70 The Alabama Lawyer 266 (2009). Purchasing from Merchants on eBay and the Implied Warranty of Merchantability: An Overview.

• Author: BY GARY E. SULLIVAN

The Alabama Lawyer

2009.

70 The Alabama Lawyer 266 (2009).

Purchasing from Merchants on eBay and the Implied Warranty of Merchantability: An Overview

Purchasing from Merchants on eBay and the Implied Warranty of Merchantability: An OverviewBY GARY E. SULLIVANMost people have heard of eBay, one of many online auction sites where users can go to sell those items that have been cluttering up their attics or garages for too long. Since its inception, eBay has morphed from an outlet for selling unused or unwanted items to a massive platform for conducting e-commerce transactions between and among individuals, retailers and other businesses. As recently as October 2008, the number of "active users" on eBay numbered more than 85 million.(fn1) Unlike "old-fashioned" transactions involving face-to-face interactions, however, the buyer on eBay is purchasing an item he has never seen from someone he has never met.

Most experienced merchant sellers on eBay - many with online stores and long online sale histories - have warranty disclaimers. Some merchant sellers may replace those disclaimed warranties with express warranties. Many merchant sellers provide neither express warranties nor warranty disclaimers. Transactions involving these sellers may, however, still be covered(fn2) under the implied warranty of merchantability (IWM). The purpose of this article is to point out ways in which Alabama buyers can use eBay's present services to protect themselves when dealing on eBay by determining whether a particular transaction is likely to be covered by the IVM.

The UCC, "Merchants" and the IWM

The effect and purpose of the IWM is best understood in the context of the historical emergency of the Uniform Commercial Code ("U.C.C.") as the authoritative source of law covering sales transactions. While the U.C.C. was being drafted during the 1940s, it was heavily affected by the legal scholarship of the drafting committee's chief reporter, Karl Llewelyn. Llewelyn's intention for Article 2 (covering sales of goods) was to make a functional and predictable business law for business people - regardless of whether that followed contemporary business practice or legal norms. Ingrid Michelsen Hillinger, The Article 2 Merchant Rules, 73 Geo. L. J. 1141, 1151 (1985). One aspect of this was that he wanted to make it such that the courts did not twist the businessman's law to accommodate justice for the non-businessman. Id. at 1147-48. By separating out merchants from non-merchants, the courts could apply business law to business people without having to muddy the waters with concessions for non-business people. Id. Originally, Article 2 explicitly provided for the application of "merchant provisions" to non-merchants so long as the "circumstances and underlying reasons justify extending its application." Id. at 1174 (citing U.C.C. § 1-102(3) of the 1949 draft). The provision was removed before adoption so it appears today that there are two distinct classes of provisions, Id. at 1176, even though there are some remnants of the original plan in section 1-102(1) and Comment 1 of section 2-1-4. See Id. at 1181.

The U.C.C. as it was finally adopted, however, did not explicitly state Llewelyn's intention. The comments to section 2-104, the provision defining "merchant," lend themselves to the understanding that there are two types of merchants: practices merchants and goods merchants. A practices merchant is one "who by his occupation holds himself out as having knowledge or skill peculiar to the practices involved in the transaction." U.C.C. § 2-104 cmt. 2 (2003). This language, the comment states, would apply to nearly all businesspeople because the provisions to which this applies - dealing with the statute of frauds, firm offers, etc. - are common practices to all businesspeople. Id.

The U.C.C.'s IWM clause, however, only applies "if the seller is a merchant with respect to goods of that kind." U.C.C. § 2-314 (2003). Goods merchants are those that have a "professional status as to particular kinds of goods." U.C.C. § 2-104 cmt. 2 (2003). Presumably, this would encompass the remainder of the merchant definition under section 2-104, i.e., one who "deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the goods involved in the transaction." U.C.C. § 2-104 (2003). Although a goods merchant is likely to also be a practices merchant, it is not necessarily so.

Despite its division implied by the comments, the definition of "merchant" under section 2-104 was written as a single piece: "a person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction." Id. This, unfortunately, led to problems of interpretation since the comments do not make it explicitly clear that section 2-104 is to be divvied up between the various merchant provisions.

Courts have not always come to the same conclusions as to what a merchant with respect to goods of the kind is. Dealers in a particular good are generally held as merchants with respect to goods of that kind.(fn3) When dealer status is questionable, the courts tend to use the "sales over time" test.(fn4) With those who are obviously not dealers, however, sales over time are irrelevant, but, depending on the jurisdiction, specialized knowledge may or may not make them a "merchant with respect to goods of the kind" anyway.(fn5) Those who are obviously not dealers and have no special knowledge as to the goods are not merchants,(fn6) and those carrying out isolated transactions are generally not merchants, regardless, under 2-314, comment 3.(fn7)

Despite what was lost in its application, Llewelyn's...