Section 14.1
Express and Implied Warranties
The
Importance
of
Section
14.1
Express
and
Implied
Chapter 14
Warranties
Warranties
Section 14.1
Express and Implied Warranties
Section 14.2
Exclusion of Warranties, Privity,
and Duty to Notify
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
What You’ll Learn
How to describe the three ways an
express warranty can be made (p. 294)
How to state the obligations of merchants
under the Magnuson-Moss Warranty Act
(p. 297)
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
What You’ll Learn
How to contrast a limited warranty with a
full warranty (pp. 297, 298)
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
What You’ll Learn
How to differentiate between the implied
warranty of fitness of a particular purpose
and the implied warranty of
merchantability (pp. 301, 302)
How to explain the warranty of title
(p. 303)
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Why It’s Important
Understanding warranties will keep you from
losing money.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Legal Terms
warranty (p. 294)
express warranty (p. 294)
full/limited warranty (pp. 297, 298)
implied warranty (p. 301)
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Legal Terms
warranty of fitness for a particular purpose
(p. 301)
warranty of merchantability (p. 302)
usage of trade (p. 303)
warranty of title (p. 304)
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section Outline
Law of Warranties
Express Warranties
Statement of Fact or Promise
Availability before Sale
Advertising Express Warranties
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section Outline
Express Warranties, continued
Magnuson-Moss Warranty Act
Description of the Goods
Sample or Model
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section Outline
Implied Warranties
Warranty of Fitness for a Particular
Purpose
Warranty of Merchantability
Usage of Trade
Warranty of Title
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Pre-Learning Question
What is a warranty?
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Law of Warranties
The UCC provides protection under its
law of warranties for situations such as:
Products that don’t work after you
buy them.
Impurities in foods in restaurants.
Technical problems with computers.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Law of Warranties
A warranty is another name for a
guarantee.
A breach of warranty is a breach of
contract.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Pre-Learning Question
What is an express warranty?
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Express Warranties
An express warranty is an oral or
written statement, promise, or other
representation about the quality,
ability, or performance of a product.
Express warranties apply to goods
that are sold or leased.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Express Warranties
Express warranties are conveyed in
three ways:
1. By a statement of fact or promise
made by the seller
2. By a description of the goods
3. By the use of a sample or model
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Statement of Fact or Promise
An express warranty is created when
a private party or a merchant sells
goods and makes a statement of fact
or a promise about the goods to the
buyer.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Statement of Fact or Promise
An express warranty may be a
statement of fact or a promise of
something that may happen in the
future.
Express warranties are often found
in sales brochures, circulars, and
advertisements.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Availability before Sale
Written warranties on consumer
products costing more than $15 must
be made available before you buy the
product.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Advertising Express Warranties
An advertisement stating that a
product is warranted must tell you how
to get a copy of the warranty before
you buy the product.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Magnuson-Moss Warranty Act
The Magnuson-Moss Warranty Act is
a law affecting only the sale of goods
sold in interstate commerce (business
activities that touch more than one
state).
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Magnuson-Moss Warranty Act
This federal act gives added
protection to consumers when written
express warranties are made.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Magnuson-Moss Warranty Act
When a written warranty is offered on
consumer goods costing more that
$10 and sold in interstate commerce,
the warranty must be labeled as full or
limited.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Full Warranty
A full warranty promises to fix or
replace a defective product at no
charge to the consumer.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Full Warranty
A full warranty:
Must be honored within a
reasonable amount of time.
Is good for the period mentioned in
the warranty, regardless of who
owns the item when it breaks.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Limited Warranty
A limited warranty is any written
warranty that does not meet the
requirements for a full warranty.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Limited Warranty
A limited warranty:
Does not promise free repair or
replacement.
Commonly covers only parts, not
labor.
May offer a partial refund.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Limited Warranty
A limited warranty:
May require you to pay shipping.
May only apply to the original buyer.
Must be labeled “limited warranty.”
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Description of the Goods
Any description of the goods that is
part of a transaction also creates an
express warranty.
The seller warrants that the goods will
be the same as the description.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Sample or Model
Any sample or model that is part of a
transaction creates an express
warranty.
