What describes the implied warranty of merchantability and how it can be disclaimed?

• A. The implied warranty of merchantability is implied whenever the seller is a merchant; the disclaimer can be oral, but must use the term 'merchantability' and must be conspicuous if written.
• B. It is implied only if the goods are defective.
• C. It is never implied; disclaimers are not allowed.
• D. It is implied only for non-merchants; disclaimers must be oral.

Answer: (A)

The key idea is that the implied warranty of merchantability automatically arises when the seller is a merchant who deals in goods of the kind sold. It promises the goods are fit for their ordinary purpose and meet the expectations of someone buying such goods, not defective in a way that would render them unusable.

Disclaiming that warranty is allowed, but with limits. A disclaimer must clearly state that the warranty of merchantability does not apply and must be presented in a way that is conspicuous. If the disclaimer is in writing, it must be conspicuous; and it must use the term “merchantability” to be effective. Oral disclaimers can be used, but they should include the term “merchantability” to satisfy the requirement that the disclaimer clearly communicates the exclusion.

So this correctly captures that the warranty is automatic when the seller is a merchant, and that the disclaimer can be oral, provided it uses the term and is conspicuous when written.