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Consumer Warranty Law: 9.7.1 Federal Law Requires Any Remedy Limitation to Be Conspicuous If “Written Warranty” Provided

The Magnuson-Moss Warranty Act leaves sellers free to limit warranty remedies for consumer products, but a seller who gives a “written warranty” as defined by the statute must make clear and conspicuous disclosure, in simple and readily understood language, of any limitations on warranty remedies.116 The disclosures must be part of a single document that includes other required information about the warranty.117

Consumer Warranty Law: 9.7.3 Effect of State Plain Language Statute

Several states, including Connecticut, Hawaii, Maine, Minnesota, Montana, New Jersey, New York, Oregon, Pennsylvania, and West Virginia, have adopted plain language statutes that are generally applicable to a wide variety of consumer transactions. Other states have plain language requirements as part of other statutes, such as rent-to-own statutes, deceptive practices (UDAP) statutes, insurance codes, consumer credit statutes, and hearing aid sales statutes.127

Consumer Warranty Law: 9.8 Seller’s Post-Sale Conduct May Waive the Contractual Limitation

The seller’s post-sale conduct can operate as a waiver of the remedy limitation or can be a course of performance that demonstrates that the limited remedy was not intended by the parties to be exclusive.128 A common example is a contractual requirement that the buyer deliver the goods to the seller or manufacturer for warranty work. A warrantor who does not hold the buyer to this requirement cannot invoke it at a later date.129

Consumer Warranty Law: 9.10 Seller’s Bad Faith

The seller’s bad faith may also bar the seller from enforcing a limitation of remedies.144 The UCC imposes a non-waivable145 obligation of good faith upon all transactions it covers.146 “Good faith” is defined as honesty in fact and the observance of reasonable commercial standards of fair dealing.147

Consumer Warranty Law: 9.11 Remedy Limitations That Make Warranty Unfair or Deceptive

A limitation of remedies clause can be challenged as a deceptive or unfair trade practice. For example, a remedy limitation that so restricts the warranty as to render it nearly illusory may violate the state’s unfair and deceptive acts and practices (UDAP) statute.152 If promotional material for a burglar alarm stresses how it safeguards the buyer’s valuables and is guaranteed, a limitation of the warranty to repair or replacement may be deceptive.

Consumer Warranty Law: 18.6.1 General

Just as with goods,281 a builder or seller of a house can make an express warranty as to the quality or other aspects of the house, the breach of which leads to a claim if it was part of the basis of the bargain.282 The warranty may be written or oral, and whether a particular statement constitutes a warranty is usually a question of fact.283 Quite often the purchase and sale agreement,284 or the cons

Consumer Warranty Law: 18.6.2.1 Houses Purchased with Federally Insured Loans

Federal law requires that homes built pursuant to a loan guaranteed by the Veterans Administration296 or financed by the Federal Housing Administration pursuant to the National Housing Act297 be accompanied by “a warranty that the dwelling is constructed in substantial conformity with the plans and specifications.” One court has held that this statute does not create a private federal cause of action.298 Nonetheless, if the contract contains the re

Consumer Warranty Law: 18.6.3.1 The Merger Doctrine

Builders argue that the merger doctrine (not to be confused with a merger clause) extinguishes a sales contract’s express warranties. That doctrine states that agreements made prior to a conveyance are merged into—meaning extinguished—by the deed unless specifically repeated in it.

Consumer Warranty Law: 18.6.3.3 Notice Requirements and Other Warranty Restrictions

An express warranty is contractual, and conditions placed on the warranty, such as a requirement that the buyer notify the seller of a warranty breach within a specific period of time or allow the seller an opportunity to repair, may be enforced if not unconscionable.315 The requirement of notice and an opportunity to cure also exists in some states because of a stand-alone statute applicable to any type of home warranty claim.316 However, when a plaintiff has a reasonable excuse for failing to

Consumer Warranty Law: 18.6.3.4 Puffing

“Puffing”—that is, sales statements expressing an opinion and not intended to guarantee a particular quality—will not create an express warranty.

Consumer Warranty Law: 18.7.1.1 UDAP Claims

New home defects usually give rise to a variety of claims in addition to breach of warranty claims. State unfair and deceptive acts and practices (UDAP) statutes usually apply to home sales unless a particular state UDAP statute does not apply to real estate transactions.323 Some UDAP statutes also exclude non-merchant sellers,324 and therefore would not cover individuals selling their own homes.

Consumer Warranty Law: 18.7.1.2 Tort Claims

A builder may be liable in tort under a strict liability theory,328 so that no negligence need be shown, and recovery can be had despite lack of privity or the existence of disclaimers of liability.329 The consumer only has to show that the house is unreasonably dangerous.330

Consumer Warranty Law: 18.7.1.3 Breach of Contract Claims

A claim can be styled as a simple breach of contract action.336 The buyer need not show that the defect resulted from negligence, or that the seller misrepresented the condition of the property in any way,337 though if these circumstances exist other claims may be available.338

Consumer Warranty Law: 18.1 Limited Applicability of the Uniform Commercial Code

The Uniform Commercial Code (UCC) defines “goods” as “all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale.”1 Houses—as distinguished from manufactured homes2—are not goods and so Article 2 does not apply.3 Courts are split as to whether a house’s component parts that were goods before being incorporated into the house lose their status as goods once incorporated.

Consumer Warranty Law: 18.3.3.1 Does the Warranty Apply Only to Buyers for Their Own Use?

A few courts apply the warranty of habitability only to those buying a house in order to live in it, and not to those buying for investment or commercial purposes,40 but most courts rule that the warranty does not depend upon either the buyer’s purpose41 or sophistication.42 “[R]esolution of the question whether the buyer has received that which he bargained for does not depend upon the status of the buyer or ultimate user; it depends upon the qual

Consumer Warranty Law: 18.3.3.2 Do Subsequent Buyers Have Rights Under the Warranty?

Courts diverge on whether a warranty of quality extends to subsequent purchasers—those further down the chain of title from the original purchaser. Can a subsequent owner sue the original builder, as the subsequent owner is not in privity with the builder? This question is different than whether a subsequent owner (purchasing a used home) can sue the seller. Instead the subsequent owner wants to bring a claim against the original builder for a defect that traces back to the original construction.

Consumer Warranty Law: 18.3.4.1 Do Only Professional Builders Provide the Warranty?

Some courts require that, to be subject to the warranty, the seller must be in the profession of building houses49 and build the house with the intention of selling it—that is, with a commercial purpose.50 This view echoes the UCC’s warranty of merchantability, which arises only when the seller is a merchant with respect to goods of the kind sold.51 Other courts though do not find that the breach of a warranty of quality applies only to professiona

Consumer Warranty Law: 18.3.4.2 Other Parties Liable Under the Warranty

In cases in which the builder and seller are different legal entities, courts have been willing in certain circumstances to adapt the warranty to provide redress to the consumer against both the builder and the seller.60 Developers who did not actually construct the house, but did the infrastructure work of site selection and preparation, have been found by some courts to have extended the implied warranty.61 When a building owner hires a contractor to convert the building into condominiums and