1. Importance of Warranties
Chapter 14
Importance of Warranties

2. Manufacturers ~ Retailers ~ Consumers
Warranty:
A guarantee on a product given by the seller
A breach of warranty = a breach of a contract
Manufacturers ~ Retailers ~ Consumers

3. Express Warranty
Oral or written statement, promise, or other representation about the quality, ability, or performance of a product.
Apply to goods that are sold or leased.

4. Created in three ways…

5. Statement/Promise by Seller
Statement of fact or promise about goods
Formal words, such as warranty are not necessary
Must relate to goods and be part of the transaction
Should be in clear, precise, and understandable terms
Salesperson’s opinion does not equal warranty

6. Description of Goods
Only description of the goods that is part of the transaction creates an express warranty

7. Use of Sample or Model
If it is part of the transaction it creates an express warranty
Action must be the same as the product used in demonstration

8. Availability before Sale
Written warranties on goods costing more than $15 must be available before the sale
Commonly found on packaging of product

9. Advertising Express Warranties
An ad stating that a product is warranted must tell you how to get a copy of the warranty
Also applies to mail, phone, and Internet orders
Expressions such as “Satisfaction Guaranteed” require a full refund to consumers if they are not happy

10. Express Warranty Protection (Consumers)
Guarantee: a promise or assurance of the quality or life of a product.
Guarantor: maker of the guarantee
Warrantor: maker of the warranty
There may be limitations on guarantees.

11. FTC – Federal Trade Commission (1914)
Ensures fair economic practices among American businesses.

12. Advertised Guarantee Must Disclose:
The product or part of the product
Specific characteristics that are covered or not covered
Time limit of guarantee must be listed
How to make to claim
How the person/company will settle any claim
Identity of the persons making the claim

13. Magnuson-Moss Warranty Act (1975)
Sale of Goods in Interstate Commerce
Authorizes FTC to develop rules regulating the advertisement of guarantee and to enforce these guidelines.

14. Full Warranty:
In which a defective product will be fixed or replaced free within a reasonable time.
Written warranty on products $10 or >

15. Limited Warranty:
A warranty that provides restricted protection; must be labeled as such (written warranty on products $15 or >) must be fully disclosed in easily understood language.
i.e. Warranty includes parts, not labor

16. Implied Warranty
A guarantee of quality imposed by law (not in writing)
Only on goods ~ not services
There are three types of implied warranties

17. Warranty of Fitness for a Purpose
When the seller knows about a particular purpose for which the goods are needed
The buyer relies on the seller’s knowledge and advice

18. Warranty of Merchantability
The merchant warrants that the goods being sold are merchantable
Only given by a merchant (someone who deals in goods)

19. To be Merchantable, goods must:
Pass without objection in the trade under contract description
Be fit for ordinary purposes for which such goods are used
Be adequately contained, packaged, and labeled as agreement requires
Conform to the promises or statements of fact made on container or label

20. Usage of Trade
An implied warranty arising from customary ways in which the parties have dealt in the past

21. Warranty of Title
The goods shall be delivered free of any financial obligations (liens) about which the buyer had no knowledge

22. Exclusion of Warranties
The words “as is” and “with all faults”
furniture sales ~ floor display
(all sales are final)

23. Privity of Contract People who deal directly with each other
In the past, warranties extended only to the actual buyer, not users
Now they extend to people who reasonably use, consume, or be affected by the goods

24. Duty to Notify
To recover money damages for breach of warranty, the buyer must notify the seller in a reasonable time after discovery
Sellers will then correct the situation ~ if not then buyer can claim damages