Consumer Warranty Law: 19.10.3.2.3 Other requirements
Some statutes impose substantive requirements or prohibitions, such as prohibiting:
Some statutes impose substantive requirements or prohibitions, such as prohibiting:
Administrative enforcement authority for automobile repair laws is not uniform; authority may be vested in the state attorney general, the secretary of state, the motor vehicle commissioner, the commerce department, or an administrative board or commission. A regulatory body may be authorized only to initiate investigations. Administrative remedies include civil penalties,295 license suspension and revocation,296 and cease and desist orders.
Several states license automobile repair shops or mechanics. These statutes often prohibit unregistered or unlicensed practice. Generally, but not always, the licensing statute is applicable only to those who repair mechanical parts, not to body and fender mechanics, and not to service stations or other employees.297 Garages, repair shops, and towing services may also be regulated by municipal ordinances.
Fees should be awarded for all work on lemon law issues, even if those issues are common to other claims on which fees are not available.618 When the consumer prevails on a lemon law claim but is unsuccessful on a related warranty claim, no reduction is appropriate because “the jury’s verdict provided the plaintiff with substantial relief.”619
When a lemon law does not explicitly provide for fees, the failure of a manufacturer to comply with the consumer’s refund or replace remedy is likely to be a state UDAP violation.629 Most UDAP statutes provide attorney fees to prevailing consumers. A Magnuson-Moss Warranty Act or UDAP claim for actual damages can also provide a vehicle for attorney fees.630 Some states have non-UCC laws that allow fee-shifting in warranty cases.631
Many lemon laws allow the consumer to recover “costs and expenses” for the litigation. The Arkansas Supreme Court construed this language as intending to make the consumer whole, and allowed reimbursement for copying and mileage costs that went beyond the general court rule on taxable costs.644 The court held that a broad construction of the statute was consistent with the legislature’s intent to address the hardship a defective vehicle causes a consumer.
It is important to be aware of potential tax issues that may arise in new car defect cases when the award includes the consumer’s attorney fees. Until recently, when a lemon law case is resolved, the manufacturer would send a lump sum check to the consumer’s attorney that included both the consumer’s damages and an award for the consumer’s attorney fees incurred in prosecuting the lemon law action. The manufacturer would issue a Form 1099-MISC to the consumer’s attorney for the entire amount, while not issuing any tax document to the consumer.
A consumer has no right to a refund or replacement if the manufacturer cures the defect within the allowed number of repair attempts.348 If a consumer requests a replacement or refund in the proper manner, the manufacturer’s eventual cure of the defect is not sufficient when the cure occurs after the maximum number of attempts349 or the maximum time period set forth in the statute has elapsed.350 The right to a lemon law remedy is determined by the
The majority of state lemon laws allow the consumer to choose between replacement or refund. A consumer who accepts a replacement vehicle cannot claim a refund remedy as well.355
The exact terms of the state law and the circumstances of the consumer’s loss of the vehicle’s possession will determine whether a consumer can bring a lemon law claim when no longer in possession of the vehicle. Some lemon laws offer a damage remedy which may be available when loss of possession prevents a refund or replace remedy.358 Losing possession before defendants can inspect the vehicle can create spoliation of evidence problems.359
Lemon laws may specify that a replacement vehicle must be both new and comparable, just comparable, just new, or comparable and “acceptable to the consumer.” These different statutory provisions may be essentially the same because statutes that require a vehicle to be “comparable” probably intend this concept to also mean “new.”371
When a consumer receives a replacement vehicle, the consumer usually does not have to pay an allowance reflecting their use of the lemon vehicle. The typical lemon law only specifies allowances relating to the refund remedy.379
Lemon law refund provisions should be construed to make the consumer whole.383 Many lemon laws require the manufacturer to refund the “purchase price” or “full purchase price.” A number of lemon laws define these terms to include not only the cash payments and trade-in allowance, but also optional purchases,384 sales tax,385 and registration fees.386 A lessee may not be entit
The value of a vehicle that the buyer traded in when purchasing the lemon is part of the purchase price that must be refunded.
Some lemon laws require that the manufacturer reimburse the consumer for incidental or consequential damages, and a few even specify which incidental or consequential damages are reimbursable.411 Even when such damages are not recoverable, the consumer may be able to bring an action to recover such damages under the UCC or some other theory. The consumer need not elect one remedy over another unless the lemon law so requires.412
Many lemon laws cover leased vehicles.413 Idaho provides that the consumer cannot opt for a replacement vehicle, but instead must turn the car in. The consumer will not owe an early termination charge and receives a pro-rata refund of any deposits, based on the number of months remaining in the lease.414
Almost all lemon laws provide that any purchase price returned to the consumer can be offset by a “reasonable allowance for use,” thereby reducing the consumer’s refund to the extent that the consumer has used and benefited from the car.419 These provisions recognize that the buyer may continue to use the car while pursuing lemon law remedies without the risks present under UCC § 2-606 that use after revocation will be found to bar cancellation.420
State lemon laws provide a refund or replace remedy closely akin to the UCC revocation of acceptance, with certain advantages over the UCC remedy.654 There are situations in which the consumer is better served by seeking UCC revocation of acceptance instead of lemon law remedies.
Revocation of acceptance is available for breaches of either express or implied warranties, as long as the breach is a substantial impairment. Interpretation of express warranties is discussed in § 7.3.5.3, supra.
To revoke acceptance under the UCC, the defect must substantially impair the vehicle. General standards for substantial impairment are set out in § 8.3.2, supra. This section examines case law determining whether new car defects are substantial impairments.
In applying the substantial impairment test to vehicles, courts have held that the following sorts of vehicles had substantially impaired value:
The cumulative effect of minor defects, none of which alone would substantially impair value, can be sufficient to justify revocation if in violation of a warranty. In Rester v. Morrow,732 the car had a gasoline fume odor, a malfunctioning air conditioner, a broken oil indicator gauge, missing chrome, soiled carpets, and other less significant problems, and the battery required repeated replacement.