Chapter PowerPoint

UNIT 4: Consumer and Housing Law
Chapter 24
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
Warranties give consumers very important
 All warranties are not the same, so it is
important to compare warranties while
 Check the state laws
 They may give you other rights that are not in the
When you look at a warranty, consider:
 The duration (how long does it last?)
 The scope (what parts or problems are covered or
 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
Express Warranties
An express warranty is a statement—written,
oral or by demonstration—concerning the
quality or performance of goods offered for
 This statement becomes part of the bargain
between the parties
 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
 A seller's opinion or an obvious exaggeration—
called puffing—will not be enforced
○ This is considered “sales talk” & can’t be relied on
 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
The warranty applies to anyone who owns the product
during the warranty period (not just the 1st purchaser)
Any protection less than this is a limited
 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
 Or it might cover only certain parts
A wise consumer should carefully read &
compare warranties or find someone else
who can do so
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
 A dated check
 A receipt from the seller
 Or warranty registration cards
Consumers should practice effective recordkeeping & 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
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
○ 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
 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
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
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
 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
 Shari should be protected if she returns the
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
Related flashcards

Business terms

50 cards


14 cards


36 cards

Free business software

44 cards

Tourism in Greece

43 cards

Create Flashcards