2023 New Mexico Statutes › Chapter 55 - Uniform Commercial Code › Article 2 - Sales › Part 3 - GENERAL OBLIGATION AND CONSTRUCTION OF CONTRACT › Section 55-2-314 - Implied warranty: merchantability; usage of trade.

(1) Unless excluded or modified (Section 2-316 [55-2-316 NMSA 1978]), 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.
(2) Goods to be merchantable must be at least such as:
(a) pass without objection in the trade under the contract description; and
(b) in the case of fungible goods, are of fair average quality within the description; and
(c) are fit for the ordinary purposes for which such goods are used; and
(d) run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved; and
(e) are adequately contained, packaged and labeled as the agreement may require; and
(f) conform to the promises or affirmations of fact made on the container or label if any.
(3) Unless excluded or modified (Section 2-316 [55-2-316 NMSA 1978]) other implied warranties may arise from course of dealing or usage of trade.
History:
1953 Comp., § 50A-2-314, enacted by Laws 1961, ch. 96, § 2-314.
OFFICIAL COMMENTS
UCC Official Comments by ALI & the NCCUSL. Reproduced with permission of the PEB for the UCC. All rights reserved.
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 reminder 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 2-316.
Point 3: Sections 1-203 and 2-104.
Point 5: Section 2-315.
Point 11: Section 2-316.
Point 12: Sections 1-201, 1-205 and 2-316.
"Agreement". Section 1-201.
"Contract". Section 1-201.
"Contract for sale". Section 2-106.
"Goods". Section 2-105.
"Merchant". Section 2-104.
"Seller". Section 2-103.
ANNOTATIONS
Sale of goods required.
— There must be a sale of goods to bring the warranty provisions of this section into operation. Where a gas company did not sell the faulty furnace, there is no basis under this section for a cause of action against the gas company in an action to recover for carbon monoxide poisoning sustained as a result of the faulty furnace.
Ortiz v. Gas Co.
, 1981-NMCA-128, 97 N.M. 81, 636 P.2d 900.
Refusal to provide warranted service is breach of contract.
— A seller's refusal to provide warranted service perfects a cause of action for breach of contract, subject to the statutory time limit for filing an action.
Lieb v. Milne
, 1980-NMCA-125, 95 N.M. 716, 625 P.2d 1233.
Product liability claim and implied warranty claim may be identical.
— In a personal injury case, a products liability claim and a claim concerning an implied warranty of merchantability may be identical. Both claims require a defect. Where the identical defect is relied on to support both theories of liability, both theories may be submitted to the jury.
Perfetti v. McGhan Med.
, 1983-NMCA-032, 99 N.M. 645, 662 P.2d 646, cert. denied, 99 N.M. 644, 662 P.2d 645.
Privity of contract not required.
— A defendant may be held liable for breach of implied warranty of merchantability under the UCC without regard to privity of contract.
Perfetti v. McGhan Med.
, 1983-NMCA-032, 99 N.M. 645, 662 P.2d 646, cert. denied, 99 N.M. 644, 662 P.2d 645.
Expiration of warranty period not bar to action.
— The expiration of the term of a written warranty period is not a jurisdictional bar to an action for breach of implied warranties.
Lieb v. Milne
, 1980-NMCA-125, 95 N.M. 716, 625 P.2d 1233.
Sale of beverages for on-premises consumption.
— Since the warranty of merchantable goods provisions in this section specifically apply to the sale of beverages to be consumed on the premises, 55-2-725 NMSA 1978 governs claims arising from such sales; the limitation period for on-premises beverage sales is four years.
Fernandez v. Char-Li-Jon, Inc.
, 1994-NMCA-130, 119 N.M. 25, 888 P.2d 471, cert. denied, 199 N.M. 20, 888 P.2d 466,
overruled on other grounds by
Romero v. Bachicha
, 2001-NMCA-048, 130 N.M. 610, 28 P.3d 1151.
Passing without objection in the trade.
— Summary judgment on claims of breach of implied warranty of merchantability was precluded since there were issues of fact as to whether the steel manufactured for a tube used in a light-gas gun, and the boring and finishing of the tube, would have passed "without objection in the trade under the contract description."
