Skip to main content

Search

Consumer Warranty Law: 6.2.4.2.1 Issues in analyzing state law

In analyzing a state’s privity requirements, several points need to be kept in mind. First, courts and statutes may take different positions about whether a consumer can sue a manufacturer depending on whether the suit is for personal injury or property damage or whether it is for economic damage to the product itself—that the product purchased is worth less because it is defective.

Consumer Warranty Law: 6.2.4.2.3 State law surveyed

Whether a state has abolished vertical privity for implied warranty claims seeking economic damages requires a review of both statutory and case law in that state. There is more variation on this issue among the states than on almost any other UCC Article 2 warranty issue.

Consumer Warranty Law: 6.2.5.1 Consumer As Third-Party Beneficiary of Manufacturer’s Warranty

Lack of privity is not a defense when the retail buyer is a third-party beneficiary of the warranty in the sales contract between the manufacturer and the retail seller.211 This theory is one of the many grounds on which courts hold manufacturers responsible for breaching express warranties that are intended to protect the retail buyer, but are delivered through intermediaries,212 or created by samples provided to the retailer to use in the sales presentation.

Consumer Warranty Law: 6.2.5.2 Dealer As Manufacturer’s Agent

The manufacturer may also be liable to the retail buyer on an agency theory. Privity of contract will exist between the ultimate purchaser and the manufacturer when the dealer is found to be the agent of the manufacturer.222 Vertical privity may also exist if the intermediate buyer is the agent of the ultimate consumer.223

Consumer Warranty Law: 6.2.5.4 Manufacturer’s Issuance of Express Warranty As Creating Privity for Implied Warranties; Manufacturer Rebate Programs

Some courts hold that merely issuing an express warranty is sufficient to create privity between a buyer and a remote manufacturer, thus allowing the buyer to sue for implied as well as express warranties.233 The manufacturer may also have a direct enough relationship with the buyer to obviate privity concerns when the dealer has a warranty from the manufacturer and assigns that warranty to the buyer.234 It is also possible that a manufacturer’s relationship with the buyer through a manufacturer

Consumer Warranty Law: 6.2.5.5 Manufacturer’s Liability Based on Equitable Estoppel

The manufacturer may be liable under principles of equitable estoppel. Under this theory, the manufacturer is estopped from asserting lack of privity as a defense to a claim for breach of the manufacturer’s express warranty.235 For example, equitable estoppel has been applied when the manufacturer had given the dealer a warranty for delivery to the buyer, had initially made repairs under the warranty, and had voluntarily extended it.

Consumer Warranty Law: 6.2.5.6 Non-Warranty Claims

Claims such as fraud, fraudulent suppression, violation of state unfair and deceptive acts and practices (UDAP) statutes, negligence, and products liability can often be asserted without regard to privity.238 In states that retain vertical privity requirements for warranty actions, these alternative liability theories should be explored. States differ, however, on the extent to which economic losses can be recovered in tort.239

Consumer Warranty Law: 6.2.6 Direct Seller’s Liability on Indirect Seller’s Warranty

If privity requirements prevent consumers from obtaining relief from the manufacturer on its warranty, another possibility is to hold the dealer liable for the manufacturer’s warranty. Generally, the retail seller is not bound by the manufacturer’s warranty, just as the manufacturer is not obligated under the retail seller’s express or implied warranties.240 Two contract theories are available, however, for holding the retail seller liable on the manufacturer’s warranty.

Consumer Warranty Law: 6.2.7 Proving Breach of Warranty Against Indirect Seller

Although exceptions to vertical privity avoid the legal obstacle to manufacturer liability for breach of warranty, an important practical problem remains. The manufacturer’s express warranty often promises “no defects in factory materials and workmanship.” Theoretically then, the buyer is required to prove that the problems arose in the factory rather than during the course of the retail seller’s handling.

Consumer Warranty Law: 6.3.1 Introduction

This section examines the warranty rights of someone other than the actual retail buyer, including a relative or friend for whom the goods were purchased, a recipient of a gift, a subsequent buyer of the product, or a person who received the product from the buyer-spouse through divorce or abandonment. This chapter does not focus on the rights of accident victims, neighbors, passersby, or employees who suffer personal injury or property damage because of the defects in the product.

Consumer Warranty Law: 6.3.2 No Horizontal Privity Requirement When There Is a “Written Warranty” or Implied Warranty

The Magnuson-Moss Warranty Act eliminates horizontal privity problems for written and implied warranties provided to consumers. If the transaction involves a consumer product251 and there is either a “written warranty” as defined by the Act252 or an implied warranty, then any “consumer” can sue for failure to comply with it. “Consumer,” as defined by the Act, includes not only the buyer but also subsequent owners.253

Consumer Warranty Law: 6.3.3.2 Analysis of State Law Variations

Section 2-318 is the only Uniform Commercial Code (UCC) section addressing the rights of nonbuyers. It offers three alternative provisions: Alternatives A, B, and C.255 Alternative C goes the farthest in eliminating horizontal privity, allowing any person who “may reasonably be expected to use, consume or be affected by the goods” and who is “injured” by breach of the seller’s warranty, whether express or implied, to sue the seller.

Consumer Warranty Law: 6.3.3.3 Survey of State Law

Somewhat less than half the states abolish the requirement of horizontal privity, even for economic injury.278 That is, donees and subsequent buyers can enforce warranty rights even when the suit is based on the diminished value of the goods not conforming to their warranty.

Consumer Warranty Law: 6.3.5 Privity Unnecessary If Buyer Is Agent for Ultimate User

In the alternative, it may be possible to show that the buyer was only the consumer’s agent. For example, if the person who handled the purchase was acting as an agent for the eventual user, then this user is actually the buyer, avoiding any horizontal privity issue.281 This theory is useful for a consumer whose spouse, parent, child, sibling, or friend bought the goods at the consumer’s request.

Consumer Warranty Law: 6.3.6 Asserting Warranty Rights As a Third-Party Beneficiary

Even when horizontal privity would otherwise be a bar, a nonbuyer user of the goods may be able to sue the seller for economic loss or property damage as a third-party beneficiary of the warranties given by the seller to the buyer.282 The nonbuyer is a third-party beneficiary if the buyer purchased the goods at least in part for the benefit of the nonbuyer.283

Consumer Warranty Law: 19.1 Introduction

Automobile repairs, home improvements, and other service transactions may only incidentally involve the sale of goods, and thus raise issues as to the applicability of Uniform Commercial Code (UCC) Article 2 and the Magnuson-Moss Warranty Act.

Consumer Warranty Law: 19.2.1 Magnuson-Moss Applicability

The Magnuson-Moss Warranty Act applies to “consumer products,” defined as tangible personal property.1 Consequently, the Act does not apply to services.2 Warranties which relate solely to the quality of a repairer’s work in performing repairs, such as a warranty on the rebuilding of an automobile engine, are not covered.3

Consumer Warranty Law: 19.2.2 UCC Article 2 Applicability

Pure service transactions are not covered by Uniform Commercial Code (UCC) Article 2 because no goods are involved.5 A medical check-up6 or a contract to mow a lawn or to provide legal services, for example, usually involves only services. Health spa7 and buyers’ club8 memberships have been ruled to be services, not goods.