Warranty
Encyclopedia
In business and legal transactions, a warranty is an assurance by one party to the other party that specific facts or conditions are true or will happen; the other party is permitted to rely on that assurance and seek some type of remedy if it is not true or followed.
In real estate transactions, a general warranty deed
is an agreement that the buyer's title
to a parcel of land will be defended. A limited warranty deed, on the other hand, is a promise that the title will be defended against a limited set of claims which is usually claims arising from incumberances executed by the grantor. Thus, a general warranty deed binds the grantor to defend the title against all claims even those arising from previous owners; whereas, a limited warranty deed typically only binds the grantor to defend the title against claims arising from when the grantor held title to the property. A limited warranty deed is the deed of choice for banks when selling foreclosed properties.
A warranty may be express or implied depending on what you bought.
The warranty of merchantability is implied, unless expressly disclaimed by name, or the sale is identified with the phrase "as is
" or "with all faults." To be "merchantable", the goods must reasonably conform to an ordinary buyer's expectations, i.e., they are what they say they are. For example, a fruit that looks and smells good but has hidden defects would violate the implied warranty of merchantability if its quality does not meet the standards for such fruit "as passes ordinarily in the trade". In Massachusetts
consumer protection
law, it is illegal to disclaim this warranty on household goods sold to consumers etc.
The warranty of fitness for a particular purpose is implied when a buyer relies upon the seller to select the goods to fit a specific request. For example, this warranty is violated when a buyer asks a mechanic to provide snow tires and receives tires that are unsafe to use in snow. This implied warranty can also be expressly disclaimed by name, thereby shifting the risk of unfitness back to the buyer.
for starting a court complaint for breach of warranty if the seller refuses to honor the warranty. This period is often overlooked where there is an "extended warranty" in which a seller or manufacturer contracts to provide the additional service of replacing or repairing goods that fail within the extended period. However, if the goods were defective at the time of sale, and the relevant statute of limitations has not expired, then existence or duration of any "extended warranty" is secondary: there was a breach of a primary warranty for which the seller may be liable.
It could be an unfair and deceptive business practice
(a statutory type of fraud
) to attempt to avoid liability for breach of a primary warranty by claiming expiration of the irrelevant extended warranty. A statute of limitations on a contract claim may be shorter (or longer) than that of a tort claim, and some breach of warranty cases are filed late and are characterized as a fraud or other related tort.
For example, a consumer buys an item that was discovered to be broken or missing pieces before it was even taken out of the package. This is a defective product and can be returned to the seller for refund or replacement, regardless of what the seller's "returns policy" might state (with limited exceptions for second-hand or "as is" sales), even if the problem wasn't discovered until after the "extended warranty" expired. Similarly, if the product fails prematurely, it may have been defective when it was sold and could then be returned for a refund or replacement. If the seller dishonors the warranty, then a contract claim can be started in court.
") commonly refers to a guarantee of the reliability of a product under conditions of ordinary use. It is called "extended" warranty because it covers defects that could arise some time after the date of sale. Should the product malfunction within a stipulated amount of time after the purchase, the manufacturer or distributor is typically required to provide the customer with a replacement, repair, or refund. Such warranties usually do not cover "acts of God", owner abuse, malicious destruction, commercial use, or anything, for that matter, outside of a mechanical failure incurred with normal personal usage. Most warranties exclude parts that normally wear out, and supplies that must be periodically replaced as they are normally used up (e.g., tires and lubrication on a vehicle). An extended warranty may be included in the purchase price, or optionally extended for an additional fee, and may have yearly extensions as well as ambiguous terms like "lifetimes" of the product.
Third-party warranty providers offer optional "extended warranty" agreements for a multitude of products, considered a contract of insurance for that product. Third parties are sold through a range of smaller, self-insured companies as well as larger, well known store chains, such as Best Buy
and Circuit City. As with other types of insurance, the companies are gambling that the products will be reliable, that the warranty will be forgotten, or that any claims made can be handled inexpensively. Some third party companies provide their own support such as JTF Business Systems; these companies will remove the defective part and send it back to the manufacturer for replacement.
Extended warranties are not usually provided through the manufacturer but are extended through independent administrators. In some circumstances it may work to the consumer's benefit having an assurance to the product from a company outside of place of purchase and/or service. For instance, when an auto warranty is provided through a car dealership
, it's usually a sub-contracted warranty (often from the retailer with the lowest offer), where vehicle repairs are negotiated to a lower rate, often compromising the service, labor and parts to a lower standard. Many times these types of warranties require an unexpected out-of-pocket expense at the time of repair, such as:
-unexpected services provided outside of the warranty terms
-uncovered parts and labor rates
-paying the full balance while a reimbursement is arranged through dealership/warranty claims offices.
Some mechanics and dealer service centers might put off, or defer the needed repair until the dealership's warranty has expired so that their (in-house) warranty will no longer be bound to cover the cost of repair, or so that the ordinary (higher) shop rate will apply.
, the rights and remedies of buyers and sellers of goods are governed by the Article 2 of Uniform Commercial Code
(UCC) as it has been adopted with variations from state
to state. The UCC governs both express and implied warranties. It also covers the extent to which sellers may disclaim
certain types of warranties (e.g., warranty of merchantability or fitness for a particular purpose, or even disclaim all warranties in the case of goods sold "as is
."
Whereas in the U.S. warranties are generally provided in writing subject to control of the laws, in other countries warranties may be governed by specific statutes. For example, a country's law may provide that goods are assured by the seller for a period of 12 months and may provide other specific rights and remedies in the event of a product failure. However, even in the U.S. there are specific laws that may provide warranties or warranty-like assurances to buyers. For example, many states have statutory warranties on new home construction, and many have so-called "lemon laws" governing new motor vehicles with repeated defects.....
Some companies also offer extended warranties or used car warranties for vehicles up to 12 years old. The term extended warranty. Non-manufacturer based warranties are technically called motor vehicle service agreements or service contracts.
In real estate transactions, a general warranty deed
Deed
A deed is any legal instrument in writing which passes, or affirms or confirms something which passes, an interest, right, or property and that is signed, attested, delivered, and in some jurisdictions sealed...
is an agreement that the buyer's title
Title (property)
Title is a legal term for a bundle of rights in a piece of property in which a party may own either a legal interest or an equitable interest. The rights in the bundle may be separated and held by different parties. It may also refer to a formal document that serves as evidence of ownership...
to a parcel of land will be defended. A limited warranty deed, on the other hand, is a promise that the title will be defended against a limited set of claims which is usually claims arising from incumberances executed by the grantor. Thus, a general warranty deed binds the grantor to defend the title against all claims even those arising from previous owners; whereas, a limited warranty deed typically only binds the grantor to defend the title against claims arising from when the