CO Code § 4-2-314 (2021)
2021 Colorado Code|Title 4 - Uniform Commercial Code|Article 2 - Sales|Part 3 - General Obligation and Construction of Contract|§ 4-2-314. Implied Warranty - Merchantability - Usage of Trade

  Unless excluded or modified (section 4-2-316), a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind. Under this section, the serving for value of food or drink to be consumed either on the premises or elsewhere is a sale.    Goods to be merchantable must be at least such as:   Pass without objection in the trade under the contract description; and    In the case of fungible goods, are of fair average quality within the description; and    Are fit for the ordinary purposes for which such goods are used; and    Run, within the variations permitted by the agreement, of even kind, quality, and quantity within each unit and among all units involved; and    Are adequately contained, packaged, and labeled as the agreement may require; and    Conform to the promises or affirmations of fact made on the container or label if any.       Unless excluded or modified (section 4-2-316), other implied warranties may arise from course of dealing or usage of trade.     History. Source: L. 65: P. 1310, § 1. C.R.S. 1963: § 155-2-314. History. Source: L. 65: P. 1310, § 1. C.R.S. 1963: § 155-2-314.    OFFICIAL COMMENT   Prior Uniform Statutory Provision: Section 15(2), Uniform Sales Act.   Changes: Completely rewritten.   Purposes of Changes: This section, drawn in view of the steadily developing case law on the subject, is intended to make it clear that:   1. The seller's obligation applies to present sales as well as to contracts to sell subject to the effects of any examination of specific goods. (Subsection (2) of Section 2-316). Also, the warranty of merchantability applies to sales for use as well as to sales for resale.   2. The question when the warranty is imposed turns basically on the meaning of the terms of the agreement as recognized in the trade. Goods delivered under an agreement made by a merchant in a given line of trade must be of a quality comparable to that generally acceptable in that line of trade under the description or other designation of the goods used in the agreement. The responsibility imposed rests on any merchant-seller, and the absence of the words “grower or manufacturer or not” which appeared in Section 15(2) of the Uniform Sales Act does not restrict the applicability of this section.   3. A specific designation of goods by the buyer does not exclude the seller's obligation that they be fit for the general purposes appropriate to such goods. A contract for the sale of second-hand goods, however, involves only such obligation as is appropriate to such goods for that is their contract description. A person making an isolated sale of goods is not a “merchant” within the meaning of the full scope of this section and, thus, no warranty of merchantability would apply. His knowledge of any defects not apparent on inspection would, however, without need for express agreement and in keeping with the underlying reason of the present section and the provisions on good faith, impose an obligation that known material but hidden defects be fully disclosed.   4. Although a seller may not be a “merchant” as to the goods in question, if he states generally that they are “guaranteed” the provisions of this section may furnish a guide to the content of the resulting express warranty. This has particular significance in the case of second-hand sales, and has further significance in limiting the effect of fine-print disclaimer clauses where their effect would be inconsistent with large-print assertions of “guarantee”.   5. The second sentence of subsection (1) covers the warranty with respect to food and drink. Serving food or drink for value is a sale, whether to be consumed on the premises or elsewhere. Cases to the contrary are rejected. The principal warranty is that stated in subsections (1) and (2)(c) of this section.   6. Subsection (2) does not purport to exhaust the meaning of “merchantable” nor to negate any of its attributes not specifically mentioned in the text of the statute, but arising by usage of trade or through case law. The language used is “must be at least such as ...,” and the intention is to leave open other possible attributes of merchantability.   7. Paragraphs (a) and (b) of subsection (2) are to be read together. Both refer, as indicated above, to the standards of that line of the trade which fits the transaction and the seller's business. “Fair average” is a term directly appropriate to agricultural bulk products and means goods centering around the middle belt of quality, not the least or the worst that can be understood in the particular trade by the designation, but such as can pass “without objection.” Of course a fair percentage of the least is permissible but the goods are not “fair average” if they are all of the least or worst quality possible under the description. In cases of doubt as to what quality is intended, the price at which a merchant closes a contract is an excellent index of the nature and scope of his obligation under the present section.   