Spectron Dev. Lab. v. American Hollow Boring Co.
, 1997-NMCA-025, 123 N.M. 170, 936 P.2d 852.
Breach of the implied warranty of merchantability.
— To establish a claim for breach of the implied warranty of merchantability, a plaintiff must prove that the seller sold a product that failed to meet the statutory definition of "merchantable", or that the product was defective and not fit for the ordinary purposes for which the product is used, that there was a warranty, and that the breach of the warranty was the proximate cause of the loss sustained.
American Mechanical Solutions L.L.C v. Northland Process Pipe, Inc
., 184 F.Supp.3d 1030 (D.N.M 2016).
Expert testimony required to prove breach of the implied warranty of merchantability.
— Where defendants entered into a contract with plaintiff to supply custom-fit hoses and fittings of a certain grade and quality for installation at the southwest cheese company, and where, immediately after extensive installation, the hoses began to fail, and where plaintiff alleged a breach of the implied warranty of merchantability, but proffered no expert testimony that defendants caused the harm which it alleged to have suffered, defendants were entitled to summary judgment because New Mexico generally requires expert testimony when the issue of causation is presented in a context which is not a matter of common knowledge, and in an action based on breach of warranty of merchantability, it is 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, and in this case causation is technical and cannot be evaluated by resort to common knowledge and plaintiff did not provide expert testimony.
American Mechanical Solutions L.L.C v. Northland Process Pipe, Inc
., 184 F.Supp.3d 1030 (D.N.M 2016).
Plaintiff alleged a design defect sufficient to support a claim for breach of an implied warranty of merchantability.
— Where plaintiff brought an action against a medical device manufacturer and its distributor, alleging breach of implied and express warranties for an implantable filter, widely advertised and promoted by defendants as a safe and effective treatment for prevention of recurrent blood clots via placement in the inferior vena cava (IVC), which, after plaintiff's physician implanted the filter, became embedded in plaintiff's IVC and perforated the wall of her IVC, and where plaintiff alleged that the filter was not merchantable , and where defendants moved to dismiss the claims, arguing that plaintiff failed to plead a product or design defect claim under New Mexico law and that plaintiff's allegations were vague and conclusory, defendants' motion was denied, because plaintiff alleged that the filter that was implanted in her IVC was designed to prevent pulmonary embolisms, but was not fit for its intended use and purpose because its defective design made it prone to an unreasonably high incident of embedment, fracture, and perforation of vessels and organs. The court could reasonably infer from those allegations that the filter was not fit for the ordinary purposes for which a filter is used, i.e., to safely prevent pulmonary embolisms.
Suttman-Villars v. Argon Medical Devices, Inc.
, 553 F. Supp.3d 946 (D. N.M. 2021).
Law reviews.
— For article, "Buyers and Sellers of Goods in Bankruptcy," see 1 N.M. L. Rev. 435 (1971).
For note, "Self-Help Repossession Under the Uniform Commercial Code: The Constitutionality of Article 9, Section 503," see 4 N.M. L. Rev. 75 (1973).
For article, "New Mexico's 'Lemon Law': Consumer Protection or Consumer Frustration?", see 16 N.M.L. Rev. 251 (1986).
For annual survey of commercial law in New Mexico, see 18 N.M.L. Rev. 313 (1988).
Am. Jur. 2d, A.L.R. and C.J.S. references.
— 15A Am. Jur. 2d Commercial Code § 13; 38 Am. Jur. 2d Guaranty § 13; 63 Am. Jur. 2d Products Liability §§ 470 to 472.
Chain, cable, or wire, implied warranty of strength or fitness, 59 A.L.R. 1235.
Construction and effect of express or implied warranty on sale of an article intended for use as explosive, 62 A.L.R. 1510.
Liability of seller of article not inherently dangerous for personal injuries due to the defective or dangerous condition of the article, 74 A.L.R. 343, 168 A.L.R. 1054.
Implied warranty by other than packer of fitness of food sold in sealed cans, 90 A.L.R. 1269, 142 A.L.R. 1434.
