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 Kentucky, as in many states, the Uniform Commercial Code (UCC) provides for an implied warranty of merchantability in lease transactions for goods, which includes office equipment, computers, telephone systems, heavy machinery, home furniture, motor vehicles, or electronics. Under this implied warranty, the leased goods must meet certain criteria to be considered merchantable: they must conform to the lease agreement's description and be fit for the ordinary purposes for which such goods are used; they must be of consistent quality and quantity within each unit and among all units involved; and they must be properly contained, packaged, and labeled as required by the lease agreement. Additionally, the goods must live up to any claims made on their container or label. Beyond the implied warranty of merchantability, other implied warranties may arise from the specific course of dealing between the lessor and lessee or from the standard practices in the industry (usage of trade).