Startups that sell products should also consider the warranties that they’ve placed on their products. There are two types of warranties. The first, express warranties, are the kinds of warranties people are more familiar with, and include the warranties that come with purchases of products such as cars and computers. An express warranty is any warranty of a good (or service) that a company explicitly makes — e.g. “This product will function properly for at least 3 years, and we will repair it if it stops functioning properly within those three years”.
The second kind of warranty, probably less well-known by many people, is the implied warranty. As the name suggests, an implied warranty is by law “implied” by the sale of the goods, which means that the seller does not need to explicitly make the warranty. The law provides for several types of implied warranties. The two types most relevant to sales of goods are the implied warranty of merchantability and the implied warranty of fitness for a particular purpose.
The implied warranty of merchantability provides that goods will conform to the buyer’s reasonable expectation of being what they are supposed to be and are of fair and average quality — for example, a pair of pants will not be damaged under normal wear and washing.
The implied warranty of fitness for a particular purpose provides that goods will be suitable for the purposes the buyer has either provided to the seller and the seller has recommended the product to the buyer, and/or the seller has advertised. For example, a buyer asks for a cutting board that cannot be scratched by normal knife use, and the seller provides a board that the seller asserts meets the buyer’s requirements; or, a seller advertises that a watch is waterproof up to 50 meters’ depth.
Besides the implied warranties of merchantability and fitness for a particular purpose, another implied warranty that applies to sales of goodish the implied warranty of title — that the seller has proper title to sell the good to the buyer (so that, if the seller were to not own the good, the buyer would not be forced to later have to also pay the true owner of the good).
Implied warranties apply unless a seller sells goods “as is”, or explicitly disclaims any implied warranties in connection with the sale of the goods; however, some states, such as Massachusetts, severely limit a seller’s ability to disclaim implied warranties, particularly with respect to consumer transactions.