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Under Uniform Commercial Code ("U.C.C.") section 2-314, a warranty that goods are "merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind." Among other definitions, this means that the goods will be "fit for the ordinary purposes for which such goods are used." A warranty of merchantability is implied in every contract for sale, "[uinless excluded or modified," because the expectation that goods will be fit for their ordinary purpose "is so commonly taken for granted that its exclusion from the contract is a matter threatening surprise and therefore requiring special precaution." The special precaution referred to comes in the form of section 2-316.

According to section 2-316(2), any attempt to "exclude or modify the implied warranty of merchantability or any part of it" must: (1) mention the term "merchantability" and (2) be "conspicuous" if made in writing." Alternatively, one may achieve a disclaimer of all implied warranties by compliance with section 2-316(3), which contains three methods of excluding or modifying the implied warranties. The first method of exclusion is the use of phrases such as "with all faults" and "as is." The test of whether a phrase is sufficient is if "in common understanding [it] calls the buyer's attention to the exclusion of warranties and makes plain that there is no implied warranty." The second method of disclaiming a warranty under section 2-316(3) is by an inspection. If, before entering into the contract, the buyer examines the goods "as fully as he desire[s]," or if the buyer has "refused to examine the goods," then no implied warranty exists as to defects that "an examination ought in the circumstances to have revealed to him." The third method of excluding or modifying an implied warranty under section 2-316(3) is by course of dealing"s and usage of trade.