Introduction:
A warranty is a promise made by a manufacturer or seller as to the condition of the product sold or transferred. A warranty usually includes terms and situations in which repairs, refunds, or exchanges will be made if the product does not function as originally described or intended. Warranties offer consumers some assurance that the goods and services they purchase are as advertised or represented.
Almost all warranties are subject to the state law in which the product is sold. States vary in the actual requirements they impose upon those giving warranties, with some states, such as California, having numerous and strict requirements on warranties that are given and the terms of when they can be utilized, while other states have few requirements, leaving it to the consumer and manufacturers to handle the transaction.
However, there is Federal law that imposes warranties on all transactions within the United States and that law supersedes State law and must be adhered to in every State. That law is found in the Magnuson-Moss Warranty Act which was passed in 1975 and is the subject of this article.
The Basic Federal Law:
First, some definitions to keep in mind.
The terms warranty and guarantee are often used interchangeably by consumers, but there are significant differences between the two. Both require sellers to act on certain representations they make to consumers as to their products. However, the difference lies in the level of duty the manufacturer assumes regarding the product's quality and functionality.
A guarantee is a promise or assurance from the manufacturer or seller that the product will work as described or meet specific quality standards. If it does not, the manufacturer will fix or replace it. Guarantees are of no cost to the buyer and can be offered for both products and services. They do not require certain acts by the buyer in most instances...if the product does not work, they guarantee they will replace it.
A warranty is a guarantee from a seller that if their product fails to meet certain specifications, a remedy is available. A warranty describes the conditions under which the seller is liable and what conditions are excluded. Although the buyer does not pay a separate cost for the warranty, the warranty price is included in the product's price.
Buyers must fulfill specific duties for the warranty to be honored. There are two types of warranties – express and implied. Each has subtypes intended for different circumstances and products.
Warranties can be either expressed or implied.
Express Warranty
An express warranty is a stated commitment from a seller or manufacturer to a buyer that the purchased product performs according to certain specifications. If defects are present, the seller agrees to repair or replace the defective product. The warranty can be expressed in writing or verbally in advertising, on the product, or through other means.
Implied Warranty
An implied warranty, which is also called an implied warranty of merchantability, is a commitment that the purchased product functions in the manner designed. It need not be expressed to be valid. This guarantee is implied unless it is explicitly excluded, as seen in sales utilizing the term "Sold As Is."
Implied warranties also exist when sellers present and sell a product fit to fulfill a specific purpose. The buyer relies on the seller's expertise to purchase the product. Any statements made by the seller regarding the product can be considered assurances.
The Magnuson-Moss Warranty Act was created to protect consumers from fraud and misrepresentations on a federal level, thus applying to each and every state regardless of local state law. Hereafter it is called “The Act.”
The Act does NOT impose any warranty nor require that a warranty exists for every product. It is still permissible to offer no warranty at all...selling the product AS IS, so long as clearly stated. But if a party offers a warranty, the Act imposes minimum standards for each consumer warranty.
It is vital to note that the U.S. Congress passed the Act to set standards and rules for consumer product warranties to protect consumers from fraud and misrepresentations.
The Act stipulates that the terms and conditions of warranties must be fully and clearly disclosed to the buyer before purchase, including whether it is a full or limited warranty. It also prohibits deceptive practices, such as the inclusion of misleading or false terms or requiring the buyer to purchase another product to validate the warranty.
Foreign companies are subject to the Magnuson-Moss Warranty Act if their deceptive practices are likely to cause injury within the United States.
The Act contains many definitions:
A "consumer" is a buyer of consumer goods for personal use. A buyer of consumer products for resale is not a consumer.
A "supplier" is any person engaged in the business of making a consumer product directly or indirectly available to consumers.
A "warrantor" is any supplier or other person who gives or offers a written warranty or who has some obligation under an implied warranty.
A "consumer product" is generally any tangible personal property for sale that is normally used for personal, family, or household purposes. It is important to note that the determination of whether a good is a consumer product requires a factual finding, on a case-by-case basis. Najran Co. for General Contracting and Trading v. Fleetwood Enterprises, Inc., 659 F. Supp. 1081 (S.D. Ga. 1986).
A "written warranty" (also called an express warranty) is any written promise made in connection with the sale of a consumer product by a supplier to a consumer that relates to the material and/or workmanship and that affirms that the product is defect-free or will meet a certain standard of performance over a specified time.
An "implied warranty" is defined in state law. The Act simply provides limitations on disclaimers and provides a remedy for their violation.
A "service contract" differs from a warranty because service contracts do not affirm the quality or workmanship of a consumer product. A service contract is a written instrument in which a supplier agrees to perform, over a fixed period or for a specified duration, services relating to the maintenance or repair, or both, of a consumer product. Agreements that meet the statutory definition of service contracts but are sold and regulated under state law as contracts of insurance do not come under the Act's provisions.
A "full warranty" is one that meets the federal minimum standards for a warranty. Such warranties must be "conspicuously designated" as full warranties. If each of the following five statements is true about a warranty's terms and conditions, it is a "full" warranty:
There is no limit on the duration of implied warranties.
Warranty service is provided to anyone who owns the product during the warranty period; that is, the coverage is not limited to first purchasers.
