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 Minnesota, the concept of an implied warranty of merchantability in lease transactions is recognized and is similar to the standards set forth for sales. Under Minnesota Statutes, Section 336.2A-212, which mirrors the Uniform Commercial Code (UCC), a lessor of goods is required to ensure that the leased goods are merchantable. This means the goods must be fit for the ordinary purposes for which such goods are used, must conform to the lease agreement, and must meet various criteria such as being of even kind, quality, and quantity, and being adequately contained, packaged, and labeled as per the agreement. Additionally, if the lessor has made any affirmations of fact or promises about the goods, the goods must conform to those statements. The implied warranty of merchantability can also be influenced by the course of dealing or usage of trade between the parties involved. It's important to note that while these warranties are implied by law, they can be modified or excluded under certain conditions as provided by the statute.