IMPLIED WARRANTY OF MERCHANTABILITY CAN APPLY TO USED GOODS

MAN Engines & Components, Inc. v. Shows
Supreme Court of Texas, No. 12-0490 (June 6, 2014)
Justice Willett (Opinion)
Shows bought a used boat, a big one, with high-performance inboard engines made by MAN. When one of the engines failed beyond repair, Shows sued MAN for, among other things, breach of the implied warranty of merchantability. So, as Justice Willett wryly observed, “This breach-of-warranty case poses a fundamental question: Does the implied warranty of merchantability extend to purchasers of used goods? Our answer: It depends.” Relying on its 1977 decision in Nobility Homes v. Shivers, the Court concluded that the implied warranty of merchantability does apply to used goods, even in the absence of privity between the buyer and maker, but (1) merchantability is warranted only for the state of the product when it passed to the first buyer, and (2) if that warranty is effectively disclaimed at the point of the first purchase, that disclaimer passes to each subsequent purchaser to bar such claims. The facts here presented two other significant, related issues but, unfortunately, they were not preserved by MAN in the trial court. First, an express warranty was unearthed that seemed to disclaim the implied warranty of merchantability. But the Court held that such a disclaimer is an affirmative defense that must be pleaded by the defendant under Rule 94, and MAN didn’t do that here. Second, the original buyer sold the boat to Shows “as is,” which ordinarily would eliminate any warranties, at least between the parties to the sale. Whether such “as is” language would also eliminate an implied warranty from the manufacturer will have to wait for another day because, again, MAN did not plead the “as is” sale as a defense in the trial court.

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