When displaying a sample or model,
the seller warrants that the goods sold
will be the same.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Pre-Learning Question
What is an implied warranty?
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Implied Warranties
An implied warranty is a guarantee of
quality imposed by law.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Implied Warranties
An implied warranty:
Is not in writing.
Applies only to goods that are sold,
not services contracted.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Implied Warranties
There are three types of implied
warranties:
1. Warranty of fitness for a particular
purpose
2. Warranty of merchantability
3. Warranty that comes from a course
of dealing or usage of trade
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
What is the difference between an
express and an implied warranty?
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
ANSWER
Express: provided by the seller;
implied: imposed by law.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Warranty of Fitness
for a Particular Purpose
A warranty of fitness for a particular
purpose is created when the seller
knows the purpose for which the
goods are needed.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Warranty of Fitness
for a Particular Purpose
The seller advises the buyer in making
a purchase, and the buyer relies on
the seller’s knowledge and advice.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Warranty of Fitness
for a Particular Purpose
In this way, the seller warrants by
implication that the goods will be fit for
the purpose for which they are to be
used.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Warranty of Fitness
for a Particular Purpose
This warranty exists whether the seller
is a merchant or a private party.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Warranty of Merchantability
Under an implied warranty of
merchantability, the merchant
warrants that the goods being sold are
merchantable.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Warranty of Merchantability
This warranty is given only when the
seller regularly sells goods of that
kind.
Unless disclaimed, retailers,
wholesalers, and manufacturers imply
such a warranty in every sale.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Warranty of Merchantability
This gives assurance that their
products are fit for the purpose for
which they are purchased.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Warranty of Merchantability
Private parties do not provide the
warranty of merchantability.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Usage of Trade
Another implied warranty arises from
the customary ways in which the
parties have dealt in the past, or the
usage of trade.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Pre-Learning Question
What is a warranty of title?
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Warranty of Title
When a merchant or a private party
sells goods, the seller warrants that
the title being conveyed is good and
that the transfer is lawful.
This is called the warranty of title.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 14.1 Assessment
Reviewing What You Learned
1. What are the three ways an express
warranty can be made?
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 14.1 Assessment
Reviewing What You Learned
Answer
By a statement of fact or promise made by
the seller, by a description of the goods,
and by the use of a sample or model.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 14.1 Assessment
Reviewing What You Learned
2. What are the obligations of
merchants under the MagnusonMoss Warranty Act?
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 14.1 Assessment
Reviewing What You Learned
Answer
Merchants must label written warranties as
either “full” or “limited” for consumer
products costing more than $10.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 14.1 Assessment
Reviewing What You Learned
3. What is difference between a limited
warranty and a full warranty?
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 14.1 Assessment
Reviewing What You Learned
Answer
A limited warranty is one that does not
meet all of the requirements for a full
warranty.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 14.1 Assessment
Reviewing What You Learned
4. What is the difference between the
implied warranty of fitness for a
particular purpose and the implied
warranty of merchantability?
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 14.1 Assessment
Reviewing What You Learned
Answer
A warranty of fitness for a particular
purpose is created when the seller knows
about a particular purpose for which the
goods are needed.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 14.1 Assessment
Reviewing What You Learned
Answer
The seller advises the buyer in making a
purchase and the buyer relies on the
seller’s advice. This warranty exists
whether the seller is a merchant or a
private party.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 14.1 Assessment
Reviewing What You Learned
Answer
In contrast, sellers who regularly sell goods
of a particular kind imply a warranty of
merchantability in every sale, assuring that
their products are fit for the purpose for
which they are purchased.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 14.1 Assessment
Reviewing What You Learned
Answer
Private parties do not provide the warranty
of merchantability.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 14.1 Assessment
Reviewing What You Learned
5. What is the warranty of title?
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 14.1 Assessment
Reviewing What You Learned
Answer
Guarantees that the title being conveyed is
good, and the transfer is lawful.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 14.1 Assessment
Critical Thinking Activity
Opinion or Fact
A statement of fact by a seller about a
product is a warranty; a seller’s opinion is
not. Talk with another class member and
compare the following pairs of statements.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 14.1 Assessment
Critical Thinking Activity
Opinion or Fact
Classify each statement as fact or opinion.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 14.1 Assessment
Critical Thinking Activity
Opinion or Fact
1. These goods are 100 percent wool.
This is the finest wool around.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 14.1 Assessment
Critical Thinking Activity Answer
Opinion or Fact
1. These goods are 100 percent wool.
(fact)
This is the finest wool around.