8. Fitness for the ordinary purposes for which goods of the type are used is a fundamental concept of the present section and is covered in paragraph (c). As stated above, merchantability is also a part of the obligation owing to the purchaser for use. Correspondingly, protection, under this aspect of the warranty, of the person buying for resale to the ultimate consumer is equally necessary, and merchantable goods must therefore be “honestly” resalable in the normal course of business because they are what they purport to be.   9. Paragraph (d) on evenness of kind, quality and quantity follows case law. But precautionary language has been added as a remainder of the frequent usages of trade which permit substantial variations both with and without an allowance or an obligation to replace the varying units.   10. Paragraph (e) applies only where the nature of the goods and of the transaction require a certain type of container, package or label. Paragraph (f) applies, on the other hand, wherever there is a label or container on which representations are made, even though the original contract, either by express terms or usage of trade, may not have required either the labelling or the representation. This follows from the general obligation of good faith which requires that a buyer should not be placed in the position of reselling or using goods delivered under false representations appearing on the package or container. No problem of extra consideration arises in this connection since, under this Article, an obligation is imposed by the original contract not to deliver mislabeled articles, and the obligation is imposed where mercantile good faith so requires and without reference to the doctrine of consideration.   11. Exclusion or modification of the warranty of merchantability, or of any part of it, is dealt with in the section to which the text of the present section makes explicit precautionary references. That section must be read with particular reference to its subsection (4) on limitation of remedies. The warranty of merchantability, wherever it is normal, is so commonly taken for granted that its exclusion from the contract is a matter threatening surprise and therefore requiring special precaution.   12. Subsection (3) is to make explicit that usage of trade and course of dealing can create warranties and that they are implied rather than express warranties and thus subject to exclusion or modification under Section 2-316. A typical instance would be the obligation to provide pedigree papers to evidence conformity of the animal to the contract in the case of a pedigreed dog or blooded bull.   13. In an action based on breach of warranty, it is of course necessary to show not only the existence of the warranty but the fact that the warranty was broken and that the breach of the warranty was the proximate cause of the loss sustained. In such an action an affirmative showing by the seller that the loss resulted from some action or event following his own delivery of the goods can operate as a defense. Equally, evidence indicating that the seller exercised care in the manufacture, processing or selection of the goods is relevant to the issue of whether the warranty was in fact broken. Action by the buyer following an examination of the goods which ought to have indicated the defect complained of can be shown as matter bearing on whether the breach itself was the cause of the injury.   Cross References:   Point 1: Section 4-2-316 .   Point 3: Sections 4-1-203 and 4-2-104 .   Point 5: Section 4-2-315 .   Point 11: Section 4-2-316 .   Point 12: Sections 4-1-201 , 4-1-205 and 4-2-316 .   Definitional Cross References:   “Agreement”. Section 4-1-201 .   “Contract”. Section 4-1-201 .   “Contract for sale”. Section 4-2-106 .   “Goods”. Section 4-2-105 .   “Merchant”. Section 4-2-104 .   “Seller”. Section 4-2-103 .   ANNOTATION   Law reviews. For article, “The Uniform Commercial Code and Sales Warranties in Colorado”, see 38 U. Colo. L. Rev. 7 . For note, “Implied Warranty of Fitness for Habitation in Sale of Residential Dwellings”, see 43 Den. L. J. 379 (1966). For note, “Implied Warranties — Sales of Used Cars in Colorado”, see 42 U. Colo. L. Rev. 473 (1971). For article, "Buyer-Secured Party Conflicts Under Section 9-307(1) of the Uniform Commercial Code", see 46 U. Colo. L. Rev. 333 (1974-75). For article, “The Enterprise Liability Theory of Torts”, see 47 U. Colo. L. Rev. 153 (1976). For comment, “Implied Warranties in the Sale of Real Estate in Colorado: Rational Boundaries of the Doctrine”, see 53 U. Colo. L. Rev. 137 (1981). For article, “Let the Builder-Vendor Beware: The Demise of Caveat Emptor in Colorado — Part I”, see 16 Colo. Law. 463 (1987). For article, “Let the Builder-Vendor Beware: Defenses and Damages in Home Builder Litigation — Part II”, see 16 Colo. Law. 629 (1987). For article, “What's in the Package: Food, Beverage, and Dietary Supplement Law and Litigation Part I”, see 43 Colo. Law. 77 (July 2014).   Annotator's note. Since § 4-2-314 is similar to repealed § 121-1-15(1)(c) , C.R.S. 1963, § 121-1-15(2) , CRS 53, and CSA, C. 143A, § 15(2) (uniform sales act), relevant cases construing those provisions have been included in the annotations to this section.   The several types of warranties coexist. Westric Battery Co. v. Standard Elec. Co., 482 F.2d 1307 (10th Cir. 1973).   Implied warranties of merchantability and fitness for a particular purpose may coexist when there is sufficient evidence to support the creation of each warranty. Palmer v. A.H. Robins Co., Inc., 684 P.2d 187 (Colo. 1984); Hawkinson v. A.H. Robins Co., Inc., 595 F. Supp. 1290 (D. Colo. 1984 ).   