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Date: September 30, 2000

To: Uniform Consumer Leases Act Drafting Committee & Observers

From: Ralph Rohner, Reporter

Re: Warranties

This is an extension of the "Warranties" memo circulated to the Drafting Committee in July and discussed in the Committee's conference-call meeting in early August.

In our draft of the UCLA we have carried a caption for Section 308: Warranties of Quality and Title, but without any statutory text pending the outcome of the UCC Article 2 and 2A revisions. UCC Articles 2 and 2A were not completed at the summer 2000 meeting of the Conference. The comments below are based on the latest drafts of those Articles.

The question is whether we want to say anything about warranties in the UCLA, and if so, what. This memo is to bring that issue to a head. In a nutshell, our options are:

1. Delete our Section 308 and rely on the UCC Article 2 and 2A provisions to be adequate.

2. Include our own warranty provisions in the UCLA, whether consistent with the eventual version of Article 2A or not.

3. As an alternative to either 1 or 2, include in the UCLA a prohibition or limitation on warranty disclaimers and remedy limitations.

A. What do revised UCC Arts. 2 and 2A do:

1. Revised Article 2 retains the substance of the original provisions dealing with the "quality" warranties: "express warranties," and "implied warranties" of merchantability and fitness for particular purpose. Revised Article 2 also retains the substance of the prior "warranty of title" provision. In other words, the basic quality/title warranties that run from Seller to Buyer are largely unchanged from prior law.

2. Revised Article 2A likewise retains the express and implied warranty, and title warranty rules, from the prior version of 2A [Sections 2A-210 thru 2A-213], and these are substantially the same as those in Article 2. Thus, if we defer to Article 2A on warranties, we are effectively retaining the original UCC warranty structure.

3. Revised Article 2, however, contains two new provisions which can directly affect consumer lessees. These are Sections 2-313A and 2-313B; both operate to extend a seller's quality responsibility (on new goods only) to a remote purchaser under certain circumstances. And "remote purchaser" includes someone who "leases" goods from an original buyer. Section 2-313A binds the original seller to a warranty (or "remedial promise") packaged with the goods [the "warranty in the box"]. Section 2-313B binds the seller to representations made in advertising addressed to the public. This carries the manufacturer's warranty through to the end user, so a consumer buyer or lessee would get the benefit of the factory warranty that is in the new car's glove compartment.

4. Revised Article 2A, like Article 2 for sellers, allows a lessor to disclaim the implied warranties in a consumer lease [Section 2A-214(c)] and to limit or exclude the lessee's remedies for breach of warranty [Section 2A-503]. The proposed new rules in Article 2A do clarify how a lessor must state a disclaimer [Section 2A-214(c)(2)], but a retail lessor can still offer its goods essentially "as is," i.e., without any warranty coverage at all. This means that a consumer lessee would have no recourse against the leasing dealer if the goods are defective (although the lessee would have rights against the manufacturer if there were a factory warranty). Or the dealer might give an express warranty but restrict the lessee's remedy to repair or replacement of parts, without recovery of consequential damages.

B. Non-UCC "warranty" implications

1. Independently from the UCC, the federal Magnuson-Moss Warranty Act imposes disclosure and other obligations on a supplier -- typically the manufacturer -- that makes a "written warranty" with respect to a consumer product it sells. This reinforces the rights of a consumer buyer, and probably a consumer lessee as well, against the manufacturer, and is consistent with what new Article 2 would do in its Section 2-313A. But the retail dealer can avoid MMWA by making no written warranty of its own, and disclaiming the implied warranties.

2. Most states have "Lemon Laws" applicable to sales of motor vehicles. These laws obligate the manufacturer to replace or refund the price of a vehicle if it is a persistent lemon that defies repair. Some of these laws apply to leased vehicles.

3. Before the current revisions of Articles 2 and 2A, about a half dozen states made non-uniform amendments to Article 2 to prohibit retail sellers from disclaiming warranties or limiting buyers' remedies. The effect in those states is to keep the retail dealer always on the hook for warranty liability (in addition to any responsibility of the manufacturer). [I am unaware whether any states made comparable non-uniform amendments to Article 2A.]

4. If the retail dealer has warranty obligations, that liability would carry through to subsequent assignees of the dealer under Section 305(b) of the UCLA. But by its terms that section does not preserve, against an assignee, a consumer's claim or defense based on the manufacturer's warranty. So a lessee whose car is a lemon would probably have to keep up payments to the holder of the lease while separately pursuing the factory warranty claim.

