Text and Circumstance: Warranty Disclaimers in a World of Rolling Contracts

Abstract

The law of warranty disclaimers has failed to keep pace with the proliferation and growing acceptance of "rolling" or "layered" contracts. Courts have not adequately addressed or resolved this tension and have failed to articulate an appropriate test for assessing these disclaimers in rolling contracts. This Article provides a flexible test based on language in Article 2 of the Uniform Commercial Code that validates certain disclaimers "unless the circumstances indicate otherwise." The test would enable a trier of fact to find a disclaimer ineffective if the nature of the transaction is such that it puts the buyer off guard as to the existence or effect of a disclaimer. To illustrate the value of this test, the Article applies the test to the critical issue of disclaimers in rolling contracts involving consumer purchases.

The Article concludes that although it may be appropriate to provide some terms only after purchase or order, a warranty disclaimer in a consumer purchase is not such a term. A consumer typically expects that, although the seller may provide some minor terms after purchase, all the key product information will be presented "up front" in the transaction. A disclaimer of the implied warranty of merchantability should be considered just such key product information. Thus, when a purchase or order passes without disclosure of a disclaimer, a consumer is likely to be put off guard as to the existence or effect of a disclaimer disclosed afterwards. In short, sellers should generally not be able to "roll" warranty disclaimers into consumer transactions.

Keywords: warranty, disclaimers, contracts, rolling contracts

JEL Classification: K12