CO Code § 4-2-316 (2021)
2021 Colorado Code|Title 4 - Uniform Commercial Code|Article 2 - Sales|Part 3 - General Obligation and Construction of Contract|§ 4-2-316. Exclusion or Modification of Warranties

  Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit warranty shall be construed wherever reasonable as consistent with each other; but subject to the provisions of this article on parol or extrinsic evidence (section 4-2-202), negation or limitation is inoperative to the extent that such construction is unreasonable.    Subject to subsection (3) of this section, to exclude or modify the implied warranty of merchantability or any part of it, the language must mention merchantability and in case of a writing must be conspicuous, and to exclude or modify any implied warranty of fitness the exclusion must be by a writing and conspicuous. Language to exclude all implied warranties of fitness is sufficient if it states, for example, that “There are no warranties which extend beyond the description on the face hereof.”    Notwithstanding subsection (2) of this section:   Unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like “as is”, “with all faults”, or other language which in common understanding calls the buyer's attention to the exclusion of warranties and makes plain that there is no implied warranty; and    When the buyer before entering into the contract has examined the goods or the sample or model as fully as he desired or has refused to examine the goods, there is no implied warranty with regard to defects which an examination ought in the circumstances to have revealed to him; and    An implied warranty can also be excluded or modified by course of dealing or course of performance or usage of trade.       Remedies for breach of warranty can be limited in accordance with the provisions of this article on liquidation or limitation of damages and on contractual modification of remedy (sections 4-2-718 and 4-2-719).     History. Source: L. 65: P. 1311, § 1. C.R.S. 1963: § 155-2-316. History. Source: L. 65: P. 1311, § 1. C.R.S. 1963: § 155-2-316.    OFFICIAL COMMENT   Prior Uniform Statutory Provision: None. See sections 15 and 71, Uniform Sales Act.   Purposes:   1. This section is designed principally to deal with those frequent clauses in sales contracts which seek to exclude “all warranties, express or implied.” It seeks to protect a buyer from unexpected and unbargained language of disclaimer by denying effect to such language when inconsistent with language of express warranty and permitting the exclusion of implied warranties only by conspicuous language or other circumstances which protect the buyer from surprise.   2. The seller is protected under this Article against false allegations of oral warranties by its provisions on parol and extrinsic evidence and against unauthorized representations by the customary “lack of authority” clauses. This Article treats the limitation or avoidance of consequential damages as a matter of limiting remedies for breach, separate from the matter of creation of liability under a warranty. If no warranty exists, there is of course no problem of limiting remedies for breach of warranty. Under subsection (4) the question of limitation of remedy is governed by the sections referred to rather than by this section.   3. Disclaimer of the implied warranty of merchantability is permitted under subsection (2), but with the safeguard that such disclaimers must mention merchantability and in case of a writing must be conspicuous.   4. Unlike the implied warranty of merchantability, implied warranties of fitness for a particular purpose may be excluded by general language, but only if it is in writing and conspicuous.   5. Subsection (2) presupposes that the implied warranty in question exists unless excluded or modified. Whether or not language of disclaimer satisfies the requirements of this section, such language may be relevant under other sections to the question whether the warranty was ever in fact created. Thus, unless the provisions of this Article on parol and extrinsic evidence prevent, oral language of disclaimer may raise issues of fact as to whether reliance by the buyer occurred and whether the seller had “reason to know” under the section on implied warranty of fitness for a particular purpose.   6. The exceptions to the general rule set forth in paragraphs (a), (b) and (c) of subsection (3) are common factual situations in which the circumstances surrounding the transaction are in themselves sufficient to call the buyer's attention to the fact that no implied warranties are made or that a certain implied warranty is being excluded.   7. Paragraph (a) of subsection (3) deals with general terms such as “as is,” “as they stand,” “with all faults,” and the like. Such terms in ordinary commercial usage are understood to mean that the buyer takes the entire risk as to the quality of the goods involved. The terms covered by paragraph (a) are in fact merely a particularization of paragraph (c) which provides for exclusion or modification of implied warranties by usage of trade.   8. Under paragraph (b) of subsection (3) warranties may be excluded or modified by the circumstances where the buyer examines the goods or a sample or model of them before entering into the contract. “Examination” as used in this paragraph is not synonymous with inspection before acceptance or at any other time after the contract has been made. It goes rather to the nature of the responsibility assumed by the seller at the time of the making of the contract. Of course if the buyer discovers the defect and uses the goods anyway, or if he unreasonably fails to examine the goods before he uses them, resulting injuries may be found to result from his own action rather than proximately from a breach of warranty. See Sections 2-314 and 2-715 and comments thereto.   In order to bring the transaction within the scope of “refused to examine” in paragraph (b), it is not sufficient that the goods are available for inspection. There must in addition be a demand by the seller that the buyer examine the goods fully. The seller by the demand puts the buyer on notice that he is assuming the risk of defects which the examination ought to reveal. The language “refused to examine” in this paragraph is intended to make clear the necessity for such demand.   