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Consumer Warranty Law: 13.3.6 Pleading the Existence and Terms of the Warranty and Its Breach

The buyer has the burden of pleading and proving the existence and terms of the warranty.125 A complaint alleging breach of an implied warranty of fitness for a particular purpose should allege what the particular purpose was.126 A court has found that it was not necessary to attach a copy of the warranty to the complaint.127 When there are multiple defendants, it may be necessary to plead how each one made, or is responsible for, a warranty

Consumer Warranty Law: 13.3.7 Pleading Privity

Privity between the consumer and the defendant is not required for many warranty claims.131 But if privity is required, the consumer should allege agency or some other relationship sufficient to satisfy the privity requirement, such as that the buyer is a third-party beneficiary of the manufacturer’s contract with the dealer.132

Consumer Warranty Law: 13.3.8 Pleading Incidental and Consequential Damages

The general rule is that incidental and consequential damages must be pleaded specifically in order to recover them.133 Be prepared for the seller to argue that a limitation of remedy clause prevents recovery of these damages.134 There is some authority that the consumer may challenge a remedy limitation clause as unconscionable without having pleaded unconscionability.135

Consumer Warranty Law: 13.3.9.2 Manufacturers and Dealers

Typically, more than one party is responsible for getting the product to the consumer. The consumer deals directly with the retail seller, but there is also a manufacturer and perhaps a distributor. Keeping distinct the rights and liabilities of each party in the distribution chain is important. Similarly, warranties by one entity may not be enforceable against another. Disclaimers by one entity generally will have no effect on the warranty liability of another.141

Consumer Warranty Law: 13.3.9.3 Institutions That Finance the Sale

Another question is whether to join the institution that financed the sale. The Federal Trade Commission’s Holder Rule generally makes lenders and assignees liable for claims that could be asserted against the seller, with a cap on damages allowing the consumer to cancel the remaining indebtedness and to recover any amounts paid by the consumer.146

Consumer Warranty Law: 13.7.2 Negotiating a Settlement

The first settlement approach to the defendants is crucial for setting the tone of the negotiations. The consumer’s demand should be high but realistic. Most critically, the attorney and client should be prepared to follow through. An initial demand that is low or equivocal signals to the defendant that the case is not serious. By the same token, an inflated, unsupported demand from which the consumer’s attorney quickly retreats signals not only that the case is weak, but also that the consumer is not prepared to litigate it.

Consumer Warranty Law: 13.7.4.1 Expenses to Include in Settlement Demand

When settling a lemon law or warranty case involving a vehicle, the client will not want to be left without transportation while waiting for the settlement check. If the client will be required to return the vehicle before receiving the settlement check, the settlement amount should include the costs of renting a replacement vehicle for a week or two.

Consumer Warranty Law: 13.7.4.2 Protecting Against Delay in Payment

Incorporate into the settlement agreement a deadline for the settlement proceeds to be paid. If the defendant misses the deadline, the agreement can provide that the consumer has the option of (1) enforcing the settlement agreement327 or (2) declaring the settlement agreement null and void, with the result that the case returns to the trial calendar.

Consumer Warranty Law: 13.7.4.3 Protecting the Consumer’s Credit Record

Any settlement agreement should protect the consumer’s credit record. If the manufacturer is going to pay the balance on the debt as part of the settlement, get proof of payment before the buyer signs a release. If the manufacturer pays late, the creditor may report a delinquency to the credit bureau.

Consumer Warranty Law: 13.7.4.4 Confidentiality Clauses and Exculpatory Clauses

The manufacturer or dealer may ask for a confidentiality agreement as part of the settlement. While agreeing that the exact amount of the settlement will be confidential is fairly common, a clause that requires the fact of settlement or the details of the case to be kept confidential is very troubling, and against public policy in certain jurisdictions. A confidentiality clause may prevent the disclosure and correction of safety problems that could affect other people. The seller may want a confidentiality clause in order to avoid branding the vehicle as a lemon, contrary to state law.

Consumer Warranty Law: 13.7.4.5 Settling with the Entity That Financed the Sale

When the buyer’s financing for the purchase was originated or arranged through the dealer, it may be advantageous to make an early settlement offer to the entity that is holding the credit paper secured by the goods.332 Settling with the creditor will give the consumer some immediate compensation and will mean that the consumer is litigating against just one opponent rather than two.

Consumer Warranty Law: 13.7.6 Effect of Settlement upon Other Parties

If the consumer settles with the entity that financed the purchase, that entity may have a recourse agreement with the seller. If the seller repurchases the paper, the seller may demand the payments that the consumer thought were forgiven by the agreement with the financier. If the settlement satisfies the obligation, the settlement agreement should require the creditor to mark the note or contract paid.

Consumer Warranty Law: 13.8.1.1 General

Most elements of a warranty case are questions for the trier of fact. Only if reasonable minds cannot differ based on the evidence will the court decide the question as a matter of law.340 For jury trials, this means that a jury will determine most key issues, and juries are likely to be sympathetic to consumer buyers in disputes with merchants over defective goods.

Consumer Warranty Law: 13.8.1.6 Questions of Law in Warranty Cases

The determination of unconscionability is a question of law for the court.379 The language of the Magnuson-Moss Warranty Act also makes it clear that the question of an award of attorney fees is for the judge, not the jury.380 Many lemon laws and UDAP statutes similarly state that “the court” is to make the attorney fee award.381 Even when fee awards are based on contract, courts have found the question of the amount of the award to be a question f