(opinion)
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 14.1 Assessment
Critical Thinking Activity
Opinion or Fact
2. This truck has never been in an
accident.
This truck is solid.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 14.1 Assessment
Critical Thinking Activity Answer
Opinion or Fact
2. This truck has never been in an
accident. (fact)
This truck is solid. (opinion)
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 14.1 Assessment
Critical Thinking Activity
Opinion or Fact
3. This ink will not stain clothes.
This ink is safe to use.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 14.1 Assessment
Critical Thinking Activity Answer
Opinion or Fact
3. This ink will not stain clothes. (fact)
This ink is safe to use. (opinion)
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 14.1 Assessment
Critical Thinking Activity
Opinion or Fact
4. This is an IBM-compatible computer.
This computer is as good as any
IBM.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 14.1 Assessment
Critical Thinking Activity Answer
Opinion or Fact
4. This is an IBM-compatible computer.
(fact)
This computer is as good as any
IBM. (opinion)
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 14.1 Assessment
Critical Thinking Activity
Opinion or Fact
5. This watch is waterproof.
This watch is durable.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 14.1 Assessment
Critical Thinking Activity Answer
Opinion or Fact
5. This watch is waterproof. (fact)
This watch is durable. (opinion)
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 14.1 Assessment
Legal Skills in Action
Written Guarantees
Turner is planning to sell his computer
system to Lynne. It is only two years old
and has a modem, color monitor, and CDROM drive. According to Turner, the
system has never had a problem.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 14.1 Assessment
Legal Skills in Action
Written Guarantees
Lynne is a little nervous about buying a
used system and wants a written
guarantee. In groups of two, help Turner
write a warranty on his computer system.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 14.1 Assessment
Legal Skills in Action Answer
Written Guarantees
Warranties will vary, but should recognize
that Turner need only provide Lynne with a
warranty of fitness for a particular purpose.
Understanding Business and Personal Law
The Importance of Warranties
End of Section 14.1
Express and Implied Warranties
Section 15.1
Express and Implied Warranties
Consumer
Protection
Section
14.1
Express
and
Implied
Chapter 15
and Product Liability
Warranties
Section 15.1
Consumer Protection
Section 15.2
Product Liability
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
What You’ll Learn
How to explain the main differences
between state and federal consumer
protection law (p. 316)
How to describe two unfair and deceptive
practices (p. 317)
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
What You’ll Learn
How to recognize bait and switch
advertising (p. 321)
How to identify four Federal Trade
Commission rules that protect
consumers (p. 321)
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Why It’s Important
Knowledge of consumer protection laws will
prevent you from falling victim to fraud and
deception.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Legal Terms
caveat emptor (p. 316)
caveat venditor (p. 316)
consumer (p. 316)
unfair and deceptive practice (p. 317)
fraudulent misrepresentation (p. 318)
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Legal Terms
cease and desist orders (p. 320)
bait and switch (p. 321)
cooling-off rule (p. 322)
telemarketers (p. 323)
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section Outline
The Development of Consumer
Protection Law
Federal and State Consumer
Protection Laws
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section Outline
Unfair and Deceptive Practices
Fraudulent Misrepresentation
Work-at-Home Schemes
Unordered Merchandise
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section Outline
False Advertising
Bait and Switch Advertising
FTC Trade Regulation Rules
Negative Option Rule
The Cooling-Off Rule
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section Outline
FTC Trade Regulation Rules,
continued
Telemarketing Sales Rule
900-Telephone-Number Rules
Shopping by Mail, Telephone, Fax, or
Internet
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Pre-Learning Question
How did consumer protection laws
develop?
