Every day, businesses throughout the Houston metropolitan area enter into commercial transactions involving warranties, whether they realize it or not. A manufacturer sells equipment to a distributor. A software company delivers a product to a business client. A service provider completes a job for a commercial customer. In each of these situations, warranties arise, sometimes because the seller made specific promises, and sometimes because the law imposes them automatically.

When products fail, services do not meet expectations, or a buyer believes they received something different from what was promised, warranty disputes follow. Understanding how warranties work under Texas law, and when they can be disclaimed, is essential for both business owners who sell goods or services and those who buy them.

The Two Main Types of Warranties in Commercial Transactions

Texas commercial transactions involving goods are governed primarily by the Texas Business and Commerce Code, which adopts the Uniform Commercial Code. Under this framework, warranties fall into two broad categories: express warranties and implied warranties.

Express warranties are created by the seller’s own words or actions. When a seller makes a specific statement about a product’s qualities, provides a description that forms the basis of the deal, or supplies a sample that the buyer relies on, an express warranty is created. Importantly, the seller does not need to use the word warranty or guarantee for an express warranty to exist. A statement that equipment will achieve a specific output, or that software will perform a particular function, can create an express warranty even if no formal warranty document was ever signed.

Implied warranties arise by operation of law. They are not created by anything the parties say or write. They come automatically with certain transactions unless properly disclaimed. Texas law recognizes two primary implied warranties in commercial sales of goods: the implied warranty of merchantability and the implied warranty of fitness for a particular purpose.

The Implied Warranty of Merchantability

Under Texas Business and Commerce Code Section 2.314, the implied warranty of merchantability applies when the seller is a merchant who regularly deals in goods of the type being sold. It guarantees that the goods are fit for the ordinary purposes for which such goods are used. A refrigerator that cannot keep food cold is not merchantable. A vehicle that cannot be safely driven is not merchantable. Industrial equipment that fails to perform the function it was designed for is not merchantable.

In Houston’s commercial environment, particularly in the construction, manufacturing, energy services, and distribution sectors, implied warranty of merchantability claims arise frequently and often involve substantial dollar amounts. Courts in Texas look at whether the goods were defective at the time they left the seller’s control, whether the defect caused the damages complained of, and whether the seller qualifies as a merchant with respect to those particular goods.

A one-time private seller is generally not a merchant, which means the implied warranty of merchantability would not apply to a single transaction between non-merchant parties. But for businesses regularly selling goods in their ordinary course, the warranty applies unless it has been validly disclaimed.

The Implied Warranty of Fitness for a Particular Purpose

The implied warranty of fitness for a particular purpose under Texas Business and Commerce Code Section 2.315 applies when the seller knows the buyer’s specific purpose and the buyer is relying on the seller’s expertise to select suitable goods. This warranty differs from merchantability because it focuses not on ordinary use but on the buyer’s specific intended application.

A common example arises when a buyer tells a supplier they need equipment capable of handling a specific load capacity, a specific temperature range, or a specific volume of production, and the supplier recommends a particular product. If that product fails to perform for the buyer’s stated purpose, the supplier may face a fitness warranty claim even if the product would be perfectly adequate for general use.

Disclaiming Warranties: What the Law Requires

Texas law allows sellers to disclaim implied warranties, but the requirements are strict and courts enforce them closely. Our firm has written extensively on this topic at https://businessandfamilylawyers.com/business-litigation/when-can-you-disclaim-warranties-a-business-litigation-guide/ for readers who want a deeper dive.

To disclaim the implied warranty of merchantability under the UCC, the disclaimer must be conspicuous and must specifically mention the word merchantability. A buried clause in fine print will not satisfy this requirement. Courts look for language that stands out, typically in bold text, capitalized type, or a noticeably different font. A typical compliant disclaimer looks something like: THE SELLER MAKES NO WARRANTY OF MERCHANTABILITY WITH RESPECT TO THE GOODS SOLD UNDER THIS AGREEMENT.

The implied warranty of fitness for a particular purpose can be disclaimed without using that exact phrase, but the disclaimer must be in writing and conspicuous. An as-is or with all faults clause can also disclaim implied warranties if the language is sufficiently clear and prominent.

Express warranties are harder to disclaim. Courts will not allow a seller to make a specific promise and then bury contradictory disclaimer language in the fine print. If the express warranty and the disclaimer are inconsistent, courts generally favor the warranty.

Service Contract Disputes: Special Considerations

Service contracts introduce additional warranty considerations beyond the sale of goods framework. Under Texas law, there is an implied warranty to perform services in a good and workmanlike manner. The Texas Supreme Court has addressed this doctrine in the context of both residential and commercial settings, and it applies independently of whether a claim is also pursued under the Texas Deceptive Trade Practices Act.

In the context of service agreements in the greater Houston area, warranty disputes commonly arise in construction and renovation projects, technology implementation and software contracts, maintenance and repair service agreements, and professional service engagements where the delivered work does not match what was promised or expected.

A breach of a service warranty claim requires showing what the contract promised, how the actual performance fell short, and what damages resulted from that shortfall. Unlike product warranty claims, service warranty claims often involve complex expert testimony about industry standards, what constitutes workmanlike performance, and how the failure caused specific measurable harm.

What Buyers Can Recover

When a warranty is breached, the buyer may be entitled to recover the difference between the value of the goods or services as warranted and the value as actually delivered. In some cases, this means the cost of repair or replacement. In others, it means consequential damages for the downstream losses the buyer suffered because of the defective product or service, though consequential damages can be limited or excluded by contract if the limitation is not unconscionable.

Under the Texas Deceptive Trade Practices Act, consumers who are damaged by warranty breaches may recover their actual damages, and in cases of knowing or intentional violations, up to three times those damages, plus attorney’s fees. The DTPA applies primarily to consumers rather than sophisticated commercial parties, so its availability depends on the nature of the transaction and the parties involved.

Protecting Your Business in the Greater Houston Area

For businesses selling goods or services to other businesses in Harris, Fort Bend, Montgomery, and Brazoria counties, the key to avoiding warranty disputes is clarity at the front end. State precisely what you are promising, include effective disclaimer language if you want to limit implied warranties, and have your contracts reviewed by experienced business counsel before disputes arise.

For buyers, the key is understanding that warranties may exist even when a seller has not called them warranties, and that disclaimer language in a contract is not automatically effective just because a seller put it there. If you bought goods or services that failed to perform as promised or as reasonably expected, you may have a warranty claim worth pursuing.

Related Reading

Express Warranties in Commercial Transactions:

Implied Warranty of Merchantability in Texas:

When Can You Disclaim Warranties?:

If your business is involved in a warranty dispute in the Houston area, our team is available to help. We represent both sellers and buyers in commercial warranty and service contract litigation throughout Harris, Fort Bend, Montgomery, and Brazoria counties.