Warranty service is provided free of charge, including such costs as returning the product or removing and reinstalling the product when necessary.
There is provided, at the consumer's choice, either a replacement or a full refund if, after a reasonable number of tries, the warrantor is unable to repair the product.
It is not required of consumers to perform any duty as a precondition for receiving service, except notifying that service is needed, unless it can be demonstrated that the duty is reasonable.
A "limited warranty" is one that does not meet the federal minimums described above. Such warranties must be "conspicuously designated" as limited warranties.
Requirements Imposed:
Any warrantor warranting a consumer product to a consumer through a written warranty must disclose, fully and conspicuously, in simple and readily understood language, the terms and conditions of the warranty to the extent required by rules of the Federal Trade Commission (“FTC”). The FTC has enacted regulations governing the disclosure of written consumer product warranty terms and conditions on consumer products actually costing the consumer more than $15. The Rules can be found at 16 C.F.R. Part 701.
Under the terms of the Act, ambiguous statements in a warranty are construed against the drafter of the warranty. Likewise, service contracts must fully, clearly, and conspicuously disclose their terms and conditions in simple and readily understood language.
Warrantors cannot require that only branded parts be used with the product in order to retain the warranty. This is commonly referred to as the "tie-in sales" provisions and is frequently mentioned in the context of third-party computer parts, such as memory and hard drives.
Full Warranty Requirements:
Under a full warranty, in the case of a defect, malfunction, or failure to conform with the written warranty, the warrantor:
can remedy the consumer product within a reasonable time and without charge;
may not impose any limitation on the duration of any implied warranty on the product;
may not exclude or limit consequential damages for a breach of any written or implied warranty on the product, unless the exclusion or limitation conspicuously appears on the face of the warranty; and
if the product, or a component part, contains a defect or malfunction, must permit the consumer to elect either a refund or replacement without charge, after a reasonable number of repair attempts.
In addition, the warrantor may not impose any duty, other than notification, upon any consumer, as a condition of securing the repair of any consumer product that malfunctions, is defective, or does not conform to the written warranty. However, the warrantor may require consumers to return a defective item to its place of purchase for repair.
The Act does not invalidate or restrict any right or remedy of any consumer under any other federal law, nor does the act supersede the Federal Trade Commission Act as it pertains to antitrust actions.
The act does not invalidate or restrict any right or remedy of any consumer under state law. The act is not the dominant regulation of consumer product warranties, and while it prescribes certain disclosures and restricts certain limitations on warranties, it leaves other warranty law untouched.
Although the act covers warranties on repair or replacement parts in consumer products, warranties on services for repairs are not covered.
The federal minimum standards for full warranties are waived if the warrantor can show that the problem associated with a warranted consumer product was caused by damage while in the possession of the consumer, or by unreasonable use, including a failure to provide reasonable and necessary maintenance.
Remedies under the Act
The Act is meant to provide consumers with access to reasonable and effective remedies where there is a breach of warranty on a consumer product. The act provides for informal dispute-settlement procedures and for actions brought by the government and by private parties.
The FTC has been mandated by Congress to promulgate rules to encourage the use of alternative dispute resolution, and full warranties may require mediation and/or arbitration as a first step toward settling disputes. According to the United States Court of Appeals for the Ninth Circuit, though, in the 2011 case Kolev v. Porsche Cars North America, pre-dispute mandatory arbitration agreements are banned under Magnuson-Moss, citing the MMWA's enactment after the Federal Arbitration Act and the FTC's actions against pre-dispute arbitration agreements. However, the Ninth Circuit withdrew that decision on April 11, 2012, stating, its 2011 decision "may not be cited as precedent by or to this court or any district court of the Ninth Circuit." See Kolev v. Euromotors W./The Auto Gallery, 676 F.3d 867 (9th Cir. 2012).
In addition, the federal government has the authority to take injunctive action against a supplier or warrantor who fails to meet the requirements of the act.
Consumers may seek redress in the courts for alleged violations of the Act. A consumer who has been injured by a supplier's noncompliance may bring an action in federal court if the amount in controversy is over $50,000 or a class action if the number of class plaintiffs is greater than 100. If the jurisdictional amount or number of plaintiffs does not meet these thresholds, an action under the act may be brought only in state court.
Moreover, one of the key aids to the effective enforcement of the Act by consumers is that a prevailing plaintiff may recover reasonable costs of suit, including attorney fees.
Thoughts:
The first place to seek relief when relying on a warranty is state law. Many states, such as New York, Massachusetts, Illinois, Michigan, and others, have powerful laws protecting consumers and they provide excellent relief. They impose requirements on manufacturers and sellers that are extensive and have state agencies that can assist the consumer in protecting his or her rights. Many of these protections exceed those available under Federal law.
One only turns to Federal law if the state law does not provide adequate relief. Since the attorney's fees are awarded to the prevailing party in most such statutes, both state and federal, there is an incentive on the part of manufacturers and sellers to resolve the matter and make good on the warranty. And note any sale in the United States is subject to at least the Federal law as well as the state law in which the consumer purchased the goods.
It is possible to bring both state and Federal actions in the same matter though note that arbitration may be required in the Federal matter but not the state matter.
One client commented that the Federal warranty law is essentially a backup to more local protections, to be used if no other relief is available in the state. She was correct.