Essentials Of Business Law Chapter 16 Warranties McGraw-Hill/Irwin Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Essentials of Business LawChapter 16-2 Protecting Consumers And Third Parties Warranties  Covered by the law of sales, contract law, and the UCC  Provide consumers with remedies when goods that they purchase are not or do not perform as expected Product liability  Covered by tort law  Provide consumers and users with remedies for defective goods that cause injury or property damage

Essentials of Business LawChapter 16-3 The Law Of Warranties Guarantee made by the manufacturer or seller that the goods offered really are as claimed  Or that the goods are what a reasonable person would expect Express warranty  Explicit or specifically stated promises Implied warranty  A guarantee suggested or inferred from known facts and circumstances Intended to protect the general public  Often has the effect of limiting the seller’s obligations and responsibilities

Essentials of Business LawChapter 16-4 Express Warranty By Promise Promise by the seller that the goods will have certain characteristics  Becomes part of the basis of the agreement  Creates an explicit warranty that the goods will be as promised Custom of the marketplace  Used when warrantee is vague  Court determines what a warranty means in similar transactions The buyer must have relied on the promise Specific written or oral statements by the seller are not required  Actions of the seller may be considered express warranties

Essentials of Business LawChapter 16-5 Express Warranty By Description, Sample, Or Model Description of goods  Creates an express warranty that the goods shall conform to the description Sample of goods or model  Creates an express warranty that the whole of the goods will conform to the sample or model A buyer may refuse delivered goods if:  The goods are not the same as described by the seller  The goods do not conform to the sample or model used by the seller

Essentials of Business LawChapter 16-6 Implied Warranty Warranties not made explicitly What a buyer might reasonably expect a seller to honor Relate to either:  The title of goods  The quality of goods

Essentials of Business LawChapter 16-7 Implied Warranty – Title The seller promises that:  The seller is the real owner of the goods offered for sale  The seller has the right to sell the goods  There are no claims or liens of any kind against the goods

Essentials of Business LawChapter 16-8 Implied Warranty – Quality Warranties of merchantability  Given solely by merchants  Goods sold by a merchant are fit to be sold or resold Warranties of fitness for a particular purpose  Apply more generally, to merchants as well as to others  Goods must be fit for the intended purpose

Essentials of Business LawChapter 16-9 Magnuson-Moss Warranty Act Applies when written warranties are made voluntarily on consumer products that cost more than $25 Applies only to purchases of tangible personal property normally used for personal, family, or household use Affects only warranties on products that are sold in interstate commerce Warranties covered by the act are:  Any written statement of fact relating to the quality or performance of a product  A written promise to “refund, repair, replace, or take other action” if a product fails to meet written specifications Must be labeled as either “full” or “limited”

Essentials of Business LawChapter Magnuson-Moss Warranty Act Full Warranty  Promises that a defective product will be repaired without charge within a reasonable time  If product is not repairable, the consumer may receive either a replacement product or a refund  Applies to anyone who owns the product during the warranty period, not just the original buyer  No time limitation can be placed on a full warranty Limited Warranty  A written warranty that does not meet the minimum requirements of a full warranty