UNDERSTANDING WARRANTIES

Generally, a warranty a promise, by the manufacturer or seller, to stand behind the product. It is a statement about the integrity of the product and about the commitment to correct problems when the product fails. The warranty is a contract that commits merchant or manufacturer or seller to stand behind their product.

The law recognizes two basic kinds of warranties—implied warranties and express warranties. 

Implied Warranties

Section 2-314 of the Uniform Commercial Code, which is law in every state but Louisiana, covers the implied warranty of merchantability. Missouri Revised Statutes 400.2-314 Implied warranty–merchantability–usage of trade.

Implied warranties are unspoken, unwritten promises, created by state law, that go from the seller or merchant, to their customers. Implied warranties are based upon the common law principle of "fair value for money spent," There are two types of implied warranties that occur in consumer product transactions. They are the implied warranty of merchantability and the implied warranty of fitness for a particular purpose.

The implied warranty of merchantability is a merchant's basic promise that the goods sold will do what they are supposed to do and that there is nothing significantly wrong with them. In other words, it is an implied promise that the goods are fit to be sold. The law says that merchants make this promise automatically every time they sell a product they are in business to sell. For example, if an appliance retailer, sells an oven, they are promising that the oven is in proper condition for sale because it will do what ovens are supposed to do—bake food at controlled temperatures selected by the buyer. If the oven does not heat, or if it heats without proper temperature control, then the oven is not fit for sale as an oven, and the implied warranty of merchantability would be breached. In such a case, the law requires the merchant to provide a remedy so that the buyer gets a working oven.

The implied warranty of fitness for a particular purpose is a promise that the law says a seller makes when their customer relies on their advice that a product can be used for some specific purpose. For example, suppose a customer asks an appliance retailer for a clothes washer that can handle 15 pounds of laundry at a time. If they recommend a particular model, and the customer buys that model on the strength of that recommendation, the law says that they have made a warranty of fitness for a particular purpose. If the model recommended proves unable to handle 15-pound loads, even though it may effectively wash 10-pound loads, the warranty of fitness for a particular purpose is breached.

Section 2-315 of the Uniform Commercial Code covers the implied warranty of fitness for a particular purpose. Missouri Revised Statutes 400.2-315 Implied warranty–fitness for particular purpose.

Implied warranties are promises about the condition of products at the time they are sold, but they do not assure that a product will last for any specific length of time. (The normal durability of a product is, of course, one aspect of a product's merchantability or its fitness for a particular purpose.) Nor does the law say that everything that can possibly go wrong with a product falls within the scope of implied warranties. For example, implied warranties do not cover problems such as those caused by abuse, misuse, ordinary wear, failure to follow directions, or improper maintenance.

Generally, there is no specified duration for implied warranties under state laws. However, the state statutes of limitations for breach of either an express or an implied warranty are generally four years from date of purchase. This means that buyers have four years in which to discover and seek a remedy for problems that were present in the product at the time it was sold. It does not mean that the product must last for four years. It means only that the product must be of normal durability, considering its nature and price.

A special note is in order regarding implied warranties on used merchandise. An implied warranty of merchantability on a used product is a promise that it can be used as expected, given its type and price range. As with new merchandise, implied warranties on used merchandise apply only when the seller is a merchant who deals in such goods, not when a sale is made by a private individual.

If a merchant does not offer a written warranty, the law in most states allows them to disclaim implied warranties. However, selling without implied warranties may well indicate to potential customers that the product is risky—low quality, damaged, or discontinued—and therefore, should be available at a lower price.

In order to disclaim implied warranties, merchants must inform consumers in a conspicuous manner, and generally in writing, that they will not be responsible if the product malfunctions or is defective. It must be clear to consumers that the entire product risk falls on them. They must specifically indicate that they do not warrant "merchantability," or they must use a phrase such as "with all faults," or "as is." A few states have special laws on how merchants must phrase an "as is" disclosure. (For specific information on how your state treats "as is" disclosures, consult your attorney.)

Some states do not allow merchanrts to sell consumer products "as is." At this time, these states are Alabama, Arizona, Connecticut, Kansas, Maine, Maryland, Massachusetts, Minnesota, Mississippi, New Hampshire, Vermont, Washington, West Virginia, and the District of Columbia. In those states, sellers have implied warranty obligations that cannot be avoided.

Federal law prohibits merchants from disclaiming implied warranties on any consumer product if they offer a written warranty for that product (see What the Magnuson-Moss Act Requires) or sell a service contract on it (see Offering Service Contracts).

Even if a merchant sells a product "as is" and it proves to be defective or dangerous and causes personal injury to someone, they still may be liable under the principles of product liability. Selling the product "as is" does not eliminate this liability.

Express Warranties

Section 2-313 of the Uniform Commercial Code covers express warranties. Missouri Revised Statutes 400.2-313 Express warranties by affirmation, promise, description, sample

Express warranties, unlike implied warranties, are not "read into" the sales contracts by state law; rather, the merchant explicitly offer these warranties to their customers in the course of a sales transaction. They are promises and statements that merchants voluntarily make about their product or about their commitment to remedy the defects and malfunctions that some customers may experience.