C. Issues for the Drafting Committee:

1. Are the substantive quality standards in the Article 2 and 2A warranty provisions adequate to assure consumer lessees the benefit of their bargain? If so, we can drop Section 308 from our draft. If not so, we would need to draft different warranty standards.

As Fred Miller pointed out in the Committee's teleconference, it is hard to determine how much of Article 2A would need to be incorporated into the UCLA in order to have a complete and integrated set of warranty rules. It might need to include (in addition to the explicit warranty provisions) the disclaimer rules, the remedy provisions, rules on rejection and revocation, the parol evidence rule, cure rights, and so on.

My own sense is that the quality standards in Article 2A are fine, as are the applicable remedies provisions. The "remote purchaser" provisions in the new Article 2 are also helpful in clarifying a lessee's rights against the manufacturer or other supplier. The real question is whether the retail dealer should be able to avoid or limit quality responsibility through disclaimers or remedy limitations in the lease.

2. Is it desirable and appropriate for a retail dealer to be able to avoid or limit its warranty responsibility and/or curtail the customer's remedies for breach? If so, we can defer fully to the warranty structure in Article 2A. If not, we need to draft language setting limits on the dealer's freedom to disclaim or limit warranty liability and remedies for breach.

Most retail lessors are dealing in goods produced farther up the distribution chain. The dealers cannot realistically exercise quality control over those goods. Moreover, manufacturers usually assume some quality responsibility by making an explicit warranty to the end user, which is passed on to the consumer in the retail sale or lease. Manufacturer warranties are usually limited in some respects; they may cover some but not all components of the goods, or have a limited duration, or specify a particular remedy. The dealer may have responsibility, as part of its franchise obligation, to perform repair work under the factory warranty, but the dealer does not usually guarantee quality or satisfaction on its own. At least this is generally the case with respect to motor vehicles, major appliances, and other new goods. One by-product of this structure is that the retail dealer can offer -- for a price -- an extended warranty, or service contract, to supplement the factory warranty.

As noted, in the setting of sales, a number of states have made disclaimers and remedy limitations inoperative. Such a provision in the UCLA might read as follows:

"Section 308. WARRANTY AND REMEDY LIMITATIONS UNENFORCEABLE.

A provision in a consumer lease disclaiming implied warranties by the lessor, or limiting the lessee's remedies for breach of a lessor warranty, is unenforceable."

The sections that follow are from the July 2000 draft of UCC Article 2A-Leases. The "Reporter's Notes" are from the 2A Reporter.

SECTION 2A-210. EXPRESS WARRANTIES.

(a) Express warranties by the lessor are created as follows:

(1) Any affirmation of fact or promise made by the lessor to the lessee which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods will conform to the affirmation or promise.

(2) Any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods will conform to the description.

(3) Any sample or model that is made part of the basis of the bargain creates an express warranty that the whole of the goods will conform to the sample or model.

(b) It is not necessary to the creation of an express warranty that the lessor use formal words, such as "warrant" or "guarantee", or that the lessor have a specific intention to make a warranty, but an affirmation merely of the value of the goods or a statement purporting to be merely the lessor's opinion or commendation of the goods does not create a warranty.

Reporter's Notes

This section reflects current law.

SECTION 2A-211. WARRANTIES AGAINST INTERFERENCE AND AGAINST INFRINGEMENT; LESSEE'S OBLIGATION AGAINST INFRINGEMENT.

(a) Except in a finance lease, a lessor in a lease contract warrants that, except for claims by any person by way of infringement or the like, for the duration of the lease no person holds:

(1) a claim to or interest in the goods that arose from an act or omission of the lessor which will interfere with the lessee's enjoyment of its leasehold interest; or

(2) a colorable claim to or interest in the goods that arose from an act or omission of the lessor which will unreasonably expose the lessee to litigation.

(b) A finance lessor warrants that, except for claims by way of infringement or the like, for the duration of the lease no person holds:

(1) a claim or interest in the goods which arose from an act or omission of the lessor which will interfere with the lessee's enjoyment of its leasehold interest; or

(2) a colorable claim to or interest in the goods which arose from an act or omission of the lessor which will unreasonably expose the lessee to litigation.

(c) Except in a finance lease, a lessor that is a merchant regularly dealing in goods of the kind warrants that the goods will be delivered free of the rightful claim of a third party by way of infringement or the like. However, a lessee that furnishes specifications to the lessor holds the lessor harmless against any claim of infringement or the like that arises out of compliance with the specifications.

