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 is similar to the warranty for goods that are sold. This warranty ensures that the leased goods are fit for the ordinary purposes for which such goods are used and that they conform to the description in the lease agreement. The goods must be of even kind, quality, and quantity, and be adequately contained, packaged, and labeled as per the lease's requirements. Additionally, if there are any affirmations of fact or promises made on the container or label, the goods must conform to those as well. Texas law also acknowledges other implied warranties that may arise from the course of dealing between the lessor and lessee or from the usage of trade, which refers to the standard practices in the industry. These warranties are designed to protect lessees from receiving substandard goods and to ensure fairness in lease transactions.
