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UNIT 4: Consumer and Housing Law Chapter 24 Warranties

 A warranty is a promise or guarantee made by the seller about the quality & performance of goods & services for sale  The warranty may also include a statement of what the seller or manufacturer will do if a problem occurs with the product  If the seller does not honor the warranty, the seller has breached, or broken, his/her contract with the consumer

 Warranties give consumers very important rights  All warranties are not the same, so it is important to compare warranties while shopping  Check the state laws  They may give you other rights that are not in the warranty

 When you look at a warranty, consider:  The duration (how long does it last?)  The scope (what parts or problems are covered or excluded?)  The remedy (what do you get under the warranty & what must you do to get the remedy?)

Background—Basic Consumer ?’s

 Warranties give consumers important rights, & therefore are probably the most basic form of consumer protection

 Warranties answer several essential ?’s:   What parts & repair problems are covered?

Are any expenses excluded from coverage?

 How long does the warranty last?

   What will you have to do to get repairs?

What will the company do if the product fails?

Does the warranty cover “consequential damages,” that is, other losses caused by the product’s failure?

○ For example, if your freezer breaks & all your food spoils, the loss of the food would be consequential damages  Are there any conditions or limitations on the warranty?

 Express warranties & implied warranties are 2 types of guarantees  Consumers should also be aware of disclaimers

Express Warranties

 An express warranty is a statement —written, oral or by demonstration —concerning the quality or performance of goods offered for sale  This statement becomes part of the bargain between the parties

 Examples  A salesperson who says that a certain TV will not require repairs for five years has offered an express warranty that is enforceable by law  An express warranty is created if you purchase a vacuum cleaner from an appliance store after seeing a demonstration of the vacuum picking up small particles from a deep-pile rug

 Because oral warranties & warranties by demonstration are difficult to prove, it is always best to get a written warranty  Your warranty may provide a remedy for when things go wrong  You may be able to return the item for a refund, exchange it for a replacement, or have it repaired

 Express warranties are created by statements of fact  Not everything the seller says is an express warranty  A seller's opinion or an obvious exaggeration — called puffing —will not be enforced ○ This is considered “sales talk” & can’t be relied on

 Example:  A used car dealer advertising “Fantastic Used Cars” is engaged in puffing ○ No warranty is created & no customer should rely on such a statement

Background—Warranty Labels

 Sellers do not have to give written warranties  If they do, the

Federal Consumer Product Warranties Act (

commonly known as the Magnuson-Moss Warranty Act) requires that the written warranty:  Disclose all the essential terms & conditions in a single document  Be stated in simple & easy-to-read language  Be made available to the consumer before a sale

 Written warranties must also tell you what is included & what is not included  Example: ○ ○ The warranty must explain what repairs are covered & who will make them The act doesn’t apply to products < $15

 Under the Magnuson-Moss Warranty Act warranties are labeled as either “Full Warranty” or “Limited Warranty”

 Under a Full Warranty:  A defective product will be fixed or replaced at no cost, including removal & reinstallation, if necessary  The consumer will not have to do anything unreasonable (such as shipping a piano to a factory) to get the warranty service  The product will be fixed w/in a reasonable time after the consumer complains  If the product cannot be fixed after a reasonable # of attempts, the consumer can get a refund or a replacement  The warranty applies to anyone who owns the product during the warranty period (not just the 1 st purchaser)

 Any protection less than this is a limited warranty  Such a warranty usually covers some defects or problems, but not others ○ Example:  The limited warranty on a video recorder might cover the cost of new parts but not the labor involved in installing the new parts  Or it might cover only certain parts

 A wise consumer should carefully read & compare warranties or find someone else who can do so

 Example: In comparing 2 like items at the same price, 1 with a full warranty & the other with a limited warranty, the full warranty may not be better — a 1 yr. full warranty might be less valuable than a 20-yr. limited warranty —it depends on what each warranty promises

  Purchasers almost always need to provide proof of purchase in order to receive warranty service through  A dated check  A receipt from the seller  Or warranty registration cards Consumers should practice effective record keeping & have a filing system for important records —you should develop the habit of saving & filing receipts, warranties, & other pertinent purchasing information —also take pictures for insurance

 Problem 24.1 – Page 283 “One-Year Limited Warranty”

Implied Warranties

 Many consumers believe they have no protection if a new product w/o an express warranty doesn’t work  Even if there is no written warranty, the consumer still has certain protections if the item fails to work properly or for an adequate length of time

 An implied warranty is an unwritten promise, created by law, that ensures a product will do what it is supposed to do  In this way, the law requires that products meet certain standards of quality & performance  Implied warranties apply only to products sold by bona fide (authentic) dealers of that product ○ Implied warranties do not apply to goods sold by a casual seller  Example: Such as a friend selling a used video game