Implied warranty of quality, condition or fitness on sale of "job lot," "leftovers" and the like, 103 A.L.R. 1347.
Liability of manufacturer or packer of defective article for injury to person or property of ultimate consumer who purchased from middleman, 111 A.L.R. 1239, 140 A.L.R. 191, 142 A.L.R. 1490.
Cosmetics, implied warranty by retailer, 131 A.L.R. 123.
Construction and application of provision in conditional sale contract regarding implied warranties, 139 A.L.R. 1276.
Implied warranty of reasonable fitness of food for human consumption, as breached by substance natural to the original product and not removed in processing, 143 A.L.R. 1421.
Implied warranty of quality, condition or fitness on sale of secondhand article, 151 A.L.R. 446.
Express warranty as excluding implied warranty of fitness, 164 A.L.R. 1321.
Implied warranty of fitness by one serving food, 7 A.L.R.2d 1027.
Seller's or manufacturer's liability for injuries as affected by buyer's or user's allergy or unusual susceptibility to injury from the article, 26 A.L.R.2d 963.
Implied warranty of fitness on sale of article by trade name, trademark or other particular description, 49 A.L.R.2d 852.
Time to inspect or test for compliance with warranty of fitness or merchantability, 52 A.L.R.2d 900.
Existence and scope of implied warranty of fitness on sale of livestock, 53 A.L.R.2d 892.
Implied warranty of fitness by manufacturer or seller of medical or health supplies, appliances or equipment, 79 A.L.R.2d 401.
Construction and effect of affirmative provision in contract of sale by which purchaser agrees to take article in the condition in which it is, 24 A.L.R.3d 465.
Liability for representations and express warranties in connection with sale of used motor vehicle, 36 A.L.R.3d 125.
Sales: Liability for warranty or representation that article, other than motor vehicle, is new, 36 A.L.R.3d 237.
Elements and measure of damages for breach of warranty in sale of horse, 91 A.L.R.3d 419.
Who is "merchant" under U.C.C. § 2-314(1) dealing with implied warranties of merchantability, 91 A.L.R.3d 876.
Products liability: stoves, 93 A.L.R.3d 99.
Modern cases determining whether product is defectively designed, 96 A.L.R.3d 22.
Defective vehicular gasoline tanks, 96 A.L.R.3d 265.
Liability of packer, food store, or restaurant for causing trichinosis, 96 A.L.R.3d 451.
Architect's liability for personal injury or death allegedly caused by improper or defective plans or design, 97 A.L.R.3d 455.
Personal injury or death allegedly caused by defect in aircraft or its parts, supplies, or equipment, 97 A.L.R.3d 627.
Personal injury or death allegedly caused by defect in motorcycle or its parts, supplies, or equipment, 98 A.L.R.3d 317.
Personal injury or death allegedly caused by defect in braking system in motor vehicle, 99 A.L.R.3d 179.
When is person "engaged in the business" for purposes of doctrine of strict tort liability, 99 A.L.R.3d 671.
Manufacturer's or seller's obligation to supply or recommend available safety accessories in connection with industrial machinery or equipment, 99 A.L.R.3d 693.
Personal injury or death allegedly caused by defect in steering system in motor vehicle, 100 A.L.R.3d 158.
Personal injury or death allegedly caused by defect in drive train system in motor vehicle, 100 A.L.R.3d 471.
Personal injury or death allegedly caused by defect in suspension system in motor vehicle, 100 A.L.R.3d 912.
Application of rule of strict liability in tort to person or entity rendering medical services, 100 A.L.R.3d 1205.
Liability for injury on, or in connection with, escalator, 1 A.L.R.4th 144.
Products liability: flammable clothing, 1 A.L.R.4th 251.
Liability of manufacturer or seller for injury or death caused by defect in boat or its parts, supplies, or equipment, 1 A.L.R.4th 411.
Products liability: defective heating equipment, 1 A.L.R.4th 748.
Products liability in connection with prosthesis or other product designed to be surgically implanted in patient's body, 1 A.L.R.4th 921.