(d) A warranty under this section may be excluded or modified only by specific language or by circumstances that give the lessee reason to know that the lessor purports to transfer only such right as the lessor or a third party may have, or that it is leasing subject to any claims of infringement or the like.

Reporter's Notes

Subsections (a) and (b) are new. They parallel revised Article 2 in that they specifically provide for the doctrine of marketable title, but they differ from current law and revised Article 2 in that they are drafted to reflect the differences between a finance lease and other leases.

Subsection (c) is an amalgamation of two subsections in current law. The change conforms to revised Article 2.

Subsection (d) has been moved from current Section 2A-214(4). The change is consistent with revised Article 2.

SECTION 2A-212. IMPLIED WARRANTY OF MERCHANTABILITY.

(a) Except in a finance lease, a warranty that the goods will be merchantable is implied in a lease contract if the lessor is a merchant with respect to goods of that kind.

(b) Goods to be merchantable must be at least such as:

(1) pass without objection in the trade under the description in the lease agreement;

(2) in the case of fungible goods, are of fair average quality within the description;

(3) are fit for the ordinary purposes for which goods of that description are used;

(4) run, within the variation permitted by the lease agreement, of even kind, quality, and quantity within each unit and among all units involved;

(5) are adequately contained, packaged, and labeled as the lease agreement may require; and

(6) conform to any promises or affirmations of fact made on the container or label.

Reporter's Notes

This section reflects current law except that subsection (b)(3) conforms with revised Article 2.

SECTION 2A-213. IMPLIED WARRANTY OF FITNESS FOR PARTICULAR PURPOSE. Except in a finance lease, if the lessor at the time the lease contract is made has reason to know of any particular purpose for which the goods are required and that the lessee is relying on the lessor's skill or judgment to select or furnish suitable goods, there is in the lease contract an implied warranty that the goods will be fit for that purpose.

Reporter's Notes

This section reflects current law.

SECTION 2A-214. EXCLUSION OR MODIFICATION OF WARRANTIES.

(a) Words or conduct relevant to the creation of an express warranty and words or conduct tending to disclaim or modify an express warranty must be construed wherever reasonable as consistent with each other; but subject to the provisions of this Article on parol or extrinsic evidence, words or conduct disclaiming or modifying an express warranty are ineffective to the extent that this construction is unreasonable.

(b) Notwithstanding subsection (c), unless the circumstances indicate otherwise all implied warranties are excluded by expressions such as "as is" or "with all faults" or similar language or conduct that in common understanding make it clear to the lessee that the lessor assumes no responsibility for the quality or fitness of the goods. In a consumer contract, the requirements of this subsection must be satisfied by conspicuous language in a record.

(c) Subject to subsection (b), to exclude or modify an implied warranty of merchantability or fitness, or any part of either implied warranty, the following rules apply:

(1) The language must be in a record and be conspicuous;

(2) In a consumer lease contract, the language must:

(A) in the case of an implied warranty of merchantability, state "The lessor undertakes no responsibility for the quality of the goods except as otherwise provided in this contract"; and

(B) in the case of an implied warranty of fitness, state "The lessor makes no representations that the goods will be fit for any particular purpose for which you may be leasing these goods, except as otherwise provided in the contract."⁽¹⁾

(3) In other than a consumer lease contract, the language is sufficient if:

(A) in the case of an implied warranty of merchantability, it mentions merchantability; and

(B) in the case of an implied warranty of fitness, it states, for example, that "There are no warranties which extend beyond the description on the face hereof."

(4) Language that satisfies paragraph (2) also satisfies paragraph (3).

(d) An implied warranty may also be excluded or modified by course of performance, course of dealing, or usage of trade.

(e) If a lessee before entering into the contract has examined the goods or the sample or model as fully as desired or has refused to examine the goods, there is no implied warranty with regard to defects that a reasonable examination ought in the circumstances to have revealed to the lessee.

(f) Remedies for breach of warranty may be limited in accordance with this article with respect to liquidation or limitation of damages and contractual modification of remedy.

Reporter's Notes

The subsection in current Article 2A covering modifications and disclaimers of warranties of infringement has been deleted from this section. The topic is now covered in Section 2A-211. This is consistent with revised Article 2.

