Skip to main content

Search

Consumer Warranty Law: 1.7.2.2 Liberal Construction’s Application to Consumer Transactions

The policy of liberal construction of the UCC is most important in consumer transactions.391 The Code was drafted broadly to cover many types of transactions, but its primary focus is on commercial transactions between merchants. As a result, the specific statutory language may not always reflect the realities of consumer transactions. In many key areas, courts have construed the UCC to adjust for such realities.

Consumer Warranty Law: 1.7.2.3 The UCC’s Flexible Statutory Standards

The ability of courts to construe the UCC liberally to implement its policies is enhanced by the drafters’ deliberate use of flexible, imprecise language in critical sections of the Code, thereby allowing courts the flexibility to set different standards for consumer buyers and merchant buyers. Language such as “reasonable,” “under the circumstances,” “consistent,” “fitness for the ordinary purpose,” and “fitness for a particular purpose” was designed to avoid rigidity.405

Consumer Warranty Law: 1.7.3 Other Warranty Law

Courts follow the same principles in interpreting non-UCC warranty law, giving greater protection to consumers than to commercial buyers.411 This principle is applied especially frequently in questions of tort law such as whether economic loss is recoverable.412

Consumer Warranty Law: 2.3.1.2.2 The warranty of title

Sellers may argue that the UCC warranty of title is something other than an implied warranty. The heading for UCC § 2-312 (warranty of title), unlike the headings for UCC §§ 2-314 and 2-315, does not use the term implied warranty.

The warranty of title arises by operation of law, not by express statements. If warranties are to be categorized as either express or implied, the warranty of title is an implied warranty.

Consumer Warranty Law: 2.3.2.1 General

The Magnuson-Moss Warranty Act prohibits a supplier from disclaiming or modifying an implied warranty when it provides a written warranty on the product or when, within ninety days of the sale, it enters into a service contract on the product with the consumer.316 Once a written warranty or service contract is given, no applicable implied warranty may be disclaimed “with respect to such consumer product.”317 While the duration of the implied warranty may be limited in some circumstances

Consumer Warranty Law: 2.3.2.3 Dealer’s Disclaimer of Implied Warranties

A dealer’s agreement to repair the manufacturer’s defects is a written warranty that prevents it from disclaiming implied warranties.336 A “we owe” form in which a dealer promises to repair or replace a specific car feature may be a written warranty under the Act even if it is not a UCC express warranty.337 Whether a pre-delivery inspection form is a written warranty that prevents a dealer from disclaiming implied warranties depends on its exact language.338

Consumer Warranty Law: 2.3.2.4 Consumer Remedies When Warranty Improperly Disclaimed

Disclosing that implied warranties are disclaimed when the disclaimer is ineffective is a deceptive act violating the FTC Act and should be a state deceptive practices statute (UDAP) violation.341 One case holds that, when implied warranties are wrongly disclaimed, the consumer has a Magnuson-Moss damage claim only if the seller has caused injury to the consumer by breaching the implied warranty.342

Consumer Warranty Law: 2.3.2.5.3 Factual investigation and discovery

In arguing that a dealer has “entered into” a service contract, discovery is essential. Does the service contract specify an “issuing dealer?” Is the dealer listed as the place where the service is to be performed? Has the dealer signed any document related to the service contract? What are the terms of the agreement between the dealer and the company that offers the service contract? Did the consumer sign an application for the service contract? Did the dealer? What are the terms of the application?

Consumer Warranty Law: 2.3.2.5.4 Arguments for consumers

The Act’s intent calls for a broad definition of “entered into.” By prohibiting “as is” sales when the seller provides a written warranty or enters into a service contract, the Act is meeting consumer expectations that a merchant will stand behind the product.

