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Tuesday, October 11, 2011

What Non-Lawyers Should Know About Warranties

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I've taught the law of warranties at the law school level for over forty years, and have written a number of books on point.  I thought I'd create a short version of the law for blog readers who are not lawyers, with the warning that in an actual case (unless you are going to handle little problems in a Small Claims Court) you should certainly consult a lawyer.

Sale of Homes.  There is no national unity for the law of warranties in the sale of homes.  Some states have special statutes about this, while others either use the Uniform Commercial Code (see below) by analogy or create an "implied warranty of workmanlike construction" in creating a remedy for defective homes.  For problems with defective homes you should certainly see a lawyer if you can't settle the matter with the seller.

Sale of Goods.  For the sale of goods (anything moveable, including animals and food), almost all states (Louisiana is the exception, but it has similar warranties adopted from the Napoleonic Code) use the Uniform Commercial Code [UCC] for statutory guidance in the law.  The text of the statute (but not its very helpful Official Comments) can be found at http://www.law.cornell.edu/ucc/2/article2.htm.  Let's start with the types of warranties the UCC regulates.


Express Warranties.  Of course the seller of the goods might provide a written warranty (either a formal one drawn up by lawyers, or simply something stated in a letter or email).  That's a written express warranty, and UCC section 2-313 requires the seller to live up to what is said.  But warranties can be oral (the seller in the sales pitch says "This car will last you six months without any need for repairs") or even created by actions ("Look at this model" or the photo of the food printed in the menu).  The seller might try and take away these express warranties by contractual language ("This is the entire agreement, and the seller has made no other representations"), but particularly in consumer contracts are the courts leery of enforcing such "boilerplate" (i.e, standard blather) clauses that the buyer did not necessarily agree to.  Indeed, the UCC provides that express warranties, once made, cannot be disclaimed; section 2-316(1).  The way for sellers to avoid liability for express warranties is not to make them in the first place.  Many states have Consumer Sales Practices Laws forbidding misleading statements about warranties, and creating a cause of action in favor of injured consumers that includes attorney fees and punitive damages.  I once bought an expensive set of earphones from a seller who was lavish in praise of the quality of the product.  When I got the phones home they wouldn't do all the things promised, so I took them back and asked for a refund.  "I don't warrant my products," the manager told me.  "You may not think you do," I replied, "but when you opened your mouth and said thus and so about these earphones you created express warranties under section 2-313 of the Uniform Commercial Code."  "Where is your receipt?" the manager demanded smugly.  "I don't have it any more," I responded, "but the Code doesn't require I have a receipt.  I do have to prove I bought it here, but I have both a cancelled check and a witness."  "Go away."  "Okay, but I'm going to immediately file a complaint against you in the Small Claims Court, and you will lose at trial, and then have to refund my money plus pay court costs (plus the fee of any attorney you hire), so you might as well deal with me now."  He did.

Implied Warranties.  Our law has always required sellers to live up the basics assumptions of any bargain by creating implied warranties that the product will do the expected task.  These warranties are "implied" because they are automatically part of the deal (imposed by the UCC) unless the seller or the circumstances does something to get rid of them.  There are two basic ones:

Merchantability.  The implied warranty of merchantability (strange name: "merchant" and "ability" tied together) is basically a warranty that the goods will perform their ordinary function; UCC section 2-314.  Say, for example, that you buy a sweater at a store and when you get it home it and wear it once it falls apart.  This sweater was not fit for its ordinary purpose and therefore breaches the warranty of merchantability.  When you think about it, the implied warranty is a huge warranty: it means the goods must work.  Federal law forbids its disclaimer in consumer transactions if the seller gave a written warranty [this is the federal Magnuson-Moss Warranty Act section 108], and the UCC disfavors its disclaimer in all cases unless the buyer is warned in language that actually uses the word "merchantability" so as to tell the buyer the warranty will not apply in this sale.  Buyers ought to be very suspicious if the seller disclaims the warranty of merchantability.  What?  The seller doesn't warrant the goods will work?

Fitness For a Particular Purpose.  If the buyer tells the seller prior to the sale of a particular purpose for which the buyer needs the goods ("I am about to try and climb Mt. Everest and need boots") and it's clear the buyer is relying on the seller's expertise to furnish suitable goods, an implied warranty of fitness for this particular purpose automatically arises unless the seller clearly disclaims it; UCC section 2-315.  So if you, the buyer, tell the seller why you want the goods and the seller suggests buying a certain product, the implied warranty of fitness for a particular purposes protects you if the goods can't hack it.

