what follows. Whether a term is conspicuous is generally a question for the court rather than the jury.

3.The other routes to exclusion

Naming the warranties is not the only path. The code recognizes several alternatives that operate independently of the mention-and-conspicuousness rules.

• Expressions like "as is" or "with all faults" — language that in common understanding calls the buyer's attention to the exclusion and makes plain there is no implied warranty.
• Examination of the goods, or a refusal to examine after the seller demands it, as to defects the examination ought to have revealed.
• Course of dealing, course of performance, or usage of trade, where the parties' history or the trade's customs make the exclusion understood.

The examination route is narrower than sellers hope. It reaches defects a reasonable inspection would have revealed, not latent problems, and the argument is much stronger where the seller actually demanded that the buyer inspect. Trade usage arguments require evidence about practice in the relevant trade — a proof burden, not a drafting shortcut. Some states have modified these provisions in enacting Article 2, and the enactment picture is tracked by the Uniform Law Commission.

4.Express warranties resist disclaimer

Express warranties are created by an affirmation of fact or promise about the goods, by a description of the goods, or by a sample or model — in each case where it becomes part of the basis of the bargain. No formal words are needed, and the seller does not have to intend to make a warranty.

The code then treats express warranties and disclaimers as being read together whenever that is reasonable, and where they cannot be reconciled, the disclaimer is inoperative to the extent it conflicts. A datasheet stating a throughput figure, a specification incorporated into the purchase order, or a sample the buyer approved will generally outlast a boilerplate line saying all warranties are excluded. That is why sellers who want a narrow warranty position control the marketing and specification documents rather than relying on the terms page alone.

Caution: Statements made in proposals, datasheets, and emails during negotiation can become express warranties. Whether a court will look at those documents at all depends on the state's parol evidence rules and any integration clause, an issue covered in Contract Interpretation: Plain Meaning, Ambiguity, and Parol Evidence.

Whose terms actually apply is a related and frequently decisive problem. When a buyer's purchase order and a seller's acknowledgment carry different warranty terms, the outcome depends on the form-exchange rules rather than on which document was more emphatic; that analysis is set out in Battle of the Forms: Whose Terms Govern a Purchase Order. Long-term supply arrangements raise their own quantity and quality questions, discussed in Requirements and Output Contracts Under UCC Article 2.

5.Disclaimers alongside remedy limits

A disclaimer and a remedy limitation do different things, and well-drafted terms use both. The disclaimer under 2-316 removes warranties before any breach can occur. A remedy limitation under UCC 2-719 assumes a breach and restricts what follows — typically confining the buyer to repair or replacement and excluding consequential damages.

The two clauses fail differently, which is the practical reason to have both. A disclaimer that is not conspicuous simply does not work. A remedy limitation can be valid at signing and still collapse later if the exclusive remedy fails of its essential purpose, and states divide on whether a separate consequential damages waiver survives that failure. Excluding consequential damages for commercial loss is prima facie not unconscionable, while excluding them for personal injury caused by consumer goods is prima facie unconscionable. The mechanics are covered in Limiting Liability: Caps, Carve-Outs, and Consequential Damages Waivers.

One more boundary matters. Consumer transactions are policed by additional federal and state law that does not apply the same way between merchants, including rules on how consumer warranties may be written and what a seller may say about them. General material for businesses is published at FTC business guidance. Any consumer thresholds or requirements vary and should not be assumed to carry over into a merchant-to-merchant sale.

6.Questions this raises

Does an all-capitals paragraph automatically satisfy the conspicuousness requirement?

Not automatically. Capitals help, but the test is whether a reasonable person against whom the term operates ought to have noticed it. A page consisting entirely of capitals can defeat itself, because nothing stands out. Placement, type size, contrast, and a signaling heading all contribute. Because conspicuousness is generally decided by the court, the safer approach is to make the disclaimer visually distinct from the surrounding terms rather than merely loud.

Does "as is" exclude the fitness warranty as well as merchantability?

Under the model provision, expressions such as "as is" and "with all faults" operate to exclude implied warranties generally, without naming each one. That said, states have enacted and interpreted this differently, and some restrict the phrase in particular transaction types. Many sellers use belt-and-braces drafting: a conspicuous clause naming merchantability and fitness, plus the "as is" language, so that one route survives if another is attacked.

Can a seller disclaim a specification it wrote into the purchase order?

Generally not. A description of the goods that becomes part of the basis of the bargain creates an express warranty, and a disclaimer inconsistent with an express warranty is inoperative to that extent. Courts read the two together where reasonable and give the express term priority where they conflict. A seller wanting a narrower position has to change the specification or qualify it directly, not disclaim it in general terms elsewhere.

If implied warranties are excluded, is the buyer left with nothing?

No. The buyer still has whatever express warranties were given, the seller's obligation to deliver conforming goods as the contract describes them, and any negotiated remedies. Other claims may exist outside warranty law entirely, depending on the facts and the state. What the exclusion removes is the background quality promise the law would otherwise supply, which is precisely why buyers negotiate an express warranty to replace it.

7.Checking a disclaimer that has to hold

Work through the terms in a fixed order, because the questions build on one another. First, confirm that the state's enacted Article 2 governs the transaction at all — sales of goods yes, pure services no, mixed deals depending on the state's test. Second, find the disclaimer and check that merchantability is named and that the exclusion is set off visually from the surrounding text. Third, confirm the fitness exclusion is in writing and equally visible.

Then look outward from the terms page. Collect the proposals, datasheets, samples, and specifications exchanged during the sale, and identify anything that reads as an affirmation of fact about the goods, since a disclaimer will not override it. Confirm which document set actually formed the contract. Finally, check that the remedy limitation is drafted as a separate clause with a backstop, so the failure of one part does not carry the rest away. Practical business material for smaller firms is available from the Small Business Administration. This entry states general principles only; the enacted law of the governing state controls the outcome.