Subsection (f) is new and conforms with revised Article 2. Subsections (d) and (e) are from current law but have been redrafted to conform to revised Article 2. Subsections (b) and (c) are derived from revised Article 2 and provide different standards for consumer and nonconsumer agreements. Note however, that the requirement in subsection (c) that "the language must be in a record and be conspicuous" to exclude or modify a warranty applies both to consumer and nonconsumer contracts. In revised Article 2, it only applies to consumer contracts. This is an area that the distinction between leases and sales suggests the retention of current law for leases.

SECTION 2A-503. MODIFICATION OR IMPAIRMENT OF RIGHTS AND REMEDIES.

(a) Except as otherwise provided in this article, the lease agreement may include rights and remedies for default in addition to or in substitution for those provided in this article and may limit or alter the measure of damages recoverable under this article.

(b) Resort to a remedy provided under this article or in the lease agreement is optional unless the remedy is expressly agreed to be exclusive. If circumstances cause an exclusive or limited remedy to fail of its essential purpose, or provision for an exclusive remedy is unconscionable, remedy may be had as provided in this article.

(c) Consequential damages may be liquidated under Section 2A-504, or may otherwise be limited, altered, or excluded unless the limitation, alteration, or exclusion is unconscionable. Limitation, alteration, or exclusion of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable but limitation, alteration, or exclusion of damages where the loss is commercial is not prima facie unconscionable.

(d) Rights and remedies on default by the lessor or the lessee with respect to any obligation or promise collateral or ancillary to the lease contract are not impaired by this article.

Reporter's Notes

This section conforms with revised Article 2.

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The two sections that follow, 2-313A and 2-313B, are from revised Article 2-Sales:

SECTION 2-313A. OBLIGATION TO REMOTE PURCHASER CREATED BY RECORD PACKAGED WITH OR ACCOMPANYING GOODS.

(a) In this section:

(1) "Goods" means new goods and goods sold or leased as new goods unless the transaction of purchase does not occur in the normal chain of distribution.

(2) "Immediate buyer" means a buyer that enters into a contract with the seller.

(3) "Remote purchaser" means a person that buys or leases goods from an immediate buyer or other person in the normal chain of distribution.

(b) If a seller makes an affirmation of fact or promise that relates to the goods, provides a description that relates to the goods, or makes a remedial promise, in a record packaged with or accompanying the goods, and the seller reasonably expects the record to be, and the record is, furnished to the remote purchaser, the seller has an obligation to the remote purchaser that:

(1) the goods will conform to the affirmation of fact, promise or description unless a reasonable person in the position of the remote purchaser would not believe that the affirmation of fact, promise or description created an obligation; and

(2) the seller will perform the remedial promise.

(c) It is not necessary to the creation of an obligation under this section that the seller use formal words such as "warrant" or "guarantee" or that the seller have a specific intention to undertake an obligation, but an affirmation merely of the value of the goods or a statement purporting to be merely the seller's opinion or commendation of the goods does not create an obligation.

(d) The following rules apply to the remedies for breach of an obligation created under this section:

(1) The seller may modify or limit the remedies available to the remote purchaser if the modification or limitation is furnished to the remote purchaser no later than the time of purchase or if the modification or limitation is contained in the record that contains the affirmation of fact, promise or description.

(2) Subject to a modification or limitation of remedy, a seller in breach is liable for incidental or consequential damages under Section 2-715, but the seller is not liable for lost profits.

(3) The remote purchaser may recover as damages for breach of a seller's obligation arising under subsection (b) the loss resulting in the ordinary course of events as determined in any manner that is reasonable.

(e) An obligation that is not a remedial promise is breached if the goods did not conform to the affirmation of fact, promise or description creating the obligation when the goods left the seller's control.

Preliminary Comment

Changes: This section is new.

Comments:

1. Sections 2-313A and 2-313B are new, and they follow case law and practice in extending a seller's obligations regarding new goods to remote purchasers. This section deals with what are commonly called "pass-through warranties." In the paradigm situation, a manufacturer will sell goods in a package to a retailer and include in the package a record that sets forth the obligations that the manufacturer is willing to undertake in favor of the ultimate party in the distributive chain, the person that buys or leases the goods from the retailer. If the manufacturer had sold the goods directly to the ultimate party the statements in the record might amount to an express warranty or remedial promise under Section 2-313.

