Breach of Warranty Claims Between Businesses in Texas

Where warranty law comes from

For goods, warranty law in Texas is Chapter 2 of the Business and Commerce Code, the state's version of UCC Article 2. It defines how warranties are created, how they are disclaimed, what the buyer must do to preserve a claim, and what the buyer recovers. For services, there is no comparable statute; the contract's own promises and a narrow implied warranty govern. The first question in any warranty dispute is therefore whether the deal was predominantly a sale of goods, which is covered in how the UCC changes a sale of goods dispute in Texas.

Express warranties: what the seller said

Business and Commerce Code section 2.313 creates an express warranty from any affirmation of fact or promise about the goods that becomes part of the basis of the bargain, from any description of the goods that becomes part of the bargain, and from any sample or model. The seller does not need to use the word "warranty" or intend to make one. Specifications in a quote, performance figures in a brochure, a statement in an email that the material meets a standard, and the sample shown at a trade show can all be express warranties. What does not qualify is opinion or commendation: statements of value, or that the goods are "top quality," are treated as puffing.

Written contracts often try to confine express warranties to a single section and exclude everything said before signing through a merger clause. Section 2.316 directs that words creating a warranty and words negating it be read as consistent where reasonable, and that a negation which cannot be reconciled with the express warranty is inoperative. A seller cannot promise a performance level in the specifications and then disclaim it in the boilerplate.

Implied warranties: what the law adds

Two warranties arise without anyone saying anything. Under section 2.314, a seller who is a merchant with respect to goods of that kind impliedly warrants that they are merchantable: that they pass without objection in the trade under the contract description, are fit for the ordinary purposes for which such goods are used, are of even kind and quality within the agreed variations, are adequately packaged and labeled, and conform to any promises on the label. Under section 2.315, where the seller at the time of contracting has reason to know the particular purpose for which the buyer wants the goods and that the buyer is relying on the seller's skill or judgment to select them, there is an implied warranty that the goods are fit for that purpose.

The two overlap but are not the same. A commercial oven that works but cannot reach the temperature the buyer told the seller it needed may be merchantable and still breach the fitness warranty.

Disclaimers: how sellers limit warranties

Section 2.316 lets a seller exclude implied warranties, but on conditions. To exclude the implied warranty of merchantability, the language must mention merchantability and, if written, must be conspicuous. To exclude the warranty of fitness, the exclusion must be in writing and conspicuous. Language such as "as is" or "with all faults" excludes all implied warranties unless the circumstances indicate otherwise. A buyer who examined the goods or a sample as fully as it wished, or refused to examine them, gets no implied warranty as to defects the examination should have revealed. Conspicuous means written so that a reasonable person would notice it: capitals, bold type, a contrasting color or a separate heading. A disclaimer in ordinary type in the middle of a paragraph usually fails.

Sellers also limit remedies rather than warranties, through repair-or-replace clauses and consequential damages exclusions under section 2.719. Those are enforceable between businesses with the limits explained in limitation of liability and damages caps in Texas.

The notice requirement: where buyers lose

Section 2.607(c)(1) provides that a buyer who has accepted goods must, within a reasonable time after it discovers or should have discovered any breach, notify the seller of the breach or be barred from any remedy. The notice need not be formal, but it must tell the seller that the transaction is troublesome and the goods are claimed to be defective. A buyer that uses defective material for months, complains to no one and then sues has a problem that no amount of proof about the defect will cure. Notice should be in writing, should describe the nonconformity, and should be sent as soon as the problem is identified.

Notice also preserves the buyer's other options. Under section 2.608, a buyer may revoke acceptance of goods whose nonconformity substantially impairs their value if it accepted them on the assumption the defect would be cured or without discovering a defect that was hard to find or that the seller's assurances concealed. Revocation must occur within a reasonable time and before any substantial change in the goods not caused by their own defects, and it is not effective until the buyer notifies the seller.

What the buyer recovers

Section 2.714 sets the measure for accepted goods: the difference, at the time and place of acceptance, between the value of the goods as accepted and the value they would have had as warranted, unless special circumstances show a different amount. Section 2.715 adds incidental damages, such as inspection, transportation and the cost of cover, and consequential damages: losses from requirements the seller had reason to know about at contracting that could not reasonably be prevented by cover, and injury to person or property proximately caused by the breach. Lost profits from a production line idled by a defective component are consequential damages and are the usual target of a seller's exclusion clause. A buyer who prevails on a warranty claim may also recover attorney's fees under Civil Practice and Remedies Code chapter 38 as a claim on a contract.

Deadlines

Section 2.725 requires a warranty suit to be filed within four years after the cause of action accrues, and a breach of warranty accrues when tender of delivery is made, regardless of whether the buyer knew of the defect. The exception is a warranty that explicitly extends to future performance, such as a promise that a roof membrane will not leak for ten years; there the claim accrues when the breach is or should have been discovered. The parties may shorten the four years to not less than one year in the original agreement but may not extend it. A buyer whose equipment failed in year five after delivery, under a warranty that did not expressly extend to future performance, is usually out of time.

Warranties on services

Texas does not apply Chapter 2 to pure services, and there is no general implied warranty that services will be performed well. The Texas Supreme Court recognized one specific implied warranty in Melody Home Manufacturing Co. v. Barnes in 1987: that repairs or modifications of existing tangible goods or property will be performed in a good and workmanlike manner, and the court held that this warranty cannot be waived or disclaimed. Beyond that, a service provider's obligations come from the express terms of the contract, and a failure to meet them is an ordinary breach of contract. Construction contracts raise their own warranty questions, covered in construction defect claims in Texas.

Example

Suppose a Dallas food manufacturer buys a commercial packaging machine from a Texas distributor after telling the sales representative, in writing, that it needs to seal 120 units a minute for its product line. The quote describes the model and states a sealing rate of "up to 150 units per minute." The signed order form says in bold capitals that the seller disclaims the implied warranty of merchantability and all implied warranties, and limits remedies to repair or replacement. Installed, the machine seals 70 units a minute and jams at higher speeds. The manufacturer emails the distributor the following week describing the problem, and the distributor's technicians attempt repairs over three months without success. The 150-unit statement is an express warranty under section 2.313; the bold disclaimer excludes the implied warranties but cannot negate the express rate. The email satisfies section 2.607's notice requirement. After three failed repairs, the repair-or-replace remedy has arguably failed of its essential purpose, opening the door to damages under sections 2.714 and 2.715, measured by the difference in value and the manufacturer's provable losses from the shortfall, subject to any consequential damages exclusion in the order form.

What each side should do now

A buyer should send written notice of the defect at once, preserve the goods and the records of their failure, document every repair attempt, and check the delivery date against the four-year limit. A seller should respond to notice promptly, attempt cure where the contract gives it that right, and gather the sales documents to confirm what warranties were made and which were disclaimed. Warranty disputes are decided largely on paper created before anyone thought about litigation, which is why the quote, the order form and the first complaint email usually matter more than the expert reports that follow. Tina Wysk represents Dallas buyers and sellers in warranty and sale-of-goods disputes in state and federal court and in arbitration.