 3 types of Implied Warranty 

Warranty of merchantability

Warranty of fitness for a particular purpose

Warranty of title

 Warranty of Merchantability  An unwritten promise that the item sold is at least of average quality for that type of item  Example: ○ A radio must play, a saw must cut, a freezer must keep food frozen  This warranty is always implied unless the seller expressly disclaims it  Be especially wary of goods marked w/disclaimers such as “as is” or “final sale” ○ Using a disclaimer, a seller can legally avoid responsibility for the quality of the product

 Warranty of fitness for a particular purpose  Exists when a consumer tells a seller before buying an item what the specific purpose of the item will be ○ A salesperson who sells an item w/this knowledge has created an implied warranty that the product will work for the stated purpose  Example: Suppose you tell a salesperson you want a waterproof watch, which you then buy —an implied warranty of fitness has been created —if you go swimming & water leaks into the watch, the warranty has been breached

 Warranty of title  A seller's promise that he/she owns the item being offered for sale & is not selling stolen property ○ Seller’s must own the goods in order to transfer title or ownership to the buyer ○ If a person sells stolen goods, the warranty of title has been broken

 Consumers who are harmed by products may be able to sue for damages because the manufacturer or seller has breached the warranty  Consumers may also be able to recover damages based either on the negligence of the manufacturer or seller or on a legal theory called strict liability

 If you fully examine goods —or have the opportunity to do so —before making a purchase, the implied warranty may not apply to those defects you should have discovered during the inspection  Therefore, carefully inspect any goods you buy for defects  Be especially carefully with used cars ○ Courts usually do not interpret the implied warranty of merchantability to provide much protection in used-car sales ○ Consumers should shop carefully for an express warranty when buying a used car ○ It is wise to have a mechanic you trust examine the car before you purchase it  Carefully read all instructions that come w/a product ○ If you fail to use the product properly, or if you use it for an improper purpose, you may invalidate the warranty

Background—Consumer Protection

 Most people think they have no remedy for a defective product unless an express warranty has been provided  The implied warranty of merchantability provides a legal remedy & may actually extend beyond the duration of any express warranty

 The implied warranty of merchantability, as codified in the

Uniform Commercial Code

& adopted in some form by the legislatures in all 50 states, terminates the common-law idea of caveat emptor, or “let the buyer beware”  In fact, in response to the growth of government regulation, some critics of consumer protection describe the contemporary marketplace with the somewhat tongue-in cheek paraphrase “let the seller beware”

 Problem 24.1 – Page 285

Disclaimers

 An attempt by the seller (through a clause or a statement in a warranty) to limit responsibility to the consumer in case anything goes wrong with the product

 Sellers can usually disclaim the

implied warranty of merchantability

as long as the disclaimer is easily visible & is written in terms that can be easily understood by the average consumer (“With all faults” or “as is”)  Unless these types of words are used, the seller must actually use the word

merchantability

in disclaiming the implied warranty of merchantability

 Under the Magnuson-Moss Warranty Act, sellers offering a written warranty may not disclaim or modify any implied warranty during the effective period of the written warranty  No matter how broad the written warranty is, the customer will always receive the basic protection of the implied warranty of merchantability ○ A warranty of merchantability is a promise that the product does what it is intended to do

 Seller’s sometimes use disclaimers to limit the customer’s remedy  Example: ○ ○ A contract may read, “It is expressly understood & agreed that the buyer’s only remedy shall be repair or replacement of defective parts. The seller is not liable in damages for injury to persons or property.” Suppose the warranty limits the remedy to “repair or replacement of defective parts” & this remedy is not sufficient  That is, after repeated attempts at repair, the product still doesn’t work  In such cases, the buyer can usually seek other remedies, for example, getting a refund  However, courts will usually require that the buyer give the seller a reasonable opportunity to repair the product

 Problem 24.3 – Page 286 The Case of The Guitar That Quit

 The clause quoted in the case study is a disclaimer  It is an attempt by the store to avoid responsibility for anything that goes wrong w/the guitar  The quoted clause makes it clear that an express warranty is not being offered  But does the clause disclaim the implied warranty?

 Because the sales receipt for the guitar didn’t say “as is,” “with all faults,” or “merchantability,” it is probably not effective as a disclaimer of the implied warranty of merchantability  Shari should be protected if she returns the guitar

Background—Warranty Law

  Warranty law doesn’t guarantee perfect products  Consumers who avoid impulse buying, comparison shop, & carefully inspect products before purchasing them are more likely to be satisfied w/their purchases A disclaimer attempting to exclude a seller’s liability for physical harm caused by consumer goods is considered unconscionable  Negligence or strict liability ○ From a consumer’s standpoint, recovering damages for harm caused by a defective product is best accomplished by bringing a lawsuit based on strict liability

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