A product contract is used when buying or selling goods. Whether you’re the party selling the product or the party buying the product, product contracts are essential to ensuring you get exactly what you want and need in a product. These agreements generally outline what product is being sold or bought, the quantity and quality of the product, the time period in which the product will be delivered, and the price at which the product will be sold.

When it comes to the buying or selling of goods, the Uniform Commercial Code (UCC) Article 2 has outlined many fundamental rules that you should be very familiar with when entering into a product contract. The UCC is a set of statutes that governs commercial transactions, such as the sale of goods. For most business, however, the primary concern that is covered by the UCC is warranties. In the sale of goods, a warranty is a guarantee to the buyer that the seller is providing the goods according to the agreement. Two types of warranties addressed in the UCC are express warranties and implied warranties.

Express warranties are most often affirmative statements of fact or promises regarding the goods being sold to the buyer. Beyond affirmative statements, express warranties can also be advertisements or even a description or sample of the goods being sold. Because express warranties cannot be retracted, it’s important that companies prepare themselves for the unexpected by obtaining product liability insurance. Product liability insurance protects companies financially from any claims or liabilities that may arise from the sale of their products. These product claims or liabilities can arise from injuries caused to people or damage caused to property by the product sold. To avoid liability, it’s important to foresee and predict the many ways in which the buyer could use the product.

Implied warranties, on the other hand, are warranties that exist without being affirmatively stated. There are two kinds of implied warranties: implied warranty of merchantability and implied warranty of fitness for a particular purpose. Under the doctrine of implied warranty of merchantability, the goods are warranted as “fit for the ordinary purpose” that those goods would typically be used for. Implied warranty of fitness for a particular purpose comes into play when the seller knows that the buyer is going to use the goods for a particular purpose and is relying on the seller to sell him goods for that purpose.

Overall, product contracts can be complex. The selling and buying of goods involves several important considerations that if not taken into account could result in costly liabilities. To ensure your product contract meets your needs and that you understand your responsibilities as the seller or buyer, consult an attorney.

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