Importance of Warranties

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Chapter 14

• Importance of Warranties

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Warranty

• A guarantee on a product given by the seller
• A breach of warranty a breach of a contract
• Manufacturers Retailers Consumers

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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.

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Created in three ways
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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
•  

Salespersons opinion does not equal warranty
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Description of Goods

• Only description of the goods that is part of the
  transaction creates an express warranty

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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

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Availability before Sale

• Written warranties on goods costing more than 15
  must be available before the sale
• Commonly found on packaging of product

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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

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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.

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FTC Federal Trade Commission (1914)

• Ensures fair economic practices among American
  businesses.

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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

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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.

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Full Warranty

• In which a defective product will be fixed or
  replaced free within a reasonable time.
• Written warranty on products 10 or gt

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Limited Warranty

• A warranty that provides restricted protection
  must be labeled as such (written warranty on
  products 15 or gt) must be fully disclosed in
  easily understood language.
• i.e. Warranty includes parts, not labor

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Implied Warranty

• A guarantee of quality imposed by law (not in
  writing)
• Only on goods not services
• There are three types of implied warranties

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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 sellers knowledge and
  advice

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Warranty of Merchantability

• The merchant warrants that the goods being sold
  are merchantable
• Only given by a merchant (someone who deals in
  goods)

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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

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Usage of Trade

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

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Warranty of Title

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

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Exclusion of Warranties

• The words as is and with all faults
• furniture sales floor display
• (all sales are final)

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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

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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