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
The Development of Consumer
Protection Law
Years ago, caveat emptor, which
means “let the buyer beware,”
reflected society’s attitude toward
consumers.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
The Development of Consumer
Protection Law
There were few ways to seek
compensation for damages and those
injured had no recourse due to privity
of contract.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
The Development of Consumer
Protection Law
Today, however, society demands that
manufacturers be held responsible for
foreseeable injuries to people who use
their products.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
The Development of Consumer
Protection Law
Caveat venditor, which means “let
the seller beware,” now guides
consumer transactions.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Pre-Learning Question
To whom do consumer protection laws
apply?
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Federal and State Consumer
Protection Laws
Consumer protection laws apply to
transactions between consumers and
people conducting business.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Federal and State Consumer
Protection Laws
A consumer is someone who buys or
leases goods, real estate, or services
for personal, family, or household
purposes.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Federal and State Consumer
Protection Laws
Consumer protection laws do not
protect you if:
You acquire a product from another
consumer
You buy a product to use in a
business
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
What is the difference between caveat
emptor and caveat venditor?
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
ANSWER
Caveat emptor is Latin for “let the
buyer beware” and means that the
buyer is the responsible party. Caveat
venditor is Latin for ”let the seller
beware” and means that the seller is
responsible.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
State Consumer Protection
State consumer protection offices
provide information and help
enforce state consumer protection
laws.
Offices may assist consumers with
individual problems.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Federal Consumer Protection
Federal consumer protection law
applies to businesses that sell real
estate, goods, or services in interstate
commerce, or business activity that
touches more than one state.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Federal Consumer Protection
The Federal Trade Commission (FTC)
is the U.S. government agency that
promotes free and fair trade
competition in the American economy.
The Bureau of Consumer Protection
safeguards consumers against unfair,
deceptive, or fraudulent practices.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Federal Consumer Protection
Both organizations investigate
violations of federal consumer
protection law.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Pre-Learning Question
What do you think are unfair and
deceptive practices?
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Unfair and Deceptive Practices
An unfair and deceptive practice is
an act that misleads consumers. Most
states have enacted some kind of
unfair and deceptive trade practice
law.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Unfair and Deceptive Practices
Examples include:
Work-at-home schemes
Unordered merchandise
False advertising
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Unfair and Deceptive Practices
If you feel you are the victim of an
unfair or deceptive practice:
Speak to the business owner or
manager about the problem
Write a complaint letter to the
company.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Elements of a Complaint Letter
Description of purchase
Product name and serial and model
number or service
Statement and history of problem
Ask for specific action, state
reasonable time for action
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Elements of a Complaint Letter
Copies of documents
Your address and work and home
phone numbers
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Fraudulent Misrepresentation
A fraudulent misrepresentation is
any statement that deceives the
buyer. A fraudulent misrepresentation
usually occurs when a seller misstates
the facts about something that is
important to the consumer.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Work-at-Home Schemes
Home employment schemes are
among the oldest kind of advertising
fraud.
They often promise big incomes
without explaining the costs.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Unordered Merchandise
Under state and federal laws,
unordered merchandise may be
considered a gift. You can keep it
without paying for it.
It is illegal for anyone who sends free
samples to include a bill.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
What does FTC stand for and what
does it do?
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
ANSWER
The Federal Trade Commission is the
agency of the U.S. government that
promotes free and fair trade
competition in the U.S. economy.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Pre-Learning Question
What is an example of false
advertising?
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
False Advertising
The FTC regulates false advertising
on the national level and has the
power to issue cease and desist
orders.
These orders are legally binding
orders to stop a practice that would
mislead the public.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Bait and Switch
One example of false advertising is
bait and switch advertising.
This happens when a store advertises
bargains that do not really exist to lure
customers in hopes that they will buy
more expensive merchandise.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Pre-Learning Question
What are some FTC trade regulation
rules?
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
FTC Trade Regulation Rules
The FTC has established trade
regulation rules for interstate
commerce to correct wrongdoing in
the marketplace.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
FTC Trade Regulation Rules
They include:
The negative option rule
The cooling-off rule
The telemarketing sales rule
900-telephone-number rules
Rules for shopping by mail,
telephone, fax, or Internet
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Negative Option Rule
When you subscribe to a magazine or
CD club or other plan that sends
products regularly, the negative option
rule applies.