Evidence that woman selected intrauterine device not only for the ordinary purpose of preventing pregnancy, but also for the particular purpose of providing her with a safe contraceptive device was sufficient to justify submission to the jury of the dual implied warranties of fitness for a particular purpose and merchantability. Palmer v. A.H. Robins Co., Inc., 684 P.2d 187 (Colo. 1984).   Doctrine of strict liability adopted where design renders unreasonably dangerous an otherwise properly manufactured product. Pust v. Union Supply Co., 38 Colo. App. 435, 561 P.2d 355 (1976), rev'd sub nom. Holly Sugar Corp. v. Union Supply Co., 194 Colo. 316 , 572 P.2d 148 (1977) third party indemnification issue, and aff'd, 196 Colo. 162 , 583 P.2d 276 (1978).   Design enhances extent of injuries. Strict liability attaches to an automobile design defect which, though not contributing to the collision itself, may have enhanced the injuries sustained. Roberts v. May, 41 Colo. App. 82, 583 P.2d 305 (1978).   Defect in design may render product unmerchantable or not fit for the particular purposes for which it was required. Union Supply Co. v. Pust, 196 Colo. 162 , 583 P.2d 276 (1978).   For effect on manufacturer's liability where product is unavoidably unsafe, see Belle Bonfils Mem. Blood Bank v. Hansen, 665 P.2d 118 (Colo. 1983).   Summary judgment improper where factual question as to reasonableness of design. Where plaintiff's experts raise a factual question about the reasonableness of defendant's design strategies, the drastic remedy of summary judgment is improper, and the issue of whether the design of the car unreasonably increased the risks of injury by collision should be presented to the jury. Roberts v. May, 41 Colo. App. 82, 583 P.2d 305 (1978).   A dealer who sells articles which ordinarily are used in but one way impliedly warrants fitness for use in that particular way, unless there is evidence to the contrary, and this is a warrant of merchantability. Comet Indus., Inc. v. Best Plastic Container Corp., 222 F. Supp. 723 (D. Colo. 1963 ).   Contract required to involve sale of product. A claim asserting a breach of the “implied warranty of merchantability and fitness” under this section required that the contract in question involve the sale of a product. Strong v. Retail Credit Co., 38 Colo. App. 125, 552 P.2d 1025 (1976).   Concepts of liability without fault are not applicable to service contracts. Strong v. Retail Credit Co., 38 Colo. App. 125, 552 P.2d 1025 (1976).   Warranties arise in every contract for sale unless excluded. Warranties of merchantability and of fitness for a particular purpose, assuming all other statutory prerequisites have been met, arise in every contract for sale, unless properly excluded. Lease Fin., Inc. v. Burger, 40 Colo. App. 107, 575 P.2d 857 (1977).   A seller in connection with a sale of goods who incidentally renders services in the installation of those goods, knows the use and purpose intended for the goods, and knows that the user is relying on his skill and judgment in connection with the sale is liable under the theory of implied warranty of merchantability for each and every step of the process under his control by which the goods are transferred to the ultimate user, including any services rendered. Bailey v. Montgomery Ward Co., Inc., 690 P.2d 1280 (Colo. App. 1984).   Where contract provides for sale of goods and for performance of labor or service, test under this section is whether the circumstances underlying the formation of the agreement and the performance reasonably expected demonstrate that the primary purpose of the contract is either the sale of goods or the sale of labor or service. Factors to be considered include: 1) The contractual language; 2) whether an overall price is charged, or the goods and labor are separately billed; 3) the ratio of the cost of goods to the overall contract price; and 4) the nature and reasonableness of the purchaser's expectations of acquiring a property interest in the goods. Bailey v. Montgomery Ward Co., Inc., 690 P.2d 1280 (Colo. App. 1984).   Warranty applicable to heating system which was moved into buyers' residence for installation and later removed. Thomas v. Bove, 687 P.2d 534 (Colo. App. 1984).   Transfusion of blood was not sale of product. St. Luke's Hosp. v. Schmaltz, 188 Colo. 353 , 534 P.2d 781 (1975).   Implied warranty liability extended to component parts manufacturer. As in the area of strict liability, implied warranty liability may extend to the manufacturer of component parts if the lack of fitness for the purpose or use required is found in the component parts before they leave the component parts manufacturer, and not merely in the completed system. Union Supply Co. v. Pust, 196 Colo. 162 , 583 P.2d 276 (1978); Shaw v. General Motors Corp., 727 P.2d 387 (Colo. App. 1986).   Corporation's dissemination of information qualified as warranties. Where a corporation disseminated information using advertising materials, trade publications, or technical publications and oral statements representing the quality of its product, this activity qualifies in law as warranties. Westric Battery Co. v. Standard Elec. Co., 482 F.2d 1307 (10th Cir. 1973).   