Disclaimers in contracts are generally included when one party wants to sell a product or service without any guarantee of its quality (merchantability) or suitability for the buyer’s intended use. Guarantees of a product’s quality or suitability are also known as warranties, and may be implied in the parties’ agreement without being written or spoken—usually by virtue of a state’s statutes adopting the Uniform Commercial Code’s provisions governing the sale of goods (Article 2)—or by court opinions (also known as common law or case law). Some states have laws (statutes) that prohibit the disclaimer of warranties; make disclaimers ineffective; and penalize parties who attempt to disclaim such warranties. Disclaimers in contracts also serve as an explicit warning to the parties of the risks in a sale or transaction and help avoid a subsequent claim that a party was unaware of such risks or was deceived regarding the presence of such risks.

In South Dakota, as in many states, the regulation of disclaimers in contracts is influenced by the Uniform Commercial Code (UCC), which South Dakota has adopted. Under the UCC, particularly Article 2 which governs the sale of goods, warranties can be either express or implied. Express warranties are affirmations of fact or promises explicitly made by the seller, while implied warranties arise by operation of law, such as the warranty of merchantability or the warranty of fitness for a particular purpose. South Dakota allows for the disclaimer or modification of warranties under certain conditions. However, to disclaim implied warranties, the language must be conspicuous, written, and specifically mention merchantability. Furthermore, disclaimers of the warranty of fitness for a particular purpose must be in writing and conspicuous. If a disclaimer does not meet these requirements, it may be deemed ineffective. Additionally, the South Dakota Deceptive Trade Practices and Consumer Protection Law may impact the enforceability of disclaimers and warranties, as it prohibits deceptive practices in trade and commerce. It's important for parties in South Dakota to carefully draft disclaimers to ensure they comply with the relevant statutes and UCC provisions to avoid penalties and ensure the intended risk allocation is enforceable.