No direct contract exists between the seller and the remote purchaser, and thus the seller's obligation under this section is not referred to as an "express warranty." Use of "obligation" rather than "express warranty" avoids any inference that the basis of the bargain test is applicable here. The test for whether an obligation other than a remedial promise arises is similar in some respects to the basis of the bargain test, but the test set forth in this section is exclusive. Because "remedial promise" in Section 2-313 is not subject to the basis of the bargain test, that term is used in this section.

2. The party to which an obligation runs under this section may either buy or lease the goods, and thus the term "remote purchaser" is used. The term is more limited than "purchaser" in Article 1, however, and does not include a donee or any voluntary transferee who is not a buyer or lessee. Moreover, the remote purchaser must be part of the normal chain of distribution for the particular product. That chain will by definition include at least three parties and may well include more - for example, the manufacturer might sell first to a wholesaler, that would then resell the goods to a retailer for sale or lease to the public. A buyer or lessee from the retailer would qualify as a remote purchaser and could invoke this section against either the manufacturer or the wholesaler (if the wholesaler provided a record to the retailer to be furnished to the ultimate party), but no subsequent transferee, such as a used-goods buyer or sublessee, could qualify. The law governing assignment and third-party beneficiary, including Section 2-318, must be consulted to determine whether a party other than the remote purchaser can enforce an obligation created under this section.

3. The application of this section is limited to new goods and goods sold or leased as new goods within the normal chain of distribution. It does not apply to goods that are sold outside the normal chain, such as "gray" goods or salvaged goods, nor does it apply if the goods are unused but sold as seconds. The concept is flexible, and determining whether goods have been sold or leased in the normal chain of distribution requires consideration of the seller's expectations with regard to the manner in which its goods will reach the remote purchaser. For example, a car manufacturer may be aware that its dealers frequently transfer cars among themselves, and a new car sold initially to one dealer but leased to the remote purchaser by another dealer would have been leased in the normal chain of distribution. The concept may also include such practices as door-to-door sales and distribution through a nonprofit organization (e.g., Girl Scout cookies).

4. This section applies only to obligations set forth on a record that is packaged with the goods or otherwise accompanies them (subsection (b)). Examples include a label affixed to the outside of a container, a card inside a container, or a booklet handed to the remote purchaser at the time of purchase. Moreover, the seller must be able to anticipate that the remote purchaser will acquire the record, and thus the section is limited to records that the seller reasonably expects to be furnished, and that are in fact furnished, to the remote purchaser.

Neither this section nor Section 2-313B are intended to overrule cases that impose liability on facts that are similar to those within the direct scope of one of the sections. For example, the sections are not intended to overrule a decision imposing liability on a seller that distributes a sample to a remote purchaser.

5. Obligations other than remedial promises created under this section are analogous to express warranties and are subject to a test that is akin to the basis of the bargain test of Section 2-313(b). The seller is entitled to shape the scope of the obligation, and the seller's language must be considered in context. If a reasonable person in the position of the remote purchaser, reading the seller's language as a whole, would not believe that an affirmation of fact, promise or description created an obligation, there is no liability under this section.

6. There is no difference between remedial promise as used in this section (and Section 2-313B) and the same term as used in Section 2-313. Subsection (d)(1) makes clear that the seller may employ the provisions of Section 2-719 to modify or limit the remedies available to the remote purchaser for breach of the seller's obligation hereunder. The modification or limitation may appear on the same record as the one which creates the obligation, or it may be provided to the remote purchaser separately, but in no event may it be furnished to the remote purchaser any later than the time of purchase. The requirements and limitations set forth in Section 2-719, such as the requirement of an express statement of exclusivity and the test for failure of essential purpose, are applicable to a modification or limitation of remedy under this section.

7. As with express warranties, no specific language or intention is necessary to create an obligation, and whether an obligation exists is normally an issue of fact. Subsection (c) is virtually identical to Section 2-313(c), and the tests developed under the common law and under that section to determine whether a statement creates an obligation or is mere puffing are directly applicable to this section.

Just as a seller can limit the extent to which its language creates an express warranty under Section 2-313 by placing that language in a broader context, so too can a seller under this section or Section 2-313B limit the extent of its liability to a remote purchaser. In other words, the seller, in undertaking an obligation under these sections, can spell out the scope and limits of that obligation.