Under such plans, the seller sends
you announcements describing the
current selection.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Negative Option Rule
If you want the selection, you do
nothing; the seller will ship it
automatically.
If you do not want it, you must tell the
seller not to send it, and there is a
deadline for notification.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
The Cooling-Off Rule
The cooling-off rule gives you three
days to cancel contracts for most
purchases made away from the
seller’s regular place of business.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
The Cooling-Off Rule
The rule applies to purchases of
$25 or more made at the buyer’s
home, workplace, or dormitory.
It does not apply to contracts for
real estate, insurance, securities, or
emergency home repairs.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Telemarketing Sales Rule
The Telemarketing Sales Rule
protects you from abusive
telemarketers, the people who try to
sell you products by telephone.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
900-Telephone-Number Rules
Unlike 800-telephone-numbers, if you
dial a 900-area-code telephone
number, you are charged for the call.
Sometimes consumers are charged
excessively for 900-number calls.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Protect Yourself Against
900-Number Scams
Deal only with reputable companies.
Think twice before calling a 900number for a “free gift.”
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Protect Yourself Against
900-Number Scams
Know precisely what the 900-call
will cost—before you make the call.
Don’t confuse 900-numbers with
toll-free 800-numbers.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Shopping by Mail, Telephone,
Fax, or Internet
The FTC has established rules to
protect you when ordering goods by
mail, telephone, fax, and the Internet.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Shopping by Mail, Telephone,
Fax, or Internet
Sellers must ship goods within the
time they promise in the advertising.
If shipping time is not stated, they
must ship within 30 days after
receiving an order.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Shopping by Mail, Telephone,
Fax, or Internet
You have the right to cancel and get
your money back if time limits are
not met.
Sellers must notify you of any delay
in shipment.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 15.1 Assessment
Reviewing What You Learned
1. What are the main differences
between state and federal
consumer law?
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 15.1 Assessment
Reviewing What You Learned
Answer
State consumer law provides information
and helps protect consumers in the state in
which they live. They sometimes assist
consumers with individual problems.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 15.1 Assessment
Reviewing What You Learned
Answer
Federal consumer protection law applies to
businesses that sell real estate, goods, or
services in interstate commerce.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 15.1 Assessment
Reviewing What You Learned
2. Describe two unfair and deceptive
practices.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 15.1 Assessment
Reviewing What You Learned
Answer
False advertising and work-at-home
schemes.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 15.1 Assessment
Reviewing What You Learned
3. What is bait and switch advertising?
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 15.1 Assessment
Reviewing What You Learned
Answer
Bait and switch advertising is an illegal
practice in which nonexistent bargains are
advertised to lure customers to more
expensive merchandise.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 15.1 Assessment
Reviewing What You Learned
4. What are four FTC rules designed
to protect consumers?
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 15.1 Assessment
Reviewing What You Learned
Answer
Answers include the negative option rule,
the cooling-off rule, the telemarketing sales
rule, 900-telephone-number rules, and
rules for shopping by mail, telephone, fax,
or Internet.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 15.1 Assessment
Critical Thinking Activity
Bait and Switch
How do you think bait and switch
advertising got its name? What is the bait?
What is the switch?
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 15.1 Assessment
Critical Thinking Activity Answer
Bait and Switch
Answers will vary. Bait is what one uses to
lure or catch something, as a worm is bait
for catching fish. A business advertises a
bargain to lure customers into the store.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 15.1 Assessment
Critical Thinking Activity Answer
Bait and Switch
The switch occurs when the salesperson
tries to convince the customer to buy other,
more expensive items.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 15.1 Assessment
Legal Skills in Action
The Federal Trade Commission
Merta has been a member of a CD club for
two years. She has made several
unsuccessful attempts to cancel her
membership.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 15.1 Assessment
Legal Skills in Action
The Federal Trade Commission
Roberto suggested she file a complaint
with the Federal Trade Commission.
Merta needs to know more information.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 15.1 Assessment
Legal Skills in Action
The Federal Trade Commission
Help Merta research the history of the FTC.