Products liability: fertilizers, insecticides, pesticides, fungicides, weed killers, and the like, or articles used in application thereof, 12 A.L.R.4th 462.
Allowance of punitive damages in products liability case, 13 A.L.R.4th 52.
Products liability: Cranes and other lifting apparatuses, 13 A.L.R.4th 476.
Pre-emption of strict liability in tort by provisions of UCC Article 2, 15 A.L.R.4th 791.
Products liability: firearms, ammunition, and chemical weapons, 15 A.L.R.4th 909.
Products liability: cement and concrete, 15 A.L.R.4th 1186.
Products liability: tire rims and wheels, 16 A.L.R.4th 137.
Liability of builder or real estate developer who sells new dwelling for failure to provide potable water, 16 A.L.R.4th 1246.
Products liability: blasting materials and supplies, 18 A.L.R.4th 206.
Products liability: firefighting equipment, 19 A.L.R.4th 326.
What statute of limitations applies to actions for personal injuries based on breach of implied warranty under UCC provisions governing sales (UCC § 2-725(1)), 20 A.L.R.4th 915.
Liability of blood supplier or donor for injury or death resulting from blood transfusion, 24 A.L.R.4th 508.
Recovery, under strict liability in tort, for injury or damage caused by defects in building or land, 25 A.L.R.4th 351.
Strict products liability: liability for failure to warn as dependent on defendant's knowledge of danger, 33 A.L.R.4th 368.
Products liability: stud guns, staple guns, or parts thereof, 33 A.L.R.4th 1189.
Computer sales and leases: breach of warranty, misrepresentation, or failure of consideration as defense or ground for affirmative relief, 37 A.L.R.4th 110.
Products liability: inconsistency of verdicts on separate theories of negligence, breach of warranty, or strict liability, 41 A.L.R.4th 9.
Liability of successor corporation for punitive damages for injury caused by predecessor's product, 55 A.L.R.4th 166.
Products liability: electricity, 60 A.L.R.4th 732.
Liability for injury incurred in operation of power golf cart, 66 A.L.R.4th 622.
Products liability: general recreational equipment, 77 A.L.R.4th 1121.
Burden of proving feasibility of alternative safe design in products liability action based on defective design, 78 A.L.R.4th 154.
Consequential loss of profits from injury to property as element of damages in products liability, 89 A.L.R.4th 11.
Liability for injury or death allegedly caused by foreign substance in beverage, 90 A.L.R.4th 12.
Products liability: roofs and roofing materials, 3 A.L.R.5th 851.
Products liability: prefabricated buildings, 4 A.L.R.5th 667.
Validity, construction, and application of computer software licensing agreements, 38 A.L.R.5th 1.
Presumption or inference, in products liability action based on failure to warn, that user of product would have heeded an adequate warning had one been given, 38 A.L.R.5th 683.
Products liability: theatrical equipment and props, 42 A.L.R.5th 699.
Liability on implied warranties in sale of used motor vehicle, 47 A.L.R.5th 677.
Causes of action governed by limitations period in UCC § 2-725, 49 A.L.R.5th 1.
Products liability: computer hardware and software, 59 A.L.R.5th 461.
Products liability: cement and concrete, 60 A.L.R.5th 413.
Products liability: liability for injury or death allegedly caused by defect in mobile home or trailer, 61 A.L.R.5th 473.
"Concert of activity," "alternate liability," "enterprise liability," or similar theory as basis for imposing liability upon one or more manufacturers of defective uniform product, in absence of identification of manufacturer or precise unit or batch causing injury, 63 A.L.R.5th 195.
Products liability: swimming pools and accessories, 65 A.L.R.5th 105.
Products liability: paints, stains, and similar products, 69 A.L.R.5th 137.
Products liability: helicopters, 72 A.L.R.5th 299.
Products liability: consumer expectations test, 73 A.L.R.5th 75.
Consumer product warranty suits in federal court under Magnuson-Moss Warranty - Federal Trade Commission Improvement Act (15 USCS §§ 2301 et seq.), 59 A.L.R. Fed. 461.
77A C.J.S. Sales § 252 et seq.