Fraud.  A quick note about fraud, which technically has nothing to do with the law of warranties.  Instead, fraud is the civil action for lying of any kind.  If someone makes a material misrepresentation (that's the lie, and it must be about something important to the deal) in the course of a sale (or any transaction), and means to deceive when the statement is made, any person who justifiably relies on the statement may sue for damages caused by the lie.  The TV salesperson says "This TV will receive a perfect signal from a satellite" when it is known to have major problems communicating with objects circling the planet, is committing fraud.  Fraud is  grounds for rescinding the sale and getting your money back.  Moreover, our courts have always been offended by those who make deliberate misstatements to mislead others, and sometimes will award punitive damages and attorney fees to punish such conduct.  State Consumer Sales Acts often also give such relief, and you should check online to see if your state has such a statute. 

Small Claims Courts.  For big sales transactions that go bad (the sale to the U.S. Army of weapons, for example) the usual courts are the appropriate place for a lawsuit.  But tiny consumer problems don't belong there unless a special consumer statute on point has been violated.  Instead use the internet to see if there's a Small Claims Court in your jurisdiction.  You can download the Complaint online and attach it to the threat letter you send to the seller of the defective product, threatening legal action unless the dispute is settled to your satisfaction.  In a Small Claims Court you don’t have to have an attorney (though you do have to pay the filing fee, which the website will list), and if you win you'll get back your damages (the cost of the product typically) plus any court costs (the filing fee).  Small Claims Courts are, as the name suggests, courts of limited jurisdiction.  In Ohio, for example, such courts can only hear cases where the amount in controversy is $3000 or less. 

Threat Letters.  In a the next post I'll talk about threat letters and how to write them.  For now, let me emphasize that it is unethical (and can get you sanctioned by the court) to threaten something you don't have a good faith belief in.  In future blogs I will also talk about remedies for breach of warranty, including the issue of consequential damages (the house that burns down because the TV malfunctions and causes a fire, or the hospital expenses for the victims of the conflagration).
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Related Posts:

“I Threaten To Sure Apple Over an iPad Cover,” April 8, 2011;
http://douglaswhaley.blogspot.com/2011/04/i-threaten-to-sue-apple-over-ipad2.html

“The Payment-In-Full Check: A Powerful Legal Maneuver,” April 11, 2011; http://douglaswhaley.blogspot.com/2011/04/payment-in-full-check-powerful-legal.html

"How To Write an Effective Legal Threat Letter," October 19, 2011; http://douglaswhaley.blogspot.com/2011/10/how-to-write-effective-legal-threat.html

“How To Win Arguments and Change Someone’s Mind,” August 5, 2012;
http://douglaswhaley.blogspot.com/2012/08/howto-win-argument-and-change-someones.html 


“Mortgage Foreclosures, Missing Promissory Notes, and the Uniform Commercial Code: A New Article,” February 11, 2013; http://douglaswhaley.blogspot.com/2013/02/mortgage-foreclosures-missing.html

“Legal Terms You Should Know,” September 13, 2013;
http://douglaswhaley.blogspot.com/2013/09/legal-terms-you-should-know.html

“How To Respond to a Legal Threat.” March 29, 2014; http://douglaswhaley.blogspot.com/2014/03/how-to-respond-to-legal-threat.html

“Clicking on 'I Agree': Sticking Your Head in the Lion's Mouth?” September 27, 2014;
http://douglaswhaley.blogspot.com/2014/09/clicking-on-i-agree-sticking-your-head.html  

 “My Battle with Sony To Get a Refund on a DVD Player,” July 16, 2015;
http://douglaswhaley.blogspot.com/2015/07/my-battle-with-sony-to-get-refund-on.html
  

“A Guide to the Best of My Blog,” April 29, 2013; http://douglaswhaley.blogspot.com/2013/04/a-guide-to-best-of-my-blog.html

4 comments:

  1. Interesting, I should read more about legal matter its been a while since business law class. I never knew the basic rules behind warranties until now. A company is requiring me to pay shipping charges to return a new faulty part back to them as well as the cost to ship a new one to me. They state their warranty policy does not cover these shipping cost. Is this fair? I dont think is is.

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  2. Companies can disclaim warranties and also disclaim liability for consequential and incidental damages, like shipping costs. The legal question is whether they clearly did that and whether other state laws regulate their ability to do so.

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  3. Nice information from your article, Its good to know the topic like this.

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  4. If your dispute involves less than $750, you can usually file a lawsuit in small claims court. The costs are relatively low, procedures are simple, and lawyers usually aren't needed. The clerk of the small claims court can tell you how to file your lawsuit and your state's dollar limits.

    Johan@AMT Warranty

    ReplyDelete