Next, help her to find out how to file a
complaint with the FTC.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 15.1 Assessment
Legal Skills in Action Answer
The Federal Trade Commission
Answers will vary, but research could
include the FTC Web site at www.ftc.gov.
Understanding Business and Personal Law
The Importance of Warranties
End of Section 15.1
Express and Implied Warranties
Section 14.1 Express and Implied
Warranties
Understanding Business and Personal Law
The Importance of Warranties
Section 15.2
Express and Implied Warranties
Section 14.1 Express and Implied
Warranties
What You’ll Learn
How to differentiate between product
liability and strict liability (p. 327)
How to describe the purpose of the
Consumer Product Safety Act (p. 329)
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
What You’ll Learn
How to identify the prohibitions contained
in the Food, Drug, and Cosmetic Act
(p. 329)
How to determine where to get consumer
protection assistance (p. 330)
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Why It’s Important
Learning about product liability law will help
you take effective action if you or a family
member suffers injury from faulty products.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Legal Terms
product liability (p. 327)
strict liability (p. 327)
adulterated (p. 329)
intrastate sales (p. 330)
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section Outline
What is Product Liability?
Strict Liability
Federal and State Consumer
Protection Laws
Consumer Product Safety Act
Food, Drug, and Cosmetic Act
State and Local Laws
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section Outline
Consumer Protection Assistance
Better Business Bureau
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Pre-Learning Question
What do you think product liability is?
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
What Is Product Liability?
Under product liability law, someone
who is injured from a product’s unsafe
or defective condition may recover
damages. Manufacturers, sellers, and
suppliers of goods can all be held
responsible.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Strict Liability
You do not have to prove a negligent
act on the part of the manufacturer or
seller if you are hurt using a defective
product.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Strict Liability
Strict liability makes manufacturers
or suppliers responsible for selling
goods that are unreasonably
dangerous.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Strict Liability
People who are injured or who suffer
property damage from a defective
product may recover from the
manufacturer or seller if they can
prove all of the following:
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Strict Liability
The manufacturer or seller was
engaged in the business of selling
the product.
The product was unreasonably
dangerous to the user or consumer.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Strict Liability
The defective condition was the
cause of the injury or damage.
The defective condition existed
when the product left the hands of
the manufacturer or seller.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Strict Liability
The consumer suffered physical
harm or property damage as a
result of using the product.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Pre-Learning Question
What are some federal and state
consumer protection laws?
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Federal and State Consumer
Protection Laws
Both the federal and state
governments pass laws to protect
consumers in the marketplace.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Federal and State Consumer
Protection Laws
Two federal laws are the:
Consumer Product Safety Act
Food, Drug, and Cosmetic Act
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Consumer Product Safety Act
This law protects you from
unreasonable risk of injury while using
consumer products that are sold in
interstate commerce.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Consumer Product Safety Act
Defects in products are divided into
three categories:
1. Manufacturing defects
2. Poor design
3. Inadequate instructions and
warnings about the safe use of the
product
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Food, Drug, and Cosmetic Act
This law prohibits the manufacture
and shipment of faulty products in
interstate commerce.
Faulty products include any food,
drug, cosmetic, or health-related
device that is injurious, adulterated, or
misbranded.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Food, Drug, and Cosmetic Act
A food or drug is said to be injurious if
it contains any substance that may
make it harmful to health.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Food, Drug, and Cosmetic Act
An adulterated food or drug is one
that contains any substance that will
reduce its quality or strength below
minimum standards.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Food, Drug, and Cosmetic Act
A food or drug is misbranded if its
labeling or packaging is false or
misleading.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Food, Drug, and Cosmetic Act
The government uses other methods
to discourage the sale of goods
considered harmful to the public
health. They include:
Unusually high taxes
Labeling and packaging
Outright prohibition
Understanding Business and Personal Law
The Importance of Warranties
15.2 14.1 Express and Implied
Section
Warranties
Warning Labels
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
True or False: A food or drug is said to
be injurious if it contains any
substance that may make it harmful.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
ANSWER
True
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
State and Local Laws
If goods are manufactured and sold
only within the boundaries of a state,
the federal government has no control
over the goods.
