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Consumer Warranty Law: 2.4.1.3 Application to “50-50” Warranties

A “50-50” warranty, common in low-end used car sales, provides that the dealer will make any necessary repairs for a period such as thirty days, with the consumer paying half the cost of parts and labor and the dealer performing the work and paying itself for the other half.456 The Act applies to this warranty because it meets the definition of a written warranty.457

Consumer Warranty Law: 2.4.2 Manufacturer Cannot Be Final Judge of Warranty Dispute

The Magnuson-Moss Warranty Act prohibits the warrantor granting itself (1) the sole authority to determine whether a defect or nonconformity within the scope of the written warranty exists, or (2) the final or binding decision in a dispute.467 A warrantor cannot state that it alone shall determine what is and what is not a defect. Nor can a warranty state that, in the event of a dispute, the decision of a third party designated by the warrantor is final or binding.468

Consumer Warranty Law: 2.4.3 Warranty Registration Cards

When a warrantor gives a full warranty,469 it may not condition performance obligations on return of a registration card, this being considered an unreasonable duty.470 The warrantor may suggest that the buyer fill out and return the card to place on file proof of the date of purchase.471 The suggestion must include notice that failure to return the card does not affect warranty rights if the consumer can show the purchase date in a reasonabl

Consumer Warranty Law: 2.4.4 Extension of Warranties for Time Out of Service

While the FTC has not done so, the Act gives the FTC authority to enact rules extending the time period of a warranty to correspond with any unreasonable time the consumer is deprived of the use of the product.479 The FTC could issue a rule dealing with how to extend the period of a written warranty when the product is out of service for repairs for a portion of the warranty period.

Consumer Warranty Law: 2.4.5 Warrantor Responsible for Own Warranty

The warrantor may designate a representative to perform its warranty obligations.480 Car manufacturers often designate franchised dealers as their representatives. The Act specifies that the warrantor retains direct responsibility for its obligations. A breach of warranty cause of action runs against the warrantor.481

Consumer Warranty Law: 2.5.1 Distinguishing Full from Limited Warranties

The Magnuson-Moss Warranty Act requires that every written warranty be labeled as full or limited.484 If a written warranty meets the Act’s minimum standards for full warranties,485 it must be disclosed as a “full” warranty; otherwise, it must be disclosed as “limited.”486

To be labeled a full warranty, the written warranty, at a minimum, must comply with the following:

Consumer Warranty Law: 1.9.1 Introduction

This section provides a list of litigation topics which may arise in automobile sales and finance transactions, and also pinpoints the subsections where these topics are discussed in this and other NCLC treatises. It is recommended that users view this checklist in this treatise’s digital edition, which provides live weblinks to these related subsections.

Consumer Warranty Law: 5.1.1 The Nature of Disclaimers

Most consumer transactions, especially those for used goods, involve some attempt by the seller or manufacturer to disclaim warranty liability. Typically, the disclaimer is a clause in the contract or warranty which states that there are “no warranties, express or implied,” or that the written warranty is “in lieu of all warranties, express or implied.” A more sophisticated contract will also contain a clause stating that the “IMPLIED WARRANTY OF MERCHANTABILITY IS DISCLAIMED.” A common variation of this clause is the statement that the product is sold “as is.”

Consumer Warranty Law: 5.1.2 UCC Policies Favor Giving Effect to Warranties

The Uniform Commercial Code (UCC) approach to disclaimers is based on the UCC policy to give effect as much as possible to the parties’ understandings and reasonable expectations.3 The literal language of the writing may be ignored if it differs from those understandings and expectations, as substance is favored over form.

Consumer Warranty Law: 5.2 No Disclaimer of Express Warranties

Consistent with the basic UCC policy that the substance of the parties’ actual agreement is more meaningful than the form of the written contract, section 2-316(1) provides that a seller cannot make a statement of fact or promise in the negotiation, in advertising, or in writing, and then attempt to avoid the legal consequences by using a contract disclaimer.6 To do so would be contrary to the parties’ agreement and an unfair surprise to the buyer. In the words of section 2-316(1):

Consumer Warranty Law: 2.2.1.3 Aircraft

The Federal Trade Commission (FTC) stated at one point that “general aviation aircraft” were not consumer products because no appreciable portion of new aircraft were sold to consumers; it deleted “small aircraft” from a list of consumer products.53 While an unreported district court decision agrees,54 the Seventh Circuit, in dictum, soundly rejected any blanket rule that would exclude all airplanes.55 The court pointed out that more consumers were

Consumer Warranty Law: 2.2.1.4 Medical Devices

Several courts hold that prosthetic heart valves and other medical devices are not consumer products.57 Medical devices are not customarily made directly available to consumers but are surgically implanted by medical professionals, who first purchase the product.

Consumer Warranty Law: 2.2.1.5 Personalty Versus Realty

A consumer product must be “personal” property. The Act does not apply to real property,68 but does apply to property that is intended to be attached to or installed in real property,69 including “separate items of equipment” such as water heaters, furnaces, and air conditioners.70

Consumer Warranty Law: 2.7.3 Jury Trial

When a Magnuson-Moss case is filed in federal court, whether based on diversity of citizenship or on the Magnuson-Moss Warranty Act’s own jurisdictional grant,753 the Seventh Amendment governs whether a jury trial is available.754 The answer is likely to turn on whether the consumer’s claim is perceived as an action at law or a suit in equity.

Consumer Warranty Law: 2.2.3.1 General

Many provisions of the Act apply to “written warranties.” The Act contains its own definition of written warranty, which is more limited than the term “express warranty” under the Uniform Commercial Code (UCC).96 The warranty must be written, so oral express warranties and express warranties by sample or model are not written warranties. A written warranty must meet one of two conditions:

Consumer Warranty Law: 2.2.3.3 Partial Exemption for General Assurances of Satisfaction

The Act provides that expressions of general policy concerning customer satisfaction are not subject to Sections 2302, 2303 or 2304 of the Act, which govern disclosure of warranty terms, pre-sale availability, tie-ins, designation of warranties as “full” or “limited,” and standards for full warranties.150 If the policy is not general, but is limited to specific consumer products, even these provisions apply.151 A general policy that includes an express limitation of duration, a limitation on the

Consumer Warranty Law: 2.2.3.4 Express Warranties for Used Products

Buyers of used goods may not receive a printed warranty; the sales contract may state the goods are covered by, for example, a “thirty-day 50/50 warranty on parts and labor” or a “thirty-day warranty.” Is this a written warranty?

It may be if the statement is a promise that the goods will be free of defects in the first thirty days. While the warranty may not explicitly promise that the goods are defect free or will meet a specified level of performance, such a standard is implicit, as repairs are required only if a product has a defect or malfunctions.

Consumer Warranty Law: 2.7.5 Pleading Damages

To bring a Magnuson-Moss claim, the consumer must be “damaged by the failure” of a person to comply with the law.784 The omission of any allegation of legal injury is grounds for dismissal for failure to state a claim for relief.785