8. As a rule, a remote purchaser may recover monetary damages measured in the same manner as in the case of an aggrieved buyer under Section 2-714, including incidental and consequential damages to the extent they would be available to an aggrieved buyer. Subsection (d)(3) parallels Section 2-714(a) in allowing the buyer to recover for loss resulting in the ordinary course of events as determined in any manner which is reasonable. In the case of an obligation that is not a remedial promise, the normal measure of damages would be the difference between the value of the goods if they had conformed to the seller's statements and their actual value, and the normal measure of damages for breach of a remedial promise would be the difference between the value of the promised remedial performance and the value of the actual performance received.

Subsection (d)(2) precludes a remote purchaser from recovering consequential damages that take the form of lost profits.

SECTION 2-313B. OBLIGATION TO REMOTE PURCHASER CREATED BY COMMUNICATION TO PUBLIC.

(a) In this section:

(1) "Goods" means new goods and goods sold or leased as new goods in a transaction of purchase that occurs in the normal chain of distribution.

(2) "Immediate buyer" means a buyer that enters into a contract with the seller.

(3) "Remote purchaser" means a person that buys or leases goods from an immediate buyer or other person in the normal chain of distribution.

(b) If a seller makes an affirmation of fact or promise that relates to the goods, provides a description that relates to the goods, or makes a remedial promise in advertising or a similar communication to the public and the remote purchaser enters into a transaction of purchase with knowledge of and with the expectation that the goods will conform to the affirmation of fact, promise, or description, or that the seller will perform the remedial promise, the seller has an obligation to the remote purchaser that:

(2) the seller will perform the remedial promise.

(d) The following rules apply to the remedies for breach of an obligation created under this section:

(1) The seller may modify or limit the remedies available to the remote purchaser if the modification or limitation is furnished to the remote purchaser no later than the time of purchase. The modification or limitation may be furnished as part of the communication that contains the affirmation of fact, promise or description.

(2) Subject to a modification or limitation of remedy, a seller in breach is liable for incidental or consequential damages under Section 2-715, but the seller is not liable for lost profits.

Preliminary Comment

Changes: This section is new.

Comments:

1. Sections 2-313B and 2-313A are new, and they follow case law and practice in extending a seller's obligations regarding new goods to remote purchasers. This section deals with obligations to a remote purchaser created through a medium for communication with the public, and that means primarily advertising. In the paradigm situation, a manufacturer will engage in an advertising campaign directed towards all or part of the market for its product and will make statements that if made to an immediate buyer would amount to an express warranty or remedial promise under Section 2-313. The goods, however, are sold to someone other than the recipient of the advertising and are then resold or leased to the recipient. By imposing liability on the seller, this section adopts the approach of cases such as Randy Knitwear, Inc. v. American Cyanamid Co., 11 N.Y.2d 5, 226 N.Y.S.2d 363, 181 N.E.2d 399 (Ct. App. 1962).

If the seller's communication is made to an immediate buyer, whether the seller incurs liability is determined by Section 2-313 and this section is inapplicable.

2. This section parallels Section 2-313A in most respects, and the Official Comments to that section should be consulted. In particular, the reasoning of Comment 1 (scope and terminology), Comment 2 (definition of remote purchaser), Comment 3 (new goods and goods sold as new goods in the normal chain of distribution), Comment 4 (reasonable person in the position of the remote purchaser), Comment 6 (modification or limitation of remedy), Comment 7 (puffing and limitations on extent of obligation) and Comment 8 (damages) is adopted here.

3. This section provides an additional test for enforceability not found in Section 2-313A. In order to be held liable, the remote purchaser must, at the time of purchase, have knowledge of the affirmation of fact, promise, description or remedial promise and must also have an expectation that the goods will conform or that the seller will comply. This test is entirely subjective, while the reasonable person test in subsection (b) is objective in nature.

Put another way, the seller will incur no liability to the remote purchaser if: i) the purchaser did not have knowledge of the seller's statement at the time of purchase; ii) the remote purchaser knew of the seller's statement at the time of purchase but did not expect the goods to conform or the seller to comply; iii) a reasonable person in the position of the remote purchaser would not believe that the seller's statement created an obligation (this test does not apply to remedial promises), or iv) the seller's statement is puffing.

4. Section 2-318 deals with the extension of obligations to certain third-party beneficiaries. Of course, no extension is necessary if the goods are purchased by an agent. In such a case, the knowledge and expectation of the principal, not the agent, are relevant in determining whether an obligation arises under this section. Nothing in this Act precludes a court from determining that a household operates as a buying unit under the law of agency.

1. Ed.: The bolded language is new, i.e., not in original Article 2A.