Guide To Federal Warranty Law (Understanding Warranties)
A Businessperson’s Guide to
Federal Warranty Law
Your warranty is a contract that commits you to stand behind your product.
Section 2-314 of the Uniform Commercial Code, which is law in every state but Louisiana, covers the implied warranty of merchantability.
Basically, your product is “merchantable” if it does what it is supposed to do.
Section 2-315 of the Uniform Commercial Code covers the implied warranty of fitness for a particular purpose.
Implied warranties deal with the product at the time it is purchased.
Generally, customers have four years to enforce an implied warranty claim.
Merchants of used goods also give implied warranties.
You can sell without implied warranties—”as is”—in most states.
To sell “as is” you must clearly and conspicuously disclaim implied warranties, generally in writing.
You cannot sell “as is” in some states.
You cannot avoid implied warranties if you offer a written warranty on a consumer product.
You cannot avoid responsibility for personal injury caused by a defect in your product, even if you sell “as is.”
Section 2-313 of the Uniform Commercial Code covers express warranties.
Generally, a warranty is your promise, as a manufacturer or seller, to stand behind your product. It is a statement about the integrity of your product and about your commitment to correct problems when your product fails.
The law recognizes two basic kinds of warranties—implied warranties and express warranties.
The implied warranty of merchantability is a merchant’s basic promise that the goods sold will do what they are supposed to do and that there is nothing significantly wrong with them. In other words, it is an implied promise that the goods are fit to be sold. The law says that merchants make this promise automatically every time they sell a product they are in business to sell. For example, if you, as an appliance retailer, sell an oven, you are promising that the oven is in proper condition for sale because it will do what ovens are supposed to do—bake food at controlled temperatures selected by the buyer. If the oven does not heat, or if it heats without proper temperature control, then the oven is not fit for sale as an oven, and your implied warranty of merchantability would be breached. In such a case, the law requires you to provide a remedy so that the buyer gets a working oven.
The implied warranty of fitness for a particular purpose is a promise that the law says you, as a seller, make when your customer relies on your advice that a product can be used for some specific purpose. For example, suppose you are an appliance retailer and a customer asks for a clothes washer that can handle 15 pounds of laundry at a time. If you recommend a particular model, and the customer buys that model on the strength of your recommendation, the law says that you have made a warranty of fitness for a particular purpose. If the model you recommended proves unable to handle 15-pound loads, even though it may effectively wash 10-pound loads, your warranty of fitness for a particular purpose is breached.
Implied warranties are promises about the condition of products at the time they are sold, but they do not assure that a product will last for any specific length of time. (The normal durability of a product is, of course, one aspect of a product’s merchantability or its fitness for a particular purpose.) Nor does the law say that everything that can possibly go wrong with a product falls within the scope of implied warranties. For example, implied warranties do not cover problems such as those caused by abuse, misuse, ordinary wear, failure to follow directions, or improper maintenance.
Generally, there is no specified duration for implied warranties under state laws. However, the state statutes of limitations for breach of either an express or an implied warranty are generally four years from date of purchase. This means that buyers have four years in which to discover and seek a remedy for problems that were present in the product at the time it was sold. It does not mean that the product must last for four years. It means only that the product must be of normal durability, considering its nature and price.
A special note is in order regarding implied warranties on used merchandise. An implied warranty of merchantability on a used product is a promise that it can be used as expected, given its type and price range. As with new merchandise, implied warranties on used merchandise apply only when the seller is a merchant who deals in such goods, not when a sale is made by a private individual.
If you do not offer a written warranty, the law in most states allows you to disclaim implied warranties. However, selling without implied warranties may well indicate to potential customers that the product is risky—low quality, damaged, or discontinued—and therefore, should be available at a lower price.
In order to disclaim implied warranties, you must inform consumers in a conspicuous manner, and generally in writing, that you will not be responsible if the product malfunctions or is defective. It must be clear to consumers that the entire product risk falls on them. You must specifically indicate that you do not warrant “merchantability,’ or you must use a phrase such as “with all faults,” or “as is.” A few states have special laws on how you must phrase an “as is” disclosure. (For specific information on how your state treats “as is” disclosures, consult your attorney.)
Some states do not allow you to sell consumer products “as is” At this time, these states are Alabama, Connecticut, Kansas, Maine, Maryland, Massachusetts, Minnesota, Mississippi, New Hampshire, Vermont, Washington, West Virginia, and the District of Columbia. In those states, sellers have implied warranty obligations that cannot be avoided.
Federal law prohibits you from disclaiming implied warranties on any consumer product if you offer a written warranty for that product (see What the Magnuson-Moss Act Requires) or sell a service contract on it (see Offering Service Contracts).
You should be aware that even if you sell a product “as is” and it proves to be defective or dangerous and causes personal injury to someone, you still may be liable under the principles of product liability. Selling the product “as is” does not eliminate this liability.
Express warranties can take a variety of forms, ranging from advertising claims to formal certificates. An express warranty can be made either orally or in writing. While oral warranties are important, only written warranties on consumer products are covered by the Magnuson-Moss Warranty Act.
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