1. Express and Implied Warranties Section 14.1

2. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Section 14.1 Express and Implied Warranties Section 14.2 Exclusion of Warranties, Privity, and Duty to Notify 14 Chapter The Importance of Warranties

3. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties What You’ll Learn How to describe the three ways an express warranty can be made (p. 294) How to state the obligations of merchants under the Magnuson-Moss Warranty Act (p. 297)

4. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties What You’ll Learn How to contrast a limited warranty with a full warranty (pp. 297, 298)

5. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties What You’ll Learn How to differentiate between the implied warranty of fitness of a particular purpose and the implied warranty of merchantability (pp. 301, 302) How to explain the warranty of title (p. 303)

6. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Why It’s Important Understanding warranties will keep you from losing money.

7. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Legal Terms warranty (p. 294) express warranty (p. 294) full/limited warranty (pp. 297, 298) implied warranty (p. 301)

8. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Legal Terms warranty of fitness for a particular purpose (p. 301) warranty of merchantability (p. 302) usage of trade (p. 303) warranty of title (p. 304)

9. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Law of Warranties Express Warranties Statement of Fact or Promise Availability before Sale Advertising Express Warranties Section Outline

10. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Express Warranties, continued Magnuson-Moss Warranty Act Description of the Goods Sample or Model Section Outline

11. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Implied Warranties Warranty of Fitness for a Particular Purpose Warranty of Merchantability Usage of Trade Warranty of Title Section Outline

12. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Pre-Learning Question What is a warranty?

13. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties The UCC provides protection under its law of warranties for situations such as: Law of Warranties Products that don’t work after you buy them. Impurities in foods in restaurants. Technical problems with computers.

14. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties A warranty is another name for a guarantee. A breach of warranty is a breach of contract. Law of Warranties

15. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Pre-Learning Question What is an express warranty?

16. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties An express warranty is an oral or written statement, promise, or other representation about the quality, ability, or performance of a product. Express warranties apply to goods that are sold or leased. Express Warranties

17. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Express warranties are conveyed in three ways: Express Warranties 1.By a statement of fact or promise made by the seller 2.By a description of the goods 3.By the use of a sample or model

18. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties An express warranty is created when a private party or a merchant sells goods and makes a statement of fact or a promise about the goods to the buyer. Statement of Fact or Promise

19. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties An express warranty may be a statement of fact or a promise of something that may happen in the future. Express warranties are often found in sales brochures, circulars, and advertisements. Statement of Fact or Promise

20. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Written warranties on consumer products costing more than $15 must be made available before you buy the product. Availability before Sale

21. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties An advertisement stating that a product is warranted must tell you how to get a copy of the warranty before you buy the product. Advertising Express Warranties

22. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties The Magnuson-Moss Warranty Act is a law affecting only the sale of goods sold in interstate commerce (business activities that touch more than one state). Magnuson-Moss Warranty Act

23. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties This federal act gives added protection to consumers when written express warranties are made. Magnuson-Moss Warranty Act

24. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties When a written warranty is offered on consumer goods costing more that $10 and sold in interstate commerce, the warranty must be labeled as full or limited. Magnuson-Moss Warranty Act

25. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties A full warranty promises to fix or replace a defective product at no charge to the consumer. Full Warranty

26. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties A full warranty: Full Warranty Must be honored within a reasonable amount of time. Is good for the period mentioned in the warranty, regardless of who owns the item when it breaks.

27. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties A limited warranty is any written warranty that does not meet the requirements for a full warranty. Limited Warranty

28. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties A limited warranty: Limited Warranty Does not promise free repair or replacement. Commonly covers only parts, not labor. May offer a partial refund.

29. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties A limited warranty: Limited Warranty May require you to pay shipping. May only apply to the original buyer. Must be labeled “limited warranty.”

30. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Any description of the goods that is part of a transaction also creates an express warranty. The seller warrants that the goods will be the same as the description. Description of the Goods

31. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Any sample or model that is part of a transaction creates an express warranty. When displaying a sample or model, the seller warrants that the goods sold will be the same. Sample or Model

32. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Pre-Learning Question What is an implied warranty?

33. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties An implied warranty is a guarantee of quality imposed by law. Implied Warranties

34. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties An implied warranty: Implied Warranties Is not in writing. Applies only to goods that are sold, not services contracted.

35. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties There are three types of implied warranties: Implied Warranties 1.Warranty of fitness for a particular purpose 2.Warranty of merchantability 3.Warranty that comes from a course of dealing or usage of trade

36. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties What is the difference between an express and an implied warranty?

37. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties ANSWER Express: provided by the seller; implied: imposed by law.

38. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties A warranty of fitness for a particular purpose is created when the seller knows the purpose for which the goods are needed. Warranty of Fitness for a Particular Purpose

39. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties The seller advises the buyer in making a purchase, and the buyer relies on the seller’s knowledge and advice. Warranty of Fitness for a Particular Purpose

40. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties In this way, the seller warrants by implication that the goods will be fit for the purpose for which they are to be used. Warranty of Fitness for a Particular Purpose

41. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties This warranty exists whether the seller is a merchant or a private party. Warranty of Fitness for a Particular Purpose

42. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Under an implied warranty of merchantability, the merchant warrants that the goods being sold are merchantable. Warranty of Merchantability

43. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties This warranty is given only when the seller regularly sells goods of that kind. Unless disclaimed, retailers, wholesalers, and manufacturers imply such a warranty in every sale. Warranty of Merchantability

44. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties This gives assurance that their products are fit for the purpose for which they are purchased. Warranty of Merchantability

45. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Private parties do not provide the warranty of merchantability. Warranty of Merchantability

46. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Another implied warranty arises from the customary ways in which the parties have dealt in the past, or the usage of trade. Usage of Trade

47. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Pre-Learning Question What is a warranty of title?

48. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties When a merchant or a private party sells goods, the seller warrants that the title being conveyed is good and that the transfer is lawful. This is called the warranty of title. Warranty of Title

49. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Reviewing What You Learned 1. 1.What are the three ways an express warranty can be made? Section 14.1 Assessment

50. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Reviewing What You Learned By a statement of fact or promise made by the seller, by a description of the goods, and by the use of a sample or model. Section 14.1 Assessment Answer

51. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Reviewing What You Learned 2. 2.What are the obligations of merchants under the Magnuson- Moss Warranty Act? Section 14.1 Assessment

52. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Reviewing What You Learned Merchants must label written warranties as either “full” or “limited” for consumer products costing more than $10. Section 14.1 Assessment Answer

53. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Reviewing What You Learned 3. 3.What is difference between a limited warranty and a full warranty? Section 14.1 Assessment

54. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Reviewing What You Learned A limited warranty is one that does not meet all of the requirements for a full warranty. Section 14.1 Assessment Answer

55. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Reviewing What You Learned 4. 4.What is the difference between the implied warranty of fitness for a particular purpose and the implied warranty of merchantability? Section 14.1 Assessment

56. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Reviewing What You Learned A warranty of fitness for a particular purpose is created when the seller knows about a particular purpose for which the goods are needed. Section 14.1 Assessment Answer

57. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Reviewing What You Learned The seller advises the buyer in making a purchase and the buyer relies on the seller’s advice. This warranty exists whether the seller is a merchant or a private party. Section 14.1 Assessment Answer

58. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Reviewing What You Learned In contrast, sellers who regularly sell goods of a particular kind imply a warranty of merchantability in every sale, assuring that their products are fit for the purpose for which they are purchased. Section 14.1 Assessment Answer

59. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Reviewing What You Learned Private parties do not provide the warranty of merchantability. Section 14.1 Assessment Answer

60. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Reviewing What You Learned 5. 5.What is the warranty of title? Section 14.1 Assessment

61. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Reviewing What You Learned Guarantees that the title being conveyed is good, and the transfer is lawful. Section 14.1 Assessment Answer

62. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Section 14.1 Assessment Critical Thinking Activity Opinion or Fact A statement of fact by a seller about a product is a warranty; a seller’s opinion is not. Talk with another class member and compare the following pairs of statements.

63. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Section 14.1 Assessment Critical Thinking Activity Opinion or Fact Classify each statement as fact or opinion.

64. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Section 14.1 Assessment Critical Thinking Activity Opinion or Fact 1.These goods are 100 percent wool. This is the finest wool around.

65. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Section 14.1 Assessment Critical Thinking Activity Answer Opinion or Fact 1.These goods are 100 percent wool. (fact) This is the finest wool around. (opinion)

66. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Section 14.1 Assessment Critical Thinking Activity Opinion or Fact 2.This truck has never been in an accident. This truck is solid.

67. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Section 14.1 Assessment Critical Thinking Activity Answer Opinion or Fact 2.This truck has never been in an accident. (fact) This truck is solid. (opinion)

68. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Section 14.1 Assessment Critical Thinking Activity Opinion or Fact 3.This ink will not stain clothes. This ink is safe to use.

69. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Section 14.1 Assessment Critical Thinking Activity Answer Opinion or Fact 3.This ink will not stain clothes. (fact) This ink is safe to use. (opinion)

70. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Section 14.1 Assessment Critical Thinking Activity Opinion or Fact 4.This is an IBM-compatible computer. This computer is as good as any IBM.

71. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Section 14.1 Assessment Critical Thinking Activity Answer Opinion or Fact 4.This is an IBM-compatible computer. (fact) This computer is as good as any IBM. (opinion)

72. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Section 14.1 Assessment Critical Thinking Activity Opinion or Fact 5.This watch is waterproof. This watch is durable.

73. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Section 14.1 Assessment Critical Thinking Activity Answer Opinion or Fact 5.This watch is waterproof. (fact) This watch is durable. (opinion)

74. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Section 14.1 Assessment Legal Skills in Action Written Guarantees Turner is planning to sell his computer system to Lynne. It is only two years old and has a modem, color monitor, and CD- ROM drive. According to Turner, the system has never had a problem.

75. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Section 14.1 Assessment Legal Skills in Action Written Guarantees Lynne is a little nervous about buying a used system and wants a written guarantee. In groups of two, help Turner write a warranty on his computer system.

76. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Section 14.1 Assessment Legal Skills in Action Answer Written Guarantees Warranties will vary, but should recognize that Turner need only provide Lynne with a warranty of fitness for a particular purpose.

77. Express and Implied Warranties End of Section 14.1

78. Express and Implied Warranties Section 15.1

79. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Section 15.1 Consumer Protection Section 15.2 Product Liability 15 Chapter Consumer Protection and Product Liability

80. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties What You’ll Learn How to explain the main differences between state and federal consumer protection law (p. 316) How to describe two unfair and deceptive practices (p. 317)

81. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties What You’ll Learn How to recognize bait and switch advertising (p. 321) How to identify four Federal Trade Commission rules that protect consumers (p. 321)

82. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Why It’s Important Knowledge of consumer protection laws will prevent you from falling victim to fraud and deception.

83. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Legal Terms caveat emptor (p. 316) caveat venditor (p. 316) consumer (p. 316) unfair and deceptive practice (p. 317) fraudulent misrepresentation (p. 318)

84. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Legal Terms cease and desist orders (p. 320) bait and switch (p. 321) cooling-off rule (p. 322) telemarketers (p. 323)

85. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties The Development of Consumer Protection Law Federal and State Consumer Protection Laws Section Outline

86. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Fraudulent Misrepresentation Work-at-Home Schemes Unordered Merchandise Unfair and Deceptive Practices Section Outline

87. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Bait and Switch Advertising False Advertising Section Outline Negative Option Rule The Cooling-Off Rule FTC Trade Regulation Rules

88. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Telemarketing Sales Rule 900-Telephone-Number Rules Shopping by Mail, Telephone, Fax, or Internet FTC Trade Regulation Rules, continued Section Outline

89. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Pre-Learning Question How did consumer protection laws develop?

90. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Years ago, caveat emptor, which means “let the buyer beware,” reflected society’s attitude toward consumers. The Development of Consumer Protection Law

91. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties There were few ways to seek compensation for damages and those injured had no recourse due to privity of contract. The Development of Consumer Protection Law

92. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Today, however, society demands that manufacturers be held responsible for foreseeable injuries to people who use their products. The Development of Consumer Protection Law

93. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Caveat venditor, which means “let the seller beware,” now guides consumer transactions. The Development of Consumer Protection Law

94. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Pre-Learning Question To whom do consumer protection laws apply?

95. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Federal and State Consumer Protection Laws Consumer protection laws apply to transactions between consumers and people conducting business.

96. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Federal and State Consumer Protection Laws A consumer is someone who buys or leases goods, real estate, or services for personal, family, or household purposes.

97. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Federal and State Consumer Protection Laws Consumer protection laws do not protect you if: You acquire a product from another consumer You buy a product to use in a business

98. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties What is the difference between caveat emptor and caveat venditor?

99. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties ANSWER Caveat emptor is Latin for “let the buyer beware” and means that the buyer is the responsible party. Caveat venditor is Latin for ”let the seller beware” and means that the seller is responsible.

100. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties State Consumer Protection State consumer protection offices provide information and help enforce state consumer protection laws. Offices may assist consumers with individual problems.

101. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Federal Consumer Protection Federal consumer protection law applies to businesses that sell real estate, goods, or services in interstate commerce, or business activity that touches more than one state.

102. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Federal Consumer Protection The Federal Trade Commission (FTC) is the U.S. government agency that promotes free and fair trade competition in the American economy. The Bureau of Consumer Protection safeguards consumers against unfair, deceptive, or fraudulent practices.

103. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Federal Consumer Protection Both organizations investigate violations of federal consumer protection law.

104. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Pre-Learning Question What do you think are unfair and deceptive practices?

105. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Unfair and Deceptive Practices An unfair and deceptive practice is an act that misleads consumers. Most states have enacted some kind of unfair and deceptive trade practice law.

106. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Unfair and Deceptive Practices Examples include: Work-at-home schemes Unordered merchandise False advertising

107. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Unfair and Deceptive Practices If you feel you are the victim of an unfair or deceptive practice: Speak to the business owner or manager about the problem Write a complaint letter to the company.

108. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Elements of a Complaint Letter Description of purchase Product name and serial and model number or service Statement and history of problem Ask for specific action, state reasonable time for action

109. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Elements of a Complaint Letter Copies of documents Your address and work and home phone numbers

110. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Fraudulent Misrepresentation A fraudulent misrepresentation is any statement that deceives the buyer. A fraudulent misrepresentation usually occurs when a seller misstates the facts about something that is important to the consumer.

111. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Work-at-Home Schemes Home employment schemes are among the oldest kind of advertising fraud. They often promise big incomes without explaining the costs.

112. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Unordered Merchandise Under state and federal laws, unordered merchandise may be considered a gift. You can keep it without paying for it. It is illegal for anyone who sends free samples to include a bill.

113. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties What does FTC stand for and what does it do?

114. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties ANSWER The Federal Trade Commission is the agency of the U.S. government that promotes free and fair trade competition in the U.S. economy.

115. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Pre-Learning Question What is an example of false advertising?

116. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties False Advertising The FTC regulates false advertising on the national level and has the power to issue cease and desist orders. These orders are legally binding orders to stop a practice that would mislead the public.

117. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Bait and Switch One example of false advertising is bait and switch advertising. This happens when a store advertises bargains that do not really exist to lure customers in hopes that they will buy more expensive merchandise.

118. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Pre-Learning Question What are some FTC trade regulation rules?

119. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties FTC Trade Regulation Rules The FTC has established trade regulation rules for interstate commerce to correct wrongdoing in the marketplace.

120. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties FTC Trade Regulation Rules They include: The negative option rule The cooling-off rule The telemarketing sales rule 900-telephone-number rules Rules for shopping by mail, telephone, fax, or Internet

121. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Negative Option Rule When you subscribe to a magazine or CD club or other plan that sends products regularly, the negative option rule applies. Under such plans, the seller sends you announcements describing the current selection.

122. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Negative Option Rule If you want the selection, you do nothing; the seller will ship it automatically. If you do not want it, you must tell the seller not to send it, and there is a deadline for notification.

123. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties The Cooling-Off Rule The cooling-off rule gives you three days to cancel contracts for most purchases made away from the seller’s regular place of business.

124. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties The Cooling-Off Rule The rule applies to purchases of $25 or more made at the buyer’s home, workplace, or dormitory. It does not apply to contracts for real estate, insurance, securities, or emergency home repairs.

125. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Telemarketing Sales Rule The Telemarketing Sales Rule protects you from abusive telemarketers, the people who try to sell you products by telephone.

126. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties 900-Telephone-Number Rules Unlike 800-telephone-numbers, if you dial a 900-area-code telephone number, you are charged for the call. Sometimes consumers are charged excessively for 900-number calls.

127. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Protect Yourself Against 900-Number Scams Deal only with reputable companies. Think twice before calling a 900- number for a “free gift.”

128. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Protect Yourself Against 900-Number Scams Know precisely what the 900-call will cost—before you make the call. Don’t confuse 900-numbers with toll-free 800-numbers.

129. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Shopping by Mail, Telephone, Fax, or Internet The FTC has established rules to protect you when ordering goods by mail, telephone, fax, and the Internet.

130. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Shopping by Mail, Telephone, Fax, or Internet Sellers must ship goods within the time they promise in the advertising. If shipping time is not stated, they must ship within 30 days after receiving an order.

131. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Shopping by Mail, Telephone, Fax, or Internet You have the right to cancel and get your money back if time limits are not met. Sellers must notify you of any delay in shipment.

132. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Reviewing What You Learned 1. 1.What are the main differences between state and federal consumer law? Section 15.1 Assessment

133. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Reviewing What You Learned State consumer law provides information and helps protect consumers in the state in which they live. They sometimes assist consumers with individual problems. Section 15.1 Assessment Answer

134. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Reviewing What You Learned Federal consumer protection law applies to businesses that sell real estate, goods, or services in interstate commerce. Section 15.1 Assessment Answer

135. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Reviewing What You Learned 2. 2.Describe two unfair and deceptive practices. Section 15.1 Assessment

136. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Reviewing What You Learned False advertising and work-at-home schemes. Section 15.1 Assessment Answer

137. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Reviewing What You Learned 3. 3.What is bait and switch advertising? Section 15.1 Assessment

138. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Reviewing What You Learned Bait and switch advertising is an illegal practice in which nonexistent bargains are advertised to lure customers to more expensive merchandise. Section 15.1 Assessment Answer

139. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Reviewing What You Learned 4. 4.What are four FTC rules designed to protect consumers? Section 15.1 Assessment

140. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Reviewing What You Learned Answers include the negative option rule, the cooling-off rule, the telemarketing sales rule, 900-telephone-number rules, and rules for shopping by mail, telephone, fax, or Internet. Section 15.1 Assessment Answer

141. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Section 15.1 Assessment Critical Thinking Activity Bait and Switch How do you think bait and switch advertising got its name? What is the bait? What is the switch?

142. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Section 15.1 Assessment Answers will vary. Bait is what one uses to lure or catch something, as a worm is bait for catching fish. A business advertises a bargain to lure customers into the store. Critical Thinking Activity Answer Bait and Switch

143. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Section 15.1 Assessment The switch occurs when the salesperson tries to convince the customer to buy other, more expensive items. Critical Thinking Activity Answer Bait and Switch

144. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Section 15.1 Assessment Legal Skills in Action The Federal Trade Commission Merta has been a member of a CD club for two years. She has made several unsuccessful attempts to cancel her membership.

145. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Section 15.1 Assessment Legal Skills in Action The Federal Trade Commission Roberto suggested she file a complaint with the Federal Trade Commission. Merta needs to know more information.

146. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Section 15.1 Assessment Legal Skills in Action The Federal Trade Commission Help Merta research the history of the FTC. Next, help her to find out how to file a complaint with the FTC.

147. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Section 15.1 Assessment Legal Skills in Action Answer The Federal Trade Commission Answers will vary, but research could include the FTC Web site at www.ftc.gov. www.ftc.gov

148. Express and Implied Warranties End of Section 15.1

149. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties

150. Express and Implied Warranties Section 15.2

151. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties What You’ll Learn How to differentiate between product liability and strict liability (p. 327) How to describe the purpose of the Consumer Product Safety Act (p. 329)

152. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties What You’ll Learn How to identify the prohibitions contained in the Food, Drug, and Cosmetic Act (p. 329) How to determine where to get consumer protection assistance (p. 330)

153. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Why It’s Important Learning about product liability law will help you take effective action if you or a family member suffers injury from faulty products.

154. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Legal Terms product liability (p. 327) strict liability (p. 327) adulterated (p. 329) intrastate sales (p. 330)

155. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties What is Product Liability? Strict Liability Section Outline Federal and State Consumer Protection Laws Consumer Product Safety Act Food, Drug, and Cosmetic Act State and Local Laws

156. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Consumer Protection Assistance Section Outline Better Business Bureau

157. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Pre-Learning Question What do you think product liability is?

158. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Under product liability law, someone who is injured from a product’s unsafe or defective condition may recover damages. Manufacturers, sellers, and suppliers of goods can all be held responsible. What Is Product Liability?

159. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties You do not have to prove a negligent act on the part of the manufacturer or seller if you are hurt using a defective product. Strict Liability

160. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Strict liability makes manufacturers or suppliers responsible for selling goods that are unreasonably dangerous. Strict Liability

161. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties People who are injured or who suffer property damage from a defective product may recover from the manufacturer or seller if they can prove all of the following: Strict Liability

162. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties The manufacturer or seller was engaged in the business of selling the product. The product was unreasonably dangerous to the user or consumer. Strict Liability

163. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties The defective condition was the cause of the injury or damage. The defective condition existed when the product left the hands of the manufacturer or seller. Strict Liability

164. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties The consumer suffered physical harm or property damage as a result of using the product. Strict Liability

165. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Pre-Learning Question What are some federal and state consumer protection laws?

166. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Both the federal and state governments pass laws to protect consumers in the marketplace. Federal and State Consumer Protection Laws

167. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Two federal laws are the: Federal and State Consumer Protection Laws Consumer Product Safety Act Food, Drug, and Cosmetic Act

168. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties This law protects you from unreasonable risk of injury while using consumer products that are sold in interstate commerce. Consumer Product Safety Act

169. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Defects in products are divided into three categories: Consumer Product Safety Act 1.Manufacturing defects 2.Poor design 3.Inadequate instructions and warnings about the safe use of the product

170. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties This law prohibits the manufacture and shipment of faulty products in interstate commerce. Faulty products include any food, drug, cosmetic, or health-related device that is injurious, adulterated, or misbranded. Food, Drug, and Cosmetic Act

171. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties A food or drug is said to be injurious if it contains any substance that may make it harmful to health. Food, Drug, and Cosmetic Act

172. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties An adulterated food or drug is one that contains any substance that will reduce its quality or strength below minimum standards. Food, Drug, and Cosmetic Act

173. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties A food or drug is misbranded if its labeling or packaging is false or misleading. Food, Drug, and Cosmetic Act

174. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties The government uses other methods to discourage the sale of goods considered harmful to the public health. They include: Food, Drug, and Cosmetic Act Unusually high taxes Labeling and packaging Outright prohibition

175. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties 15.2 Warning Labels

176. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties True or False: A food or drug is said to be injurious if it contains any substance that may make it harmful.

177. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties ANSWER True

178. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties If goods are manufactured and sold only within the boundaries of a state, the federal government has no control over the goods. For this reason, many states have enacted their own product liability laws. State and Local Laws

179. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties These laws apply to intrastate sales (sales within a state). Nearly all states and localities license and regulate establishments that sell food. State and Local Laws

180. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties True or False: The federal government applies unusually high taxes on harmful products in order to raise enough money to warn consumers of its dangers.

181. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties ANSWER False

182. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Pre-Learning Question Where can you go to get consumer protection assistance?

183. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Many state and local governments have offices of consumer affairs to educate consumers and help protect them against fraud. Consumer Protection Assistance

184. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties The federal Consumer Product Safety Commission establishes safety standards for consumer products. For information or to report unsafe products you can call its hotline at 1-800-638-CPSC. Consumer Protection Assistance

185. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties The Better Business Bureau (BBB) is an example of a nongovernment agency that hears consumer complaints at the local and state levels. Its mission is to promote high ethical relationships between businesses and the public. Better Business Bureau

186. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties The BBB provides services that include the following: Better Business Bureau Provides information on a business’s past dealings Helps resolve complaints Provides information on charitable organizations

187. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Publishes consumer publications, videos, and Internet advisories Alerts businesses, consumers, and law enforcement agencies about current scams and frauds Provides Internet reliability and privacy “Trustmark” seals Better Business Bureau

188. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties True or False: Intrastate sales involve the buying and selling of merchandise within a state, not across state lines.

189. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties ANSWER True

190. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Reviewing What You Learned 1. 1.What is the difference between product liability and strict liability? Section 15.2 Assessment

191. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Reviewing What You Learned Manufacturers and sellers have product liability when they place defective, unhealthy, or unsafe items on the market. They are strictly liable, without regard to fault, when they sell unreasonably dangerous products. Section 15.2 Assessment Answer

192. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Reviewing What You Learned 2. 2.What is the purpose of the Consumer Product Safety Act? Section 15.2 Assessment

193. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Reviewing What You Learned Protects consumers from unreasonable risk of injury from using consumer products. Section 15.2 Assessment Answer

194. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Reviewing What You Learned 3. 3.What prohibitions are contained in the Food, Drug, and Cosmetic Act? Section 15.2 Assessment

195. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Reviewing What You Learned It prohibits the manufacture and shipment of faulty products in interstate commerce. Section 15.2 Assessment Answer

196. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Reviewing What You Learned 4. 4.Where can you find consumer protection assistance? Section 15.2 Assessment

197. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Reviewing What You Learned From state and local consumer protection agencies, such as the Consumer Product Safety Commission and the Better Business Bureau. Section 15.2 Assessment Answer

198. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Section 15.2 Assessment Critical Thinking Activity Consumer Protection Why do you think so many consumer protection laws are necessary?

199. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Section 15.2 Assessment Critical Thinking Activity Answer Consumer Protection Answers will vary. Students will probably propose that laws are necessary to protect consumers from unethical businesses and unsafe products.

200. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Section 15.2 Assessment Legal Skills in Action Production Information Labels Olivia has taken nonprescription allergy medication for several years. Recently, the medication was taken off the market because of an ingredient called PPA.

201. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Section 15.2 Assessment Legal Skills in Action Production Information Labels Now Olivia wonders if any other dangerous ingredients were in the medication that she took.

202. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Section 15.2 Assessment Legal Skills in Action Production Information Labels In groups of two or three, investigate and review the ingredients on the labels of some of the products you use and the food you eat at school.

203. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Section 15.2 Assessment Legal Skills in Action Production Information Labels You can review products such as soda, snack items from vending machines, chewing gum, and cosmetics. Make a list of the ingredients you are not familiar with.

204. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Section 15.2 Assessment Legal Skills in Action Production Information Labels Will you continue eating the food and using the products? Why or why not?

205. Understanding Business and Personal Law Express and Implied Warranties Section 14.1 The Importance of Warranties Section 15.2 Assessment Legal Skills in Action Answer Production Information Labels Lists will vary but could include ingredients such as xanthan gum, stearic acid, partially hydrogenated cottonseed oil, and maltodextrin.

206. Express and Implied Warranties End of Section 15.2