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In simplest terms, a warranty (also called a guarantee) is an agreement between a seller and a buyer to ensure that a product will work properly. While the concept is simple, the actual application of a warranty can be quite complex. There is no law requiring a company to offer a written warranty on a product it manufactures or sells. The absence of a written warranty, however, does not mean that a product is not warranted to perform according to expectation. When a written warranty does exist, it binds the company under state and federal law into assuming responsibility in the event that a product malfunctions.
Warranties promise that a product will perform properly. When a product fails to perform, it will be replaced or repaired, or the consumer will be given a refund or a credit toward another product. The retail pioneer John Wanamaker, who introduced the concept of the "department store" in Philadelphia in 1876, is also credited with introducing the money-back guarantee. Wanamaker was a progressive businessman who was among the first to offer benefits such as paid vacations to his employees. He was also a deeply ethical man who believed that his customers should be satisfied with their purchases. The money-back guarantee earned the trust and the loyalty of Wanamaker's customers.
Trust and loyalty represent sound business practice for most companies. In fact, it is not uncommon for companies to use warranties as a selling point. By offering a better warranty than their competitors, companies are saying in effect that they believe more strongly in the quality of their products.
Warranty problems occur when the company has misstated its policy, or when the language included in the warranty is confusing. The concept of the "lifetime warranty" provides a good illustration of how this sort of confusion can develop. The Federal Trade Commission (FTC) offers the example of an automobile muffler with a so-called "lifetime" guarantee. "Lifetime" can mean the life of the automobile in which the new muffler was installed. Alternatively, it can mean the duration of the buyer's ownership of the car, or it can mean the buyer's actual lifetime. It is an unfortunate fact that some companies are unscrupulous and try to renege on their warranty agreements. But as the seemingly straightforward example of the muffler shows, sometimes the problem is misinterpretation. That said, it is the seller's responsibility to make sure that the warranty's language and intent is clear.
Under the law, there are two types of warranties: implied and express. Implied warranties exist under state law, as outlined in Article 2 of the Uniform Commercial Code (UCC). The UCC, which covers all 50 States and the District of Columbia, is a means of consolidating laws regarding commerce as a means of streamlining interstate legal issues. This allows each state to adopt the same definitions of, in this case, implied warranties. In 2003, a substantially revised version of Article 2 of the UCC was approved by the National Conference of Commissioners on Uniform State Laws and American Law Institute, but as of early 2006 no state had adopted the revised Article 2.
Implied warranties are exactly what the term says they are: unspoken and unwritten promises made by a seller to a buyer that the product being sold works. These warranties are created through the application of the law, rather than through statements that are made by a seller. The concept that encompasses the implied warranty comes from common law, specifically, the principle of "fair value for money spent." Actually, there are two types of implied warranties, both outlined under Article 2 of the UCC.
The implied warranty of merchantability is simply the promise that the product sold is in good working order and will do what it is supposed to do. For instance, a vacuum cleaner is expected to pick up dirt and dust from carpets and floors. A refrigerator is expected to keep food cold. A toaster is expected to toast bread. If the consumer buys a product and the product does not work, then this constitutes a breach of the implied warranty. The seller is required to remedy the problem, whether by repairing or replacing the product. (It should be noted that the section of the UCC covering this type of implied warranty, Section 2-314, is law in every state except Louisiana.)
The implied warranty of fitness for a particular purpose is the promise that the seller's advice on how to use the product will be correct. For example, it a consumer asks an appliance dealer whether a particular air conditioner can cool a 600 square-foot room and the dealer says yes, that dealer has effectively created a warranty of fitness. In other words, the dealer has impliedly guaranteed that the air conditioner is fit for the purpose for which the consumer needs to use it as expressed to the seller. If the air conditioner can only cool a 400 square-foot room effectively, the dealer has breached the warranty. The idea behind this is that the dealer is expected to know which product will be best for which use.
An express warranty is an explicit offer made voluntarily by the seller that a product will perform according to particular expectations. The typical express warranty offers specific remedies in the event that the product is defective. Express warranties can be oral or written. Written warranties are covered under the federal Magnuson-Moss Act, which is explained in detail below. If a seller offers an express warranty, the product in question is still covered under implied warranty.
The length of a warranty may be specified, but if it is not, the general rule is that consumers have four years from the date of purchase to enforce a warranty claim. This does not mean that the product must last four years. Rather, it means that if there was a defect in the product at the time of purchase that manifests itself later, the consumer is entitled to some sort of remedy.
Used goods are covered under implied warranties if the seller is a merchant who is in the business of selling similar products. A private individual who chooses to sell a toaster at a flea market is not expected to take responsibility for the product's performance.
