In contract law, a warranty has various meanings but generally means a guarantee or promise which provides assurance by one party to the other party that specific facts or conditions are true or will happen. This factual guarantee may be enforced regardless of materiality which allows for a legal remedy if that promise is not true or followed.
Although a warranty is in its simplest form an element of a contract, some warranties run with a product so that a manufacturer makes the warranty to a consumer with which the manufacturer has no direct contractual relationship.
A warranty may be express or implied, depending on whether the warranty is explicitly provided (typically written) and the jurisdiction. Warranties may also state that a particular fact is true at one point in time or that the fact will be continue into the future (a “promissory” or continuing warranty)
Sale of goods
Warranties provided in the sale of goods (tangible products) vary according to jurisdiction, but commonly new goods are sold with implied warranty that the goods are as advertised. Used products, however, may be sold “as is” with no warranties.
In the United States, various laws apply, including provisions in the Uniform Commercial Code which provide for implied warranties. However, these implied warranties were often limited by disclaimers. In 1975 the Magnuson–Moss Warranty Act was passed to strengthen warranties on consumer goods. Among other things, under the law implied warranties cannot be disclaimed if an express warranty is offered, and attorney fees may be recovered. In some states statutory warranties are required on new home construction, and “lemon laws” apply to motor vehicles.
Implied warranties are unwritten promises that arise from the nature of the transaction, and the inherent understanding by the buyer, rather than from the express representations of the seller. In the United States, Article 2 of the Uniform Commercial Code (which has been adopted with variations in each state) provides that the following two warranties are implied unless they are explicitly disclaimed (such as an “as is” statement):
- The warranty of merchantability is implied unless expressly disclaimed by name, or the sale is identified with the phrase “as is” or “with all faults.” To be “merchantable”, the goods must reasonably conform to an ordinary buyer’s expectations. For example, a fruit that looks and smells good but has hidden defects may violate the warranty if its quality does not meet the standards for such fruit “as passes ordinarily in the trade”. In Massachusetts consumer protection law, it is illegal to disclaim this warranty on household goods sold to consumers.
- The warranty of fitness for a particular purpose is implied unless disclaimed when a buyer relies upon the seller to select the goods to fit a specific request. For example, this warranty is violated when a buyer asks a mechanic to provide tires for use on snowy roads and receives tires that are unsafe to use in snow.
Defects In Materials and Workmanship
The most common kind of warranty on goods is a warranty that the product is free from defects in materials and workmanship. This simply promises that the manufacturer properly constructed the product, out of proper materials. This implies that the product will perform as well as such products customarily do.
It is common for these to be limited warranties, limiting the time the buyer has to make a claim. For example, a typical 90 day warranty on a television gives the buyer 90 days from the date of purchase to claim that the television was improperly constructed. Should the television fail after 91 days of normal usage, which because televisions customarily last longer than 91 days means there was a defect in the materials or workmanship of the television, the buyer nonetheless may not collect on the warranty because it is too late to file a claim.
Time limited warranties are often confused with performance warranties. A 90 day performance warranty would promise that the television would work for 90 days, which is fundamentally different from promising that it was delivered free of defects and limiting the time the buyer has to prove otherwise. But because the usual evidence that a product was delivered defective is that it later breaks, the effect is very similar.
One situation in which the effect of a time limited warranty is different from the effect of a performance warranty is where the time limit exceeds to normal lifetime of the product. If a coat is designed to last two years, but has a 10 year limited warranty against defects in materials and workmanship, a buyer who wears the coat for 3 years and then finds it worn out would not be able to collect on the warranty. But it is different from a 2 year warranty because if the buyer starts wearing the coat 5 years after buying it, and finds it wears out a year later, the buyer would have a warranty claim in Year 6. On the other hand, a 10 year performance warranty would promise that the coat would last 10 years.
In the United States, the Magnuson–Moss Warranty Act of 1976 provides for enforcement of a satisfaction guarantee warranty. In these cases, the advertiser must refund the full purchase price regardless of the reason for dissatisfaction.
A lifetime warranty is usually a warranty against defects in materials and workmanship that has no time limit to make a claim, rather than a warranty that the product will perform for the lifetime of the buyer. The actual time that product can be expected to perform is normally determined by the custom for products of its kind used the way the buyer uses it.