Admission of industry safety codes as substantive evidence on strict liability issue of whether a product is in a defective condition unreasonably dangerous is valid. Union Supply Co. v. Pust, 196 Colo. 162 , 583 P.2d 276 (1978).   Evidence of industry safety standards, when relevant as to a defect, must be introduced through an expert, must be authenticated as reliable and bona fide industry-wide safety codes, and sufficient advance notice of the intended use of such standards must be given to the adverse party so that he will have sufficient time to prepare to meet the evidence. Union Supply Co. v. Pust, 196 Colo. 162 , 583 P.2d 276 (1978).   Fertilizer containing herbicides was neither fit for its ordinary purpose nor for the farmers particular purpose, and therefore, breaches both the implied warranty of fitness and the implied warranty of merchantability. Deacon v. Am. Plant Food Corp., 782 P.2d 861 (Colo. App. 1989), rev'd on other grounds sub nom. Stone's Farm Supply, Inc. v. Deacon, 805 P.2d 1109 (Colo. 1991).   Lessee as third party beneficiary of warranties. Although a lessee of a machine does not directly receive the benefits of the warranties made by the seller to the lessor, the lessee may be a third party beneficiary of such warranties who could “reasonably be expected to use, consume, or be affected by the goods”. Lease Fin., Inc. v. Burger, 40 Colo. App. 107, 575 P.2d 857 (1977).   One who sells an article for use as food for human consumption is held to have impliedly warranted that it is fit for the purpose for which it was sold, and for breach of that warranty proximately resulting in injury, may be held to respond in damages. Gonzales v. Safeway Stores, Inc., 147 Colo. 358 , 363 P.2d 667 (1961).   Aside from the statute, a retailer who sells unwholesome food for human consumption is liable to the customer for the consequences under an implied warranty imposed by law as a matter of public policy, even though the food is in sealed containers bearing the label of the manufacturer and the retailer has no means of knowing that the contents are unfit for human consumption. Gonzales v. Safeway Stores, Inc., 147 Colo. 358 , 363 P.2d 667 (1961).   Where an advertisement does not mention the name of the product and the buyer does not see a label or other evidence of the name of the product before using it, but relies on the seller's judgment and skill to supply him with a sufficient and safe product, there is an implied warranty that the product is of merchantable quality, permitting recovery of actual damages sustained. Huscher v. Pfost, 122 Colo. 301 , 221 P.2d 931 (1950). See Gonzales v. Safeway Stores, Inc., 147 Colo. 358 , 363 P.2d 667 (1961).   Warranties will be implied in a house purchased in the course of construction that it is built in an efficient and workmanlike manner and of proper materials and when finished will be fit for habitation. Carpenter v. Donohoe, 154 Colo. 78 , 388 P.2d 399 (1964).   Implied warranties include completed buildings. The implied warranty doctrine includes agreements between builder-vendors and purchasers for the sale of newly constructed buildings, completed at the time of contracting. There is an implied warranty that builder-vendors have complied with the building code of the area in which the structure is located, and where a home is the subject of sale, there are implied warranties that the home was built in workmanlike manner and is suitable for habitation. Carpenter v. Donohoe, 154 Colo. 78 , 388 P.2d 399 (1964).   Implied warranty extends to a buyer who incurs injury through an allergic reaction to a product where such an individual is a member of an identifiable class of persons allergic thereto. Howard v. Avon Prods., Inc., 155 Colo. 444 , 395 P.2d 1007 (1964).   The buyer has the burden of establishing that the product is injurious to a “significant number” of the population. Howard v. Avon Prods., Inc., 155 Colo. 444 , 395 P.2d 1007(1964).   One fails to bring himself within the identifiable class or significant number concept when at the time of purchase, at which point the implied warranty attaches, there is no reasonably foreseeable class of potential users who could be described as prone to suffer from an allergic reaction. Howard v. Avon Prods., Inc., 155 Colo. 444 , 395 P.2d 1007 (1964).   Sellers who failed to provide purchase documentation for liquor inventory to buyers of inn breached implied warranty of merchantability entitling buyers to reject undocumented portion of liquor inventory. Purpose of this section is to allocate to seller the risk of loss stemming from defects that render goods unmerchantable. Loden v. Drake, 881 P.2d 467 (Colo. App. 1994).   Plaintiff must prove injuries proximately caused. It is incumbent upon the plaintiff in an action for breach of an implied warranty of fitness to prove that the injuries were proximately caused by the breach of such warranty. Dallison v. Sears, Roebuck Co., 313 F.2d 343 (10th Cir. 1962).   Negligence is a defense to an action for breach of such an implied warranty. Dallison v. Sears, Roebuck Co., 313 F.2d 343 (10th Cir. 1962).   Applied in Eggen v. M. K. Trailers Mobile Home Brokers, Inc., 29 Colo. App. 177, 482 P.2d 435 (1971); Pust v. Union Supply Co., 38 Colo. App. 435, 561 P.2d 355 (1976); Colorado-Ute Elec. Ass'n v. Envirotech Corp., 524 F. Supp. 1152 (D. Colo. 1981 ); White v. Mississippi Order Buyers, Inc., 648 P.2d 682 (Colo. App. 1982).