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No Implied-in-Fact Warranty Arose from Sale of Vehicle

A holding the government breached an implied-in-fact warranty when it inadvertently sold a vehicle containing concealed narcotics was reversed by the Court of Appeals for the Federal Circuit because the government's failure to perform its regulatory responsibilities did not provide a contractual remedy and the sales contract explicitly disclaimed all warranties. The Court of Federal Claims held the auction sale of a vehicle containing hidden marijuana constituted a breach of an implied-in-fact warranty because the government represented the vehicle was free of illegal substances and the contractor reasonably assumed the government removed all contraband (52 CCF 78,975). An implied-in-fact agreement requires a "meeting of minds" that can be inferred from the conduct of the parties. The CFC determined the foundation of the parties' belief was an expectation that the government had fulfilled its regulatory duty to remove any contraband from the vehicle before selling it.

Express Disclaimers

However, the government's responsibility to remove contraband from forfeited vehicles did not provide a contractual warranty to future purchasers that it has done so, because the government's performance of its regulatory functions does not create contractual obligations. Thus, the government's failure to perform its regulatory responsibility adequately did not provide a contractual remedy. Moreover, the existence of an implied-in-fact warranty was undermined by the express disclaimers the government made at the auction, which showed the government did not intend to make any warranty as to any aspect of the vehicle. The meeting of the minds required to form an implied-in-fact warranty, therefore, could not have occurred. (Agredano, et al. v. U.S., CA-FC, 54 CCF 79,255)




(The news featured above is a selection from the news covered in the Government Contracts Report Letter, which is published weekly and distributed to subscribers of the Government Contracts Reporter. )


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