Consumer Warranty Law: 2.3.2.6.1 Supplier may limit duration of implied warranties

The Magnuson-Moss Warranty Act prohibits disclaimer of implied warranties when a supplier gives a written warranty or enters into a service contract, but it allows the supplier to limit the duration of implied warranties in some circumstances. If a supplier provides a limited written warranty, it may limit the duration of any implied warranty to not less than the duration of the written warranty.365

Consumer Warranty Law: 2.3.3 Restrictions on Limitations of Remedies

The Act does not prohibit limitations on the remedies available for breach of an express or implied warranty.381 A buyer may have success in arguing that a limitation of remedies which is so severe that it has the practical effect of nullifying the implied or written warranty is void because it is against the policy of the Act.382 UCC provisions making remedy limitations unenforceable in some circumstances383 apply in Magnuson-Moss litigation as we

Consumer Warranty Law: 2.3.4 Act Prohibits Breaches of Written Warranties

The Act provides a remedy for a consumer who is damaged by the failure of a supplier, warrantor, or service contractor to comply with any obligation under a written warranty,387 whether the written warranty is full or limited.388 This provision provides a federal cause of action for actual damages and attorney fees whenever any aspect of a written warranty is breached.389

Consumer Warranty Law: 2.3.5 Act Eliminates Certain Horizontal Privity Requirements

The Act grants the right to sue to a “consumer” damaged by a violation of the Act or by noncompliance with a written warranty, implied warranty, or service contract.393 Consumer is defined to include buyers, persons to whom the product is transferred during the duration of the implied or written warranty or service contract, and other persons entitled by terms of the warranty or service contract or under applicable state law to enforce the warranty or service contract.394

Consumer Warranty Law: 2.3.6.1 No Privity Required for Claim of Breach of Written Warranty

States take differing views as to the requirement of vertical privity: whether a buyer can sue a manufacturer or other indirect seller for breach of warranty when the buyer has no contractual relationship with that entity.402 Almost no states require vertical privity when a buyer is suing a manufacturer on an express warranty.403 In the few states where privity remains an issue in express warranty suits, the Act solves the problem if an express warranty meets the definition of a wri

Consumer Warranty Law: 2.3.6.2 Does the Act Eliminate Vertical Privity Requirements for Breach of Implied Warranties?

Courts disagree whether the Act eliminates vertical privity requirements for implied warranty claims. If state law restricts a consumer from suing a manufacturer or other indirect seller for breach of an implied warranty, it is unclear whether the consumer can still maintain such an action under the Act. This issue arises in less than half the states, as a majority of states abolish vertical privity as a requirement for implied warranty claims.411

Consumer Warranty Law: 2.3.7 Does the Act Eliminate the Notice of Breach Requirement?

A precondition to UCC warranty claims is providing the seller with notice of the breach of warranty.419 The Magnuson-Moss Act does not require notice of breach, but establishes similar requirements: (1) a written warranty can require that a consumer resort to an informal dispute resolution mechanism before suing; and (2) otherwise, the consumer must afford the seller a reasonable opportunity to cure before the consumer can sue for failure to comply with a written or implied warranty or service contract.

Consumer Warranty Law: 2.3.8 Enforcement and Regulation of Service Contracts

The Act provides a remedy, including damages and attorney fees, for breach of a service contract.431 It may distinguish between those offering service contracts and those administering service contracts for another party. One court has ruled that the Act does not apply to a service contract administrator, only the party offering the service contract.432

Consumer Warranty Law: 2.4.1.1 General

The Magnuson-Moss Warranty Act prohibits a warrantor tying the performance of warranty obligations to the buyer’s use of a particular product or service.437 Violation of the tie-in prohibition may be fairly widespread. In 2018, the Federal Trade Commission sent warning letters to six major companies that market automobiles, cellular devices, and video game systems, warning them that their warranties appeared to violate the prohibition against tie-ins.438

Consumer Warranty Law: 2.4.1.2 Limitations on the Tie-In Prohibition

There are two exceptions to the tie-in prohibition: when the article or service is provided without charge under the terms of the warranty (presumably for the warranty’s duration)449 or when the FTC grants a waiver.450 To obtain a waiver, the warrantor shows in an administrative proceeding that the tied-in product or service is necessary to proper functioning of the warranted product and that the waiver is in the public interest.