If a product has been discontinued and is no longer available, the warranty may last a limited period longer. For example:
- the Cisco Limited Lifetime Warranty currently lasts for five years after the product has been discontinued, but only if you know where you bought it from as the seller is responsible for administering it.
- HP Networking product lifetime warranties last for as long as one owns the product.
Breach of warranty
Warranties are violated when the promise is broken or the goods are not as expected. The seller may honor the warranty by making a refund or a replacement. The statute of limitations depends on the jurisdiction and contractual agreements. In the United States, the Uniform Commercial Code § 2-725 provides for a four-year time limit, which can be limited to one year by contract, starting from the date of delivery or if future performance is guaranteed from the date of discovery. Refusing to honor the warranty may be an unfair business practice. In the United States, breach of warranty lawsuits may be distinct from revocation of contract suits; in the case of the breach of warranty, the buyer’s item is repaired or replaced while breach of contract involves returning the item to the seller.
Some warranties require that repairs be undertaken by an authorized service provider. In such cases, service by non-authorized personnel or company may void (nullify) the warranty. However, according to the Magnuson-Moss Act (a U.S. Federal law that governs warranties, which was passed in 1975), if the warranty does not provide full or partial payment of labor (to repair the device or system), it is the owner’s choice who will provide the labor, including the possibility of DIY (“Do It Yourself”) repairs, in which case the device or system owner will pay zero dollars for labor, yet the company that provided the warranty must still provide all the parts needed for the repair at absolutely no charge to the owner, not even a “delivery charge” that companies like Sears / Kenmore likes to call their “fee” for delivering parts.
If the defective product causes injury, this may be a cause of action for a product liability lawsuit (tort). Strict liability may be applied.
In addition to standard warranties on new items, third-parties or manufacturers may sell extended warranties (also called service contracts). These extend the warranty for a further length of time. However, these warranties have terms and conditions which may not match the original terms and conditions. For example, these may not cover anything other than mechanical failure from normal usage. Exclusions may include commercial use, “acts of God”, owner abuse, and malicious destruction. They may also exclude parts that normally wear out such as tires and lubrication on a vehicle.
These types of warranties are provided for various products, but automobiles and electronics are common examples. Warranties which are sold through retailers such as Best Buy may include significant commission for the retailer as a result of reverse competition. For instance, an auto warranty from a car dealership may be subcontracted and vehicle repairs may be at a lower rate which could compromise the quality of service. At the time of repair, out-of-pocket expenses may be charged for unexpected services provided outside of the warranty terms or uncovered parts.
Representations versus warranties
Statements of fact in a contract or in obtaining the contract are considered to be either warranties or representations. Traditionally, warranties are factual promises which are enforced through a contract legal action, regardless of materiality, intent, or reliance. Representations are traditionally precontractual statements which allow for a tort-based action if the misrepresentation is negligent or fraudulent. In U.S. law, the distinction between the two is somewhat unclear; warranties are viewed as primarily contract-based legal action while negligent or fraudulent misrepresentations are tort-based, but there is a confusing mix of case law in the United States. In modern English law, sellers often avoid using the term ‘represents’ in order to avoid claims under the Misrepresentation Act 1967, while in America ‘warrants and represents’ is relatively common. Some modern commentators suggest avoiding the words and substituting ‘state’ or ‘agree’, and some model forms do not use the words; however, others disagree.
New car factory warranties commonly range from one year to five years and in some cases extend even 10 years, with typically a mileage limit as well.
In the United Kingdom, types of warranties have been classified as either a:
- original manufacturer warranty,
- insurance warranty underwritten and regulated as insurance or
- obligor warranty, typically written by a car dealership or garage.
In the United Kingdom, the Financial Services Authority (FSA), which began to regulate insurance contracts in this context in 2005, determined that additional warranties sold by car dealerships are “unlikely to be insurance”. Insurance warranties may offer greater protection to the consumer.
A home warranty protects against the costs of home and appliance repair by offering home warranty coverage for houses, town homes, condominiums, mobile homes, and new construction homes. When a problem occurs with a covered appliance or mechanical system such as an air conditioning unit or furnace, a service technician repairs or replaces it. The homeowner pays for a service call fee and the home warranty company pays the balance for the repair or replacement of the covered item.
Warranty data consists of claims data and supplementary data. Claims data are the data collected during the servicing of claims under warranty and supplementary data are additional data such as production and marketing data. This data can help determine product reliability and plan for future modifications.
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