Laws vary from state to state but state statutes often provide for the creation of an implied warranty of merchantability by a lessor of goods in a lease transaction—such as for office equipment, computers, telephone systems, heavy machinery, home furniture, motor vehicles, or electronics.
For goods to be merchantable and comply with the implied warranty of merchantability they generally must:
• pass without objection in the trade under the description in the lease agreement;
• in the case of fungible goods, are of fair average quality within the description;
• be fit for the ordinary purposes for which goods of that type are used;
• run, within the variation permitted by the lease agreement, of even kind, quality, and quantity within each unit and among all units involved;
• be adequately contained, packaged, and labeled as the lease agreement may require; and
• conform to any promises or affirmations of fact made on the container or label.
Other implied warranties may be provided by statute or arise from the lessor and lessee’s course of dealing or usage of trade (standard practices and methods in the industry).
In Texas, the implied warranty of merchantability for leased goods is recognized and governed by the Texas Business and Commerce Code. This warranty implies that leased goods must meet certain standards to be considered merchantable. The goods must be fit for the ordinary purposes for which such goods are used, must match the description in the lease agreement, and if they are fungible goods, they should be of fair average quality. Additionally, the goods should be consistent in quality and quantity within each unit and among all units involved, be properly packaged and labeled as per the lease agreement, and conform to any affirmations made on the container or label. Texas law also acknowledges that other implied warranties may arise from the course of dealing between the lessor and lessee or from the usage of trade. It's important for both lessors and lessees to understand these provisions to ensure compliance with the law and to know their rights and obligations under a lease agreement for goods.