In most states, goods can be sold "as is." These goods do not require the seller to offer even an implied warranty. What the seller is required to do for these products is make clear to consumers that the product is being sold in less than prime condition and that the consumer assumes all responsibility for any faults and flaws. Some states prohibit this practice, including the following: Alabama, Connecticut, Kansas, Maine, Maryland, Massachusetts, Minnesota, Mississippi, New Hampshire, Vermont, Washington, West Virginia, and the District of Columbia. If a product is sold as is and it turns out to have a defect that results in personal injury, the seller is liable even in the absence of any warranty.
Anyone who has purchased appliances, stereos, computers, or similar items knows that many stores will try to sell an "extended warranty" along with the standard one. These warranties, also known as service contracts, are often unnecessary because they duplicate current warranty coverage. The reason
Another important point that consumers should know is that if they do wish to purchase a service contract, they are allowed by law to do so up until 30 days from the regular warranty's expiration date. Stores that claim a "now or never" policy are being deceptive.
Situations often arise where someone who purchases goods from the original buyer bring an action for breach of warranty against the original seller. The general rule under the UCC is that a buyer must have privity of contract with the original seller in order to recover for breach of either an express or an implied warranty. In other words, the person who actually purchased the goods from the buyer is the only person who can sue for breach of a warranty.
Some exceptions to this general rule may apply. For example, a third-party beneficiary to a seller's promise may recover from the seller even in the absence of privity of contract between the seller and the eventual buyer. The revised Article 2 of the UCC includes two new provisions that extend warranties to remote purchasers in some other circumstances, but as noted above, no state has adopted the revised Article 2.
In 1975, Congress passed the Magnuson-Moss Warranty Act as a means of providing comprehensive information to consumers about their rights under product warranties. It is important to note once again that companies are not required to provide written warranties on their products. If they do, however, they are subject to the regulations spelled out under Magnuson-Moss.
Oral warranties are not covered by Magnuson-Moss, nor are warranties on services or commercial products. Only written warranties on consumer goods are covered. The company issuing the warranty (the warrantor) or the seller must meet three basic requirements under the Act:
Anyone who offers a written warranty is prohibited from disclaiming or modifying implied warranties. In other words, consumers are protected under the implied warranty of merchantability no matter how broad or narrow the scope of the written warranty. The only exception is that the company can restrict the duration of an implied warranty to match that stated in a written limited warranty. If a company offers a three-year limited warranty on a product, for instance, it is permissible to limit the implied warranty to three years as well.
Magnuson-Moss prohibits companies from including tie-in sales provisions in its warranties. In other words, the company cannot state that owners of product X must use only product X accessories or have the product serviced at specific locations. However, companies can void a warranty if the consumer has it serviced or repaired inappropriately or incorrectly. Moreover, if the company can prove to the FTC that its products must be serviced or maintained through tie-in services, the FTC may waive this requirement.
No deceptive or misleading terms are permitted in a written warranty under Magnuson-Moss. A common example is a warranty covering moving parts in an item that has no moving parts. Moreover, the company cannot claim to offer services that it either cannot or will not provide.
Magnuson-Moss makes breach of warranty a violation of federal law and allows plaintiffs to recover court costs and reasonable attorney's fees. In general, most warranty-related lawsuits are brought in state courts, but class action suits can be brought in federal court. This is not to say that Magnuson-Moss has litigation as its goal. Rather, the goal is to make companies think carefully before they breach a warranty.
Under Magnuson-Moss, companies can include a provision in their warranties that requires customers to attempt to resolve warranty disputes through informal means (informal in the sense that they do not
While having an informal dispute procedure in place eliminates the necessity of going to court, it is clearly still enough of a burden on a company that it makes more sense to offer clear-cut warranties and honor them.
The FTC recommends that consumers take several steps in order to minimize problems that they may have with respect to warranties. These steps include the following:
The FTC provides additional information at http://www.ftc.gov/ftc/consumer.htm.
The Consumer Movement: Guardians of the Marketplace. Mayer, Robert N., Twayne Publishers, 1989.
Consumer Warranty Law.2d Edition. Sheldon, Jonathan and Carolyn L. Carter, National Consumer Law Center, 2001.
Extraordinary Guarantees: A New Way to Build Quality Throughout Your Company and Ensure Satisfaction for Your Customers. L. Hart, Christopher W. L., AMACOM, 1993.
Return to Sender: Getting A Refund or Replacement for Your Lemon Car. Barron, Nancy, National Consumer Law Center, 2000.
Sales and Leases: Examples and Explanations. Brook, James, Aspen Publishers, 2003.
Understanding Consumer Rights. Parisi, Nicolette, Dorling Kindersley, 2000.
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