Express warranties can take a variety of forms, ranging from advertising claims to formal certificates. An express warranty can be made either orally or in writing. While oral warranties are important, only written warranties on consumer products are covered by the Magnuson-Moss Warranty Act.


RSMO 400.2-318 A seller’s warranty whether express or implied extends to any natural person who is in the family or household of his buyer or who is a guest in his home if it is reasonable to expect that such person may use, consume or be affected by the goods and who is injured in person by breach of the warranty. A seller may not exclude or limit the operation of this section.

UNDERSTANDING THE MAGNUSON-MOSS  WARRANTY ACT

The Magnuson-Moss Warranty Act is the federal law that governs consumer product warranties. Passed by Congress in 1975, the Act requires manufacturers and sellers of consumer products to provide consumers with detailed information about warranty coverage. In addition, it affects both the rights of consumers and the obligations of warrantors under written warranties.

To understand the Act, it is useful to be aware of Congress' intentions in passing it.

First, Congress wanted to ensure that consumers could get complete information about warranty terms and conditions. By providing consumers with a way of learning what warranty coverage is offered on a product before they buy, the Act gives consumers a way to know what to expect if something goes wrong, and thus helps to increase customer satisfaction.

Second, Congress wanted to ensure that consumers could compare warranty coverage before buying. By comparing, consumers can choose a product with the best combination of price, features, and warranty coverage to meet their individual needs.

Third, Congress intended to promote competition on the basis of warranty coverage. By assuring that consumers can get warranty information, the Act encourages sales promotion on the basis of warranty coverage and competition among companies to meet consumer preferences through various levels of warranty coverage.

Finally, Congress wanted to strengthen existing incentives for companies to perform their warranty obligations in a timely and thorough manner and to resolve any disputes with a minimum of delay and expense to consumers. Thus, the Act makes it easier for consumers to pursue a remedy for breach of warranty in the courts, but it also creates a framework for companies to set up procedures for resolving disputes inexpensively and informally, without litigation.

What the Magnuson-Moss Act Does Not Require

First, the Act does not require any business to provide a written warranty. The Act allows businesses to determine whether to warrant their products in writing. However, once a business decides to offer a written warranty on a consumer product, it must comply with the Act.

Second, the Act does not apply to oral warranties. Only written warranties are covered.

Third, the Act does not apply to warranties on services. Only warranties on goods are covered. However, if your warranty covers both the parts provided for a repair and the workmanship in making that repair, the Act does apply to you.

Finally, the Act does not apply to warranties on products sold for resale or for commercial purposes. The Act covers only warranties on consumer products. This means that only warranties on tangible property normally used for personal, family, or household purposes are covered. (This includes property attached to or installed on real property.) Note that applicability of the Act to a particular product does not, however, depend upon how an individual buyer will use it.

What the Magnuson-Moss Act Requires

In passing the Magnuson-Moss Warranty Act, Congress specified a number of requirements that warrantors must meet. Congress also directed the FTC to adopt rules to cover other requirements. The FTC adopted three Rules under the Act, the Rule on Disclosure of Written Consumer Product Warranty Terms and Conditions (the Disclosure Rule), the Rule on Pre-Sale Availability of Written Warranty Terms (the Pre-Sale Availability Rule), and the Rule on Informal Dispute Settlement Procedures (the Dispute Resolution Rule). In addition, the FTC has issued an interpretive rule that clarifies certain terms and explains some of the provisions of the Act. This section summarizes all the requirements under the Act and the Rules.

The Act and the Rules establish three basic requirements that may apply to a warrantor or a seller.

  1. A warrantor must designate, or title, their written warranty as either "full" or "limited."
  2. A warrantor must state certain specified information about the coverage of their warranty in a single, clear, and easy-to-read document.
  3. A warrantor or a seller must ensure that warranties are available where their warranted consumer products are sold so that consumers can read them before buying.

The titling requirement, established by the Act, applies to all written warranties on consumer products costing more than $10. However, the disclosure and pre-sale availability requirements, established by FTC Rules, apply to all written warranties on consumer products costing more than $15. 

What the Magnuson-Moss Act Does Not Allow

There are three prohibitions under the Magnuson-Moss Act. They involve implied warranties, so-called "tie-in sales" provisions, and deceptive or misleading warranty terms.

Disclaimer or Modification of Implied Warranties

The Act prohibits anyone who offers a written warranty from disclaiming or modifying implied warranties. This means that no matter how broad or narrow your written warranty is, your customers always will receive the basic protection of the implied warranty of merchantability. 

There is one permissible modification of implied warranties, however. If a merchant offers a "limited" written warranty, the law allows them to include a provision that restricts the duration of implied warranties to the duration of their limited warranty. For example, if a merchant offers a two-year limited warranty, they can limit implied warranties to two years. However, if they offer a "full" written warranty, they cannot limit the duration of implied warranties. 

