2. THE FINE PRINT: CONTRACTS AND WARRANTIES

3. 1. Contract: an agreement between two or more people to exchange something of value a. Offer: initiation (proposal) the contract

4. b.Acceptance: agreement to the contract c. Consideration: something of value that is exchanged for something else of value i. law allows consumers to make both good and bad deals

5. d. To make a valid contract: i.Both parties must be legally competent (not insane or intoxicated) ii.Contract must address legal activity iii.Contract can not be unconscionable: unreasonably harsh or oppressive

6. 1. usually when the consumer could not negotiate the contract contract 2. or when there is uneven power between parties power between parties

7. iv. no fraud: false statement about an aspect of the contract that convinces someone to agree to contract 1. however, sellers are not required to give all negative info

8. e. Minors can make contracts, but have the option to not fulfill the terms of the contract i. Must return the consideration ii. Minors have problems getting credit or making large purchases

9. iii. Many businesses require cosigner: someone (usually an adult) who also puts their name on a contract as backup if the main signer fails to pay iv.Minors can be held to contracts dealing with food, shelter, medical care

10. f.Both written and oral contracts are legal i. Written are preferred ii. Must have written for: 1. sale of land 2. sale of goods more than $500 3. agreements which can not be performed within a year of contract date

11. g. breach: to violate a contract / warranty g. breach: to violate a contract / warranty 2. Warranty: promise or guarantee made by seller about quality or performance of product (not required by law) a. Also tells what seller will do if product does not perform as promised

12. b. Express warranty: statement of quality or performance of a good that becomes a part of the bargain between seller and buyer i. must be statement of fact (opinion and clear exaggeration do not count) ii. usually have a time limit

13. c. Magnuson-Moss Warranty Act (1975) requirements within written warranties: i. Include all important info in a single document ii. Be written in easy-to-read language

14. iii. Be available to buyer before sale iv. Must say exactly what is included and what is not v. Applies to products $15 or more vi.Must be labeled as full or limited

15. 1.full: a. no cost to consumer b. consumer will not have to do anything unreasonable c. product will be fixed in a reasonable time d. if can’t be fixed, will be replaced or refunded e. applies to everyone

16. d. Implied Warranty: unwritten promise that a product will perform as it is supposed to 1. law sets minimum standard in terms of performance and quality 2. only applies to products sold by dealers

17. iii.does not apply to defects that could be discovered upon careful examination before purchase iv. three types:

18. 1.warranty of merchantability: promise that the product is of at least average quality for its type a. ex: oven will cook food b. does not apply if dealer states otherwise i. items marked “as is” or “final sale”

19. 2. warranty of fitness for a particular purpose: promise that exists when consumer tells seller a specific purpose they will use the product for

20. 3.warranty of title: promise that the seller owns the item being sold (item is not stolen)

21. 3.Disclaimer: an attempt to limit seller’s responsibilities in case of problem with product (usually applies to implied warranties) a. Must use very clear language b. “as is” “with all faults” or use of word “merchantability” must be easily seen by customer

22. c.disclaimers are void in terms of implied warranties if there is a written warranty d.can be used to limit a written warranty