For this reason, many states have
enacted their own product liability
laws.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
State and Local Laws
These laws apply to intrastate sales
(sales within a state).
Nearly all states and localities license
and regulate establishments that sell
food.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
True or False: The federal government
applies unusually high taxes on
harmful products in order to raise
enough money to warn consumers of
its dangers.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
ANSWER
False
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Pre-Learning Question
Where can you go to get consumer
protection assistance?
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Consumer Protection
Assistance
Many state and local governments
have offices of consumer affairs to
educate consumers and help protect
them against fraud.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Consumer Protection
Assistance
The federal Consumer Product Safety
Commission establishes safety
standards for consumer products.
For information or to report unsafe
products you can call its hotline at
1-800-638-CPSC.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Better Business Bureau
The Better Business Bureau (BBB) is
an example of a nongovernment
agency that hears consumer
complaints at the local and state
levels. Its mission is to promote high
ethical relationships between
businesses and the public.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Better Business Bureau
The BBB provides services that
include the following:
Provides information on a
business’s past dealings
Helps resolve complaints
Provides information on charitable
organizations
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Better Business Bureau
Publishes consumer publications,
videos, and Internet advisories
Alerts businesses, consumers, and
law enforcement agencies about
current scams and frauds
Provides Internet reliability and
privacy “Trustmark” seals
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
True or False: Intrastate sales involve
the buying and selling of merchandise
within a state, not across state lines.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
ANSWER
True
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 15.2 Assessment
Reviewing What You Learned
1. What is the difference between
product liability and strict liability?
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 15.2 Assessment
Reviewing What You Learned
Answer
Manufacturers and sellers have product
liability when they place defective,
unhealthy, or unsafe items on the market.
They are strictly liable, without regard to
fault, when they sell unreasonably
dangerous products.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 15.2 Assessment
Reviewing What You Learned
2. What is the purpose of the
Consumer Product Safety Act?
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 15.2 Assessment
Reviewing What You Learned
Answer
Protects consumers from unreasonable
risk of injury from using consumer
products.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 15.2 Assessment
Reviewing What You Learned
3. What prohibitions are contained in
the Food, Drug, and Cosmetic Act?
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 15.2 Assessment
Reviewing What You Learned
Answer
It prohibits the manufacture and shipment
of faulty products in interstate commerce.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 15.2 Assessment
Reviewing What You Learned
4. Where can you find consumer
protection assistance?
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 15.2 Assessment
Reviewing What You Learned
Answer
From state and local consumer protection
agencies, such as the Consumer Product
Safety Commission and the Better
Business Bureau.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 15.2 Assessment
Critical Thinking Activity
Consumer Protection
Why do you think so many consumer
protection laws are necessary?
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 15.2 Assessment
Critical Thinking Activity Answer
Consumer Protection
Answers will vary. Students will probably
propose that laws are necessary to protect
consumers from unethical businesses and
unsafe products.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 15.2 Assessment
Legal Skills in Action
Production Information Labels
Olivia has taken nonprescription allergy
medication for several years. Recently, the
medication was taken off the market
because of an ingredient called PPA.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 15.2 Assessment
Legal Skills in Action
Production Information Labels
Now Olivia wonders if any other dangerous
ingredients were in the medication that she
took.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 15.2 Assessment
Legal Skills in Action
Production Information Labels
In groups of two or three, investigate and
review the ingredients on the labels of
some of the products you use and the food
you eat at school.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 15.2 Assessment
Legal Skills in Action
Production Information Labels
You can review products such as soda,
snack items from vending machines,
chewing gum, and cosmetics. Make a list
of the ingredients you are not familiar with.
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 15.2 Assessment
Legal Skills in Action
Production Information Labels
Will you continue eating the food and using
the products? Why or why not?
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 15.2 Assessment
Legal Skills in Action Answer
Production Information Labels
Lists will vary but could include ingredients
such as xanthan gum, stearic acid, partially
hydrogenated cottonseed oil, and
maltodextrin.
Understanding Business and Personal Law
The Importance of Warranties
End of Section 15.2
Express and Implied Warranties