If a merchant sells a consumer product with a written warranty from the product manufacturer, but they do not warrant the product in writing, they can disclaim their implied warranties. (These are the implied warranties under which the seller, not the manufacturer, would otherwise be responsible.) But, regardless of whether the merchant warrants the products they sell, the seller must give their customers copies of any written warranties from product manufacturers.

"Tie-In Sales" Provisions

Generally, tie-in sales provisions aren’t allowed. That’s a provision that requires a consumer to buy an item or service from a particular company to keep their warranty coverage. Here is an example of prohibited tie-in sales provisions.

To keep your new Plenum Brand Vacuum Cleaner warranty in effect, you must use genuine Plenum Brand Filter Bags. Failure to have scheduled maintenance performed, at your expense, by the Great American Maintenance Company, Inc., voids this warranty.

However, a warrantor can require a consumer to use select items or service if they’re provided free of charge under the warranty. 

The warranty can disclaim warranty coverage only for defects or damage caused by the use of parts or service you didn’t provide.  Here is an example of a permissible provision in that circumstance:

Necessary maintenance or repairs on your AudioMundo Stereo System can be performed by any company. Improper or incorrectly performed maintenance or repair that causes damage to your product may void this warranty.

One exception to the general ban on tie-in provisions is that a warrantor may include a tie-in provision if it has received a waiver from the FTC.  To get a waiver, the warrantor must prove to the FTC’s satisfaction that their product won’t work properly without a specified item or service. 

Deceptive Warranty Terms

Obviously, warranties must not contain deceptive or misleading terms. Merchants cannot offer a warranty that appears to provide coverage but, in fact, provides none. For example, a warranty covering only "moving parts" on an electronic product that has no moving parts would be deceptive and unlawful. Similarly, a warranty that promised service that the warrantor had no intention of providing or could not provide would be deceptive and unlawful.

How the Magnuson Moss Act May Affect Warranty Disputes

Two other features of the Magnuson-Moss Warranty Act are also important to warrantors. First, the Act makes it easier for consumers to take an unresolved warranty problem to court. Second, it encourages companies to use a less formal, and therefore less costly, alternative to legal proceedings. Such alternatives, known as dispute resolution mechanisms, often can be used to settle warranty complaints before they reach litigation.

Consumer Lawsuits

The Act makes it easier for purchasers to sue for breach of warranty by making breach of warranty a violation of federal law, and by allowing consumers to recover court costs and reasonable attorneys' fees. This means that if a merchant loses a lawsuit for breach of either a written or an implied warranty, they may have to pay the customer's costs for bringing the suit, including lawyer's fees.

Because of the stringent federal jurisdictional requirements under the Act, most Magnuson-Moss lawsuits are brought in state court. However, major cases involving many consumers can be brought in federal court as class action suits under the Act.

Alternatives to Consumer Lawsuits

Although the Act makes consumer lawsuits for breach of warranty easier to bring, its goal is not to promote more warranty litigation. On the contrary, the Act encourages companies to use informal dispute resolution mechanisms to settle warranty disputes with their customers. Basically, an informal dispute resolution mechanism is a system that works to resolve warranty problems that are at a stalemate. Such a mechanism may be run by an impartial third party, such as the Better Business Bureau, or by company employees whose only job is to administer the informal dispute resolution system. The impartial third party uses conciliation, mediation, or arbitration to settle warranty disputes.

The Act allows warranties to include a provision that requires customers to try to resolve warranty disputes by means of the informal dispute resolution mechanism before going to court. (This provision applies only to cases based upon the Magnuson-Moss Act.) If the merchant includes such a requirement in their warranty, their dispute resolution mechanism must meet the requirements stated in the FTC's Rule on Informal Dispute Settlement Procedures (the Dispute Resolution Rule). Briefly, the Rule requires that a mechanism must:

  • Be adequately funded and staffed to resolve all disputes quickly;
  • Be available free of charge to consumers;
  • Be able to settle disputes independently, without influence from the parties involved;
  • Follow written procedures;
  • Inform both parties when it receives notice of a dispute;
  • Gather, investigate, and organize all information necessary to decide each dispute fairly and quickly;
  • Provide each party an opportunity to present its side, to submit supporting materials, and to rebut points made by the other party; (the mechanism may allow oral presentations, but only if both parties agree);
  • Inform both parties of the decision and the reasons supporting it within 40 days of receiving notice of a dispute;
  • Issue decisions that are not binding; either party must be free to take the dispute to court if dissatisfied with the decision (however, companies may, and often do, agree to be bound by the decision);
  • Keep complete records on all disputes; and
  • Be audited annually for compliance with the Rule.

It is clear from these standards that informal dispute resolution mechanisms under the Dispute Resolution Rule are not "informal" in the sense of being unstructured. Rather, they are informal because they do not involve the technical rules of evidence, procedure, and precedents that a court of law must use.

15 U.S. Code Chapter 50 – CONSUMER PRODUCT WARRANTIES


See the Consumer Reports article, "What You Need to Know About Warranty Laws" for additonal helpful information.

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