Chapter 14

Importance of Warranties

Warranty: A guarantee on a product given by the

seller A breach of warranty = a breach of a

contract

Manufacturers ~ Retailers ~ Consumers

Express Warranty

Oral or written statement, promise, or other representation about the quality, ability, or performance of a product.

Apply to goods that are sold or leased.

Created in three ways…

Statement/Promise by Seller Statement of fact or promise about goods

Formal words, such as warranty are not necessary

Must relate to goods and be part of the transaction

Should be in clear, precise, and understandable terms

 

Salesperson’s opinion does not equal warranty

Description of Goods Only description of the goods that is

part of the transaction creates an express warranty

Use of Sample or Model If it is part of the transaction it creates

an express warranty

Action must be the same as the product

used in demonstration

Availability before Sale Written warranties on

goods costing more than $15 must be available before the sale

Commonly found on packaging of product

Advertising Express Warranties An ad stating that a product is warranted

must tell you how to get a copy of the warranty

Also applies to mail, phone, and Internet orders

Expressions such as “Satisfaction Guaranteed” require a full refund to consumers if they are not happy

Express Warranty Protection (Consumers)

Guarantee: a promise or assurance of the quality or life of a product.

Guarantor: maker of the guarantee Warrantor: maker of the warranty

There may be limitations on guarantees.

FTC – Federal Trade Commission (1914)

Ensures fair economic practices among American businesses.

Advertised Guarantee Must Disclose:

The product or part of the product Specific characteristics that are covered or not covered Time limit of guarantee must be listed How to make to claim How the person/company will settle any claim

Identity of the persons making the claim

Magnuson-Moss Warranty Act (1975)

Sale of Goods in Interstate Commerce

Authorizes FTC to develop rules regulating the advertisement of guarantee and to enforce these guidelines.

Full Warranty: In which a defective product will be fixed

or replaced free within a reasonable time.

Written warranty on products $10 or >

Limited Warranty:

A warranty that provides restricted protection; must be labeled as such (written warranty on products $15 or >) must be fully disclosed in easily understood language.

i.e. Warranty includes parts, not labor

Implied Warranty A guarantee of quality imposed by law

(not in writing)

Only on goods ~ not services

There are three types of implied warranties

Warranty of Fitness for a Purpose

When the seller knows about a particular purpose for which the goods are needed

The buyer relies on the seller’s knowledge and advice

Warranty of Merchantability

The merchant warrants that the goods being sold are merchantable

Only given by a merchant (someone who deals in goods)

To be Merchantable, goods must: Pass without objection in the trade under contract

description Be fit for ordinary purposes for which such goods are

used

Be adequately contained, packaged, and labeled as agreement requires

Conform to the promises or statements of fact made on container or label

Usage of Trade

An implied warranty arising from customary ways in which the parties have dealt in the past

Warranty of Title

The goods shall be delivered free of any financial obligations (liens) about which the buyer had no knowledge

Exclusion of Warranties The words “as is” and “with all faults”

furniture sales ~ floor display

(all sales are final)

Privity of Contract People who deal directly with each other

In the past, warranties extended only to the actual buyer, not users

Now they extend to people who reasonably use, consume, or be affected by the goods

Duty to Notify To recover money damages for breach

of warranty, the buyer must notify the seller in a reasonable time after discovery

Sellers will then correct the situation ~ if not then buyer can claim damages