Puffery and express warranty in contract law

Business Ethics -- Puffery

Puffery vs. Measurable Statement of Fact

As a general principle of contract law, there is a distinction between the types of pre-sale statements that sellers are permitted to make and those that they may not make, at least not without creating an express warranty. Specifically, subjective statements of personal opinion about the value or reliability of the subject of the proposed sale are considered "puffery" and not statements of fact that are material to the transaction. Conversely, objective statements about facts and conditions are legally binding if they are material to the nature of the transaction and they give rise to an express warranty of the facts and conditions as stated.

Examples

Consider the case of a seller of used car. The seller may say to the prospective buyer that he has always loved how well the car performs and that he expects any buyer to have a similar ownership experience because it is "the best car I ever owned." If the car later turns out to have mechanical problems or performs poorly, the seller will not be liable for any of his pre-sale statements because they are considered "puffery." However, if the seller says to the buyer that the car was never involved in a collision but the truth is that the car was involved in a major collision while he owned it and repaired, the seller may be liable for damages suffered by the buyer, such as where a problem arises that is attributable to the frame having been bent or damage and improperly repaired by the owner. That the car was involved and severely damaged in a major collision that damaged the frame is fact that is material to the decision of prospective buyer. The buyer may have a cause of action to rescind the sale and recover his payment or, in the alternative, to recover from the seller the cost of reasonable repairs to the car frame.

The seller is also responsible for and prohibited from deliberately misrepresenting the truth of any objective conditions or facts about the car. For example, if the seller says to the buyer that the original motor was recently replaced with a new one, the buyer can recover if it is determined that, in fact, the motor is the original that was never replaced. Such disputes are always subject to issues of proof, but if the buyer can prove that the owner new his statements were false, and if those statements concerned a matter that is material to the sale, the buyer can either rescind the contract or recover damages measured by the cost of putting the car into the condition warranted by the seller.

Personal Experience with Ethical Programs in Relation to Puffery

I have not had much specific personal experience within organizations in this regard, but I have known people who would typically take full advantage of the room left by the law between what is considered puffery and what is considered a warranted statement of fact. Just as in the case of business organizations, I would have less respect for people who consider themselves bound only by the letter of the law rather than (also) by objective everyday notions of fairness and truth, even about issues that are not necessarily material to negotiations between parties as a matter of law.