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Consumer Warranty Law: 19.3.1 Introduction

Courts differ in how they analyze whether the UCC applies to mixed goods and services transactions. Most courts treat the contract as a whole, and apply the UCC to either all or none of it12 after determining the predominant purpose. The UCC applies to the whole transaction if the predominant purpose is the sale of goods, but not at all if the predominant purpose is services.

Consumer Warranty Law: 19.3.2.2 When the Contract Is Predominantly for Services

When a contract is predominantly for services, many courts analyze it as a whole, and apply non-UCC law to both the goods and the services components.29 This approach is particularly common when goods were provided as part of medical treatment30 or a pharmacist dispensing a prescription medicine is involved.31 Nevertheless, courts are less prone to analyze contracts as a whole when services predominate, holding that the U

Consumer Warranty Law: 19.3.4.2 Finished Product As Determining Predominant Purpose

Instead of attempting to ascertain the parties’ intent, an alternative test asks whether the goods involved are already finished products or are to be made from raw materials, specifically for that contract.67 Thus the sale and installation of overhead doors was within Article 2, even though the installation was a lengthy process, because the doors were already a finished product.68 Most consumer transactions are for finished products, such as cars, appliances, or storm windows, so that the finished

Consumer Warranty Law: 19.4 UCC Applicability by Analogy

Some courts apply UCC Article 2 to service transactions by analogy. The theory is that state legislatures, by enacting the UCC, embellished the common law of warranties, and abandoned the outmoded 19th-century common law principles of caveat emptor or “buyer beware.”

Comment 2 to section 2-313 states that Article 2’s limitation to goods was not intended to preclude common law evolution in other contractual circumstances. Comment 1 to section 1-103 also indicates:

Consumer Warranty Law: 19.5.1 Introduction

If the UCC does not apply to all or part of a transaction, an alternative rule of law must be found. No other statute comprehensively regulates warranty rights in service transactions. The UCC can be applied by analogy, as described in § 19.4, supra.

Consumer Warranty Law: 19.5.2 Common Law Express Warranties

Even without Article 2, consumers should have little difficulty enforcing an express warranty provided in a service or repair transaction.75 The express warranty is akin to an express contract, although privity may not be required for breach of a common law warranty.76 The express warranty is a contract term, and its breach is remedied as a breach of contract.

Consumer Warranty Law: 19.5.4 Damages for Breach of Common Law Warranties

To recover damages, a causal relation between the breach of a common law warranty and the damages must be shown, and the damages must be proved with a reasonable degree of certainty.98 Expectancy damages place the consumer in as good a position as if the contract had been performed,99 preserving the consumer’s bargain.

Consumer Warranty Law: 19.6.3 Parties Liable

Servicers are liable for their own faulty work and, under the doctrine of respondeat superior, for work done by their employees or by a subcontractor.141 A subcontractor is also liable for its own negligence.142 The manufacturer can be liable in negligence if the repair parts are defective. A franchisor may be liable for faulty repair by its franchisee if the franchisee is the franchisor’s agent.143

Consumer Warranty Law: 19.6.4 Proving Damages

Proof of damages in a negligent services case is generally the same as in any negligence action,144 except that, unlike negligence actions involving goods, courts may allow recovery of economic losses in negligence actions involving services.145 This subsection examines special proof issues related to negligent automobile repair, which should also be available by analogy in negligence claims involving other services.

Consumer Warranty Law: 19.7 Breach of Bailment Contract

Breach of a bailment contract is a potential claim when a repair shop damages property it agreed to repair. A bailment contract, express or implied, is created when personal property is delivered into the possession of another person in trust for a specific purpose, under an agreement that the property will eventually be returned to the owner.151 Delivery of property to a repair shop thus creates a bailment.152

Consumer Warranty Law: 19.8 UDAP and Fraud Claims

Unfair and deceptive acts and practices (UDAP) claims are especially relevant to service transactions. UDAP statutes apply equally to goods and services.157 A number of UDAP regulations and cases deal specifically with automobile repair, home improvement, and other services.158 UDAP statutes’ stronger remedies and deception and unfairness standards often match well with the more egregious home improvement and automobile repair practices.

Consumer Warranty Law: 19.9.1.2 Truth in Lending Rescission

Home improvement sales often result in the seller or lender gaining a security interest in the consumer’s home, either by taking a non-purchase money first or second mortgage in the home as part of the credit sale, or when a statutory lien in the home is created because of the seller’s improvement to the home. In either case, a right of rescission arises under the federal Truth in Lending Act (TILA).168 The creditor must give the consumer notice of this right of rescission in the form prescribed by TILA and Regulation Z.

Consumer Warranty Law: 19.9.1.3 FTC Cooling-Off Rule for Off-Premises Sales

The Federal Trade Commission (FTC) Cooling-Off Period Rule175 provides consumers with a right to cancel, within three business days of a sale, any contract not made at the seller’s principal place of business. Cancellation can be for any reason, and is not contingent on the nature of the contractor’s work. This rule is analyzed in detail in NCLC’s Federal Deception Law.176

Consumer Warranty Law: 19.9.1.5 Credit Repair Organization Statutes

Many states have adopted credit repair organization statutes that give consumers a three to five-day cancellation right.187 Although at least one court has disagreed,188 there is an argument that a home improvement contractor who arranges credit for the buyer meets the statutory definition of credit repair organization and must provide this right to cancel.

Consumer Warranty Law: 19.9.2 Failure to Complete Work; Completion Certificates

Even when work is not being performed or is being performed poorly, contractors and those enforcing home improvement loans may claim that the consumer is obligated to make payments on the work. But if the contract specifies that the first payment is due “on completion” or “X days after completion,” the consumer does not owe any payment until the work is completed.