Application of the doctrine of “caveat emptor” in all cases where the buyer examines the goods regardless of statements made by the seller is, however, rejected by this Article. Thus, if the offer of examination is accompanied by words as to their merchantability or specific attributes and the buyer indicates clearly that he is relying on those words rather than on his examination, they give rise to an “express” warranty. In such cases the question is one of fact as to whether a warranty of merchantability has been expressly incorporated in the agreement. Disclaimer of such an express warranty is governed by subsection (1) of the present section.   The particular buyer's skill and the normal method of examining goods in the circumstances determine what defects are excluded by the examination. A failure to notice defects which are obvious cannot excuse the buyer. However, an examination under circumstances which do not permit chemical or other testing of the goods would not exclude defects which could be ascertained only by such testing. Nor can latent defects be excluded by a simple examination. A professional buyer examining a product in his field will be held to have assumed the risk as to all defects which a professional in the field ought to observe, while a nonprofessional buyer will be held to have assumed the risk only for such defects as a layman might be expected to observe.   9. The situation in which the buyer gives precise and complete specifications to the seller is not explicitly covered in this section, but this is a frequent circumstance by which the implied warranties may be excluded. The warranty of fitness for a particular purpose would not normally arise since in such a situation there is usually no reliance on the seller by the buyer. The warranty of merchantability in such a transaction, however, must be considered in connection with the next section on the cumulation and conflict of warranties. Under paragraph (c) of that section in case of such an inconsistency the implied warranty of merchantability is displaced by the express warranty that the goods will comply with the specifications. Thus, where the buyer gives detailed specifications as to the goods, neither of the implied warranties as to quality will normally apply to the transaction unless consistent with the specifications.   Cross References:   Point 2: Sections 4-2-202 , 4-2-718 and 4-2-719 .   Point 7: Sections 4-1-205 and 4-2-208 .   Definitional Cross References:   “Agreement”. Section 4-1-201 .   “Buyer”. Section 4-2-103 .   “Contract”. Section 4-1-201 .   “Course of dealing”. Section 4-1-205 .   “Goods”. Section 4-2-105 .   “Remedy”. Section 4-1-201 .   “Seller”. Section 4-2-103 .   “Usage of trade”. Section 4-1-205 .   ANNOTATION   Law reviews. For article, “Exclusion and Modification of Warranty under the U.C.C. — How to Succeed in Business Without Being Liable for Not Really Trying”, see 46 Den. L.J. 579 . For article, “The ‘Battle of the Forms' Under the Colorado Uniform Commercial Code”, see 11 Colo. Law. 78 (1982).   Annotator's note. Since § 4-2-316 is similar to repealed § 121-1-71, C.R.S. 1963 (uniform sales act), relevant cases construing § 121-1-71 have been included in the annotations to this section. Annotator's note. Since § 4-2-316 is similar to repealed § 121-1-71, C.R.S. 1963 (uniform sales act), relevant cases construing § 121-1-71 have been included in the annotations to this section.   A broad general disclaimer clause may negate implied warranties if there is a negotiated contract between a commercial seller and a commercial buyer. Cherokee Inv. Co. v. Voiles, 166 Colo. 270 , 443 P.2d 727 (1968).   But it is not appropriate to a consumer who purchases after a home demonstration. Cherokee Inv. Co. v. Voiles, 166 Colo. 270 , 443 P.2d 727 (1968).   Negating implied warranty of fitness for particular purpose by general disclaimer. The uniform commercial code, in providing for an implied warranty of fitness for a particular purpose, announced a public policy adopted by the general assembly to give buyers protection against sellers of unfit merchandise under certain conditions. In order to negative this declaration of public policy, the express agreement provided for in this section must be clear, unequivocal, and the result of a genuine agreement between the parties, and where there is an attempt to negative an implied warranty of fitness by a broad general disclaimer, it must appear that the so-called disclaimer was clearly brought to the attention of the buyer and agreed to by him in order for this disclaimer to be effective. Cherokee Inv. Co. v. Voiles, 166 Colo. 270 , 443 P.2d 727 (1968); Miehle Co. v. Smith-Brooks Printing Co., 303 F. Supp. 501 (D. Colo. 1969 ).   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).   How implied warranty of fitness excluded. An implied warranty of fitness for a particular purpose can be excluded by a conspicuous writing which states generally that there are no warranties extending beyond the description in the contract. O'Neil v. Int'l Harvester Co., 40 Colo. App. 369, 575 P.2d 862 (1978).   Where a buyer alleges the existence of oral warranties prior to execution of a written contract and there is conduct following the sale which tends to show that warranties were in fact made, there is a material issue of fact for resolution, namely, whether the parties intended the written contract to be a final expression of their agreement, and, if not, what the terms actually agreed upon by the parties consisted of. Evidence of both oral warranties and the conduct of the parties subsequent to signing the contract is admissible for purpose of resolving this issue. O'Neil v. Int'l Harvester Co., 40 Colo. App. 369, 575 P.2d 862 (1978).   Provision in contract stating that it was sole warranty does not negate buyer's claim of negligent misrepresentation and parol evidence as to such misrepresentation allowable. Keller v. A.O. Harvestore Prods., 819 P.2d 69 (Colo. 1991).   Disclaimer of implied warranty of merchantability is required to include the word “merchantability” and prevalent view is that the provisions of subsection (3) do not qualify this requirement. Richard O'Brien Companies v. Challenge-Cook Bros., 672 F. Supp. 466 (D. Colo. 1987 ).   Where an inspection of inventory under this section would not have revealed defect affecting merchantability, claim of breach of implied warranty of merchantability under § 4-2-314 is not excluded by reason of such inspection. Loden v. Drake, 881 P.2d 467 (Colo. App. 1994).   Applied in Hummel v. Skyline Dodge, Inc., 41 Colo. App. 572, 589 P.2d 73 (1978); Colorado-Ute Elec. Ass'n v. Envirotech Corp., 524 F. Supp. 1152 (D. Colo. 1981 ); Universal Drilling Co. v. Camay Drilling Co., 737 F.2d 869 (10th Cir. 1984).