To: UCC Article 2B Drafting Committee and Reporter

To: UCC Article 2B Drafting Committee and Reporter

From: Todd J. Paglia

Date: May 30, 1997

Re: Comments on UCC 2B 402


Section 402 of UCC 2B requires that in order for a vendor's representation - in advertising or product documentation - to become an express warranty, the statement must become part of the "basis of the bargain." Some courts have interpreted this to mean that in order for a statement or representation to become part of the basis of the bargain, a consumer must rely upon those statements. A clearer and better rule would be to eliminate this reliance requirement.

The law in this area is unsettled. In New York, a representation generally cannot become part of the basis of the bargain unless the customer relied upon it in making the purchase.(1) In Virginia, however, courts treat statements of fact that come with the product as express warranties whether or not the customer heard or read them before buying the product.(2) I believe the latter is the appropriate reading of the Official Comments to 313 of the current UCC Article 2. This is also the direction that has been taken by the drafting committee for the revisions to Article 2.

Consumers would be better served, and ambiguities resolved, if the Drafting Committee eliminates the basis of the bargain requirement in 402. In adopting this approach, which is consistent with the Article 2 draft, Article 2B will focus on what the company agreed to sell and impose the mild requirement that the product will actually do what the company says it will do.

1 Several states follow the rule of the old Uniform Sales Act and interpret "basis of the bargain" under the UCC to be a continuation of the requirement that actual reliance must be shown for an express warranty to be valid. See Gregg v. U.S. Industries, Inc., 887 F.2d 1462, 1472 (11th Cir. 1989) ("Many cases under New York warranty law support the district court's charge that a showing of reliance is necessary to establish a breach of warranty claim."). The law is not entirely settled in New York but it is clear that other states also follow the approach whereby an express warranty exists only where a buyer relies upon the seller's claims. Phillips v. Ripley & Fletcher, 541 A.2d 946, 950 (Maine 1988) ("[T]he purchaser must show reliance in order to make out a cause of action for breach of warranty."); Hillcrest Country Club v. N.D. Judds Co., 461 N.W.2d 55, 61 (Neb. 1990) ("This court has held that "[s]ince an express warranty must have been 'made part of the basis of the bargain,' it is essential that the plaintiffs prove reliance upon the warranty.") (citing Wendt v. Beardmore Suburban Chevrolet, 219 Neb. 775, 780, 366 N.W.2d 424, 428 (Neb. 1985)); Thursby v. Reynolds Metals Co., 466 So.2d 245, 250 (Fla. 1984) ("[A]n express warranty is generally considered to arise only where the seller asserts a fact of which the buyer is ignorant prior to the beginning of the transaction . . . and on which the buyer justifiably relies as part of the "basis of the bargain . . . .") (citations omitted); Southwestern Bell Telephone Company v. FDP Corp., 811 S.W.2d 572, fn2 (Texas 1991) ("Courts and commentators are divided on the extent to which [basis of the bargain] abrogates the common law requirement of reliance.").

2 Daughtrey v. Ashe 413 S.E.2d 336 (Virginia 1992); see also Utah v. GAF Corp., 760 P.2d 310 (Utah 1988), Massey-Ferguson v. Laird, 432 So. 2d 1259 (Alabama 1983).