Laws vary from state to state but state statutes often provide for the creation of an implied warranty of merchantability by a lessor of goods in a lease transaction—such as for office equipment, computers, telephone systems, heavy machinery, home furniture, motor vehicles, or electronics.

For goods to be merchantable and comply with the implied warranty of merchantability they generally must:

• pass without objection in the trade under the description in the lease agreement;

• in the case of fungible goods, are of fair average quality within the description;

• be fit for the ordinary purposes for which goods of that type are used;

• run, within the variation permitted by the lease agreement, of even kind, quality, and quantity within each unit and among all units involved;

• be adequately contained, packaged, and labeled as the lease agreement may require; and

• conform to any promises or affirmations of fact made on the container or label.

Other implied warranties may be provided by statute or arise from the lessor and lessee’s course of dealing or usage of trade (standard practices and methods in the industry).

In South Dakota, as in many states, the concept of an implied warranty of merchantability applies to lease transactions for goods such as office equipment, vehicles, and electronics. This implied warranty ensures that the leased goods meet certain standards and are fit for the ordinary purposes for which such goods are used. Specifically, the goods must be as described in the lease agreement, of fair average quality, suitable for their intended use, consistent in quality and quantity, properly packaged and labeled, and conform to any claims made on their labeling. South Dakota's codification of the Uniform Commercial Code (UCC) provides the framework for these warranties. Additionally, other implied warranties may arise from the history of dealings between the lessor and lessee or the customary practices within the relevant industry. It is important for both lessors and lessees to understand these warranties as they can affect the rights and obligations under a lease agreement.