Section 14.1 Express and Implied
Warranties
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BELL QUIZ ON CHAPTER 13
What does UCC stand for?
What is the UCC?
Who pays the freight charges when the
shipping terms are f.o.b.?
What is a warehouse receipt?
a) What does FTC stand for b) what do
they do?
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
1.
2.
3.
4.
5.
ANSWERS TO BELL QUIZ
Uniform Commercial Code
Collection of laws that governs various types of
business transactions.
The buyer.
A document given to a customer by the
warehouse that is storing his or her goods.
a) Federal Trade Commission; b) investigate
violations of the FTC Act, which states that, “unfair or
deceptive acts or practices in or affecting commerce
are hereby declared unlawful.”
Understanding Business and Personal Law
The Importance of Warranties
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
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
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
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 than
$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
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
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
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
usage of trade.
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.
End of Section 14.1
Understanding Business and Personal Law
The Importance of Warranties
Section 14.1 Express and Implied
Warranties
Section 15.1
Consumer Protection
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
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
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
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
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
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
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 900
number 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.
End of Section 15.1
Understanding Business and Personal Law
The Importance of Warranties