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Consumer Warranty Law: § 702.2 Scope.

The regulations in this part establish requirements for sellers and warrantors for making the terms of any written warranty on a consumer product available to the consumer prior to sale.

Consumer Warranty Law: § 702.3 Pre-sale availability of written warranty terms.

The following requirements apply to consumer products actually costing the consumer more than $15.00:

(a) Duties of seller. Except as provided in paragraphs (c) through (d) of this section, the seller of a consumer product with a written warranty shall make a text of the warranty readily available for examination by the prospective buyer by:

Consumer Warranty Law: Listing of Provisions

PART 703—INFORMAL DISPUTE SETTLEMENT PROCEDURES

§ 703.1 Definitions.

§ 703.2 Duties of warrantor.

MINIMUM REQUIREMENTS OF THE MECHANISM

§ 703.3 Mechanism organization.

§ 703.4 Qualification of members.

§ 703.5 Operation of the Mechanism.

§ 703.6 Recordkeeping.

§ 703.7 Audits.

§ 703.8 Openness of records and proceedings.

AUTHORITY: 15 U.S.C. §§ 2309 and 2310.

SOURCE: 40 Fed. Reg. 60,215 (Dec. 31, 1975), unless otherwise noted.

Consumer Warranty Law: § 703.1 Definitions.

(a) The Act means the Magnuson-Moss Warranty—Federal Trade Commission Improvement Act, 15 U.S.C. 2301, et seq.

(b) Consumer product means any tangible personal property which is distributed in commerce and which is normally used for personal, family, or household purposes (including any such property intended to be attached to or installed in any real property without regard to whether it is so attached or installed).

Consumer Warranty Law: § 703.2 Duties of warrantor.

(a) The warrantor shall not incorporate into the terms of a written warranty a Mechanism that fails to comply with the requirements contained in §§ 703.3 through 703.8 of this part. This paragraph (a) shall not prohibit a warrantor from incorporating into the terms of a written warranty the step-by-step procedure which the consumer should take in order to obtain performance of any obligation under the warranty as described in section 102(a)(7) of the Act, 15 U.S.C. 2302(a)(7), and required by part 701 of this subchapter.

Consumer Warranty Law: § 703.5 Operation of the Mechanism.

(a) The Mechanism shall establish written operating procedures which shall include at least those items specified in paragraphs (b) through (j) of this section. Copies of the written procedures shall be made available to any person upon request.

(b) Upon notification of a dispute, the Mechanism shall immediately inform both the warrantor and the consumer of receipt of the dispute.

Consumer Warranty Law: § 703.6 Recordkeeping.

(a) The Mechanism shall maintain records on each dispute referred to it which shall include:

(1) Name, address and telephone number of the consumer;

(2) Name, address, telephone number and contact person of the warrantor;

(3) Brand name and model number of the product involved;

Consumer Warranty Law: § 703.7 Audits.

(a) The Mechanism shall have an audit conducted at least annually, to determine whether the Mechanism and its implementation are in compliance with this part. All records of the Mechanism required to be kept under § 703.6 of this part shall be available for audit.

(b) Each audit provided for in paragraph (a) of this section shall include at a minimum the following:

Consumer Warranty Law: § 703.8 Openness of records and proceedings.

(a) The statistical summaries specified in § 703.6(e) of this part shall be available to any person for inspection and copying.

(b) Except as provided under paragraphs (a) and (e) of this section, and paragraph (c) of § 703.7 of this part, all records of the Mechanism may be kept confidential, or made available only on such terms and conditions, or in such form, as the Mechanism shall permit.

Consumer Warranty Law: 12.2.2 Rationales for Economic Loss Doctrine

Supporters of the economic loss rule emphasize its importance as “the fundamental boundary between contract law, which is designed to enforce the expectancy interests of the parties, and tort law, which imposes a duty of reasonable care and thereby encourages citizens to avoid causing physical harm to others.”24 They argue that allowing tort liability would disrupt the UCC statutory scheme of rights and remedies covering economic expectations.

Consumer Warranty Law: 12.2.3 Economic Damages May Be Allowed in Consumer But Not Commercial Cases

A number of courts award tort economic injury damages in consumer cases when they would not in commercial cases29 Other courts, while not reaching the question directly, stress that the particular buyer was a commercial entity with bargaining power equal to the seller’s, thereby implying that the rule might not apply to ordinary consumers30 But other courts reject any distinction between consumer and commercial cases31

Consumer Warranty Law: 12.2.5 When UCC Remedies Unavailable; Non-Privity Plaintiffs; Services

As noted in , supra, some courts base their adoption of the economic loss rule on the view that allowing recovery of these losses on strict liability and negligence claims would disrupt the UCC statutory scheme. These courts may reach the parallel conclusion that, if UCC remedies are not available in a particular case, the economic loss doctrine does not apply to an alleged tort claim in that case.47 Otherwise the plaintiff might be left without a remedy.

Consumer Warranty Law: 12.2.6 Breach of Statutory or Independent Duty

Some courts look to the source of the duty breached when they apply the economic loss doctrine. They examine the tort action to find whether the duty alleged to have been breached was the contractual promise itself, or some larger social duty,53 on the grounds that tort law is an appropriate remedy for breaches of the latter.

Consumer Warranty Law: 12.2.7 Special Relationship

Many jurisdictions allow recovery of economic losses when the parties have a special relationship.58 California courts hold that the determination whether a special relationship exists is a matter of policy and involves the balancing of various factors, including: (1) the extent to which the transaction was intended to affect the plaintiff; (2) the foreseeability of harm to the plaintiff; (3) the degree of certainty that the plaintiff suffered injury; (4) the closeness of the connection between the defendant’s conduct and the injury suffered; (

Consumer Warranty Law: 12.2.8.1 Recovery for Damage to Other Property

A tort recovery may be had by characterizing the injury not as economic damage, but as property damage or personal injury. In most jurisdictions the damage that a product causes to itself is considered economic loss, so neither the diminution in value nor repair costs can be recovered on a strict liability or negligence theory, unless some other exception to the economic loss doctrine applies.61 But tort recovery is available for damage the defective product causes to “other property.”62

Consumer Warranty Law: 12.2.8.2 The East River and Saratoga Fishing Standard

When a defective component damages the larger product into which it was installed, is this damage to the product itself or damage to other property? The United States Supreme Court has addressed this question twice in the context of maritime law. In the first case, East River Steamship Corp. v. Transamerica Delaval, Inc.,65 a manufacturer sold a turbine that had defective components. When the components malfunctioned, they damaged the turbine.

Consumer Warranty Law: 12.2.8.3 Alternative Tests

The definition of “other property” in East River and Saratoga Fishing is not universally accepted, however. Some courts follow a more complex test, allowing recovery when one component of a product damages other components if the defective part is a sufficiently discrete element of the larger product so that it is not reasonable to expect that its failure will invariably damage other components.73

Consumer Warranty Law: 12.2.8.4 Damage That a Defective Component Causes to a Home

Denying recovery for damage caused by a component that was installed in the product when the consumer bought it can be particularly unjust when the “product” is a home or condominium. For example, a defectively installed roof that allows water to enter a home may cause great damage to the home. If the home is treated as the integrated product that the consumer bought, the economic loss doctrine would deny tort recovery for this damage.

Consumer Warranty Law: 12.3.1 Introduction

The basic premise of strict liability in tort is that the manufacturer, by marketing its product for use and consumption, implicitly represents that the product is not unreasonably dangerous to person or property, and that the manufacturer should be liable if the product does prove to be unreasonably dangerous.

Consumer Warranty Law: 12.3.2 Strict Liability Can Apply to Manufacturers, Retailers, and Lessors

Manufacturers and other indirect sellers can be strictly liable in tort. The Restatement (Second) of Torts section refers to the “ultimate user or consumer,” and the very purpose of the section is to avoid privity entanglements.91 The manufacturer of a non-defective component part may be also liable if it substantially participates in the negligent integration of the part into the final product.92