UCC Warranties vs. Contractual Warranties: Scaling Across State Lines — How to Keep Your Asset Protection Strong When Expanding Nationally

Expanding your business beyond your home state is exciting. But as your company grows across state lines, so do the legal risks, and those risks often live in the fine print of your contracts and warranty terms.

If you’re selling goods in multiple states, you’ll likely come across two different types of warranty obligations:

• UCC (Uniform Commercial Code) warranties
• Contractual warranties (those written into your agreements)

Understanding the difference between the two, and how they apply when you do business nationally, is key to protecting your company’s assets and minimizing litigation exposure.

At Ayala Law, we help businesses structure contracts and corporate entities that scale safely and legally. This blog breaks down how UCC and contractual warranties differ, and how you can protect your business as you expand across jurisdictions.

What Is a UCC Warranty?

The Uniform Commercial Code (UCC) governs the sale of goods in the U.S., and all 50 states have adopted some version of it. Even if your contract doesn’t say anything about warranties, the UCC may still apply.

UCC warranties include:

• Express Warranties: Created by specific promises, descriptions, or samples you provide during a sale. If you say “This product will last 5 years,” that’s an express warranty—even if it’s not in your contract.
• Implied Warranty of Merchantability: This warranty is automatic when you sell a product in the course of business. It means the product will do what it’s generally supposed to do.
• Implied Warranty of Fitness for a Particular Purpose: This applies when a buyer relies on your recommendation for a product to perform a specific function, and it doesn’t work as promised.
  

The problem? UCC warranties apply by default, even if your contract is silent. That’s why it’s critical to draft your contracts carefully if you want to limit or disclaim these warranties.

What Is a Contractual Warranty?

A contractual warranty is any warranty you choose to include in your written agreement with a customer, supplier, or vendor.

Unlike UCC warranties, these:

• Are negotiated
• Can be customized
• Can limit or override certain UCC warranties

For example, you might include:

• A limited 12-month warranty
• Specific repair-or-replace remedies
• Language that disclaims implied warranties altogether

The key takeaway: UCC warranties exist whether you like it or not. Contractual warranties let you take back control, but only if you know how to draft them strategically.

How Do Warranty Laws Vary Across States?

While the UCC is “uniform,” each state has its own tweaks, especially around enforcement, consumer protections, and disclaimer rules.

This matters when:

• You’re selling in multiple states
• You’re headquartered in one state, but manufacture or ship from another
• You’re sued in a state with different UCC interpretations

For example:

• Some states require warranty disclaimers to be “conspicuous” (i.e., bold, all caps).
• Others don’t let you disclaim implied warranties in consumer contracts at all.
• Enforcement of limitation-of-liability clauses may differ by jurisdiction.

This is where national expansion becomes legally risky. You can’t rely on one-size-fits-all contracts across all jurisdictions.

How to Protect Your Assets When Expanding Nationally

As you grow into new markets, you need to do more than revise your warranty language, you need to rethink your legal structure. Here’s how to do both:

1. Use Holding Companies to Shield Assets

Consider placing valuable assets, like IP, real estate, or equipment, into a separate holding company. Your operating entities in other states can then license or lease those assets, keeping them insulated from local liabilities.

2. Form Separate LLCs for High-Risk Jurisdictions

If one state is particularly litigious or has strict warranty enforcement, form a separate entity to operate there. That way, any liability stays local and doesn’t jeopardize your entire business.

3. Customize Contracts Based on State Law

Work with counsel to tailor your warranty and limitation of liability provisions state by state. Your contracts should reflect local law while protecting your interests globally.

4. Include Choice-of-Law and Forum Clauses

To control which state’s law applies, include choice-of-law and venue clauses in your contracts. This can save you from defending claims in hostile jurisdictions with unfavorable laws.

Why Businesses Get Sued Over Warranty Terms

Most warranty litigation happens because businesses:

• Don’t realize UCC warranties applied
• Use generic contract templates across all states
• Assume disclaimers are enforceable everywhere
• Don’t separate their legal entities by function or geography
  

If you’re selling products or services across multiple states, and you haven’t reviewed your warranties with a business attorney, you may be exposing your company to lawsuits without realizing it.

One Contract Doesn’t Fit All

National expansion is exciting, but it’s important to make sure your legal foundation grows with you. Now is the time to revisit your warranty terms, your legal entities, and your asset protection strategy.

At Ayala Law, we help businesses:

• Review and revise UCC and contractual warranties
• Draft enforceable disclaimers
• Restructure to limit liability and protect assets
• Build legal strategies that scale with growth

If your business is growing across state lines, contact an experienced attorney in Miami at 305-570-2208.

You can also contact attorney Eduardo A. Maura at eduardo@ayalalawpa.com.

Schedule a case evaluation online here.

[The opinions in this blog are not intended to be legal advice. You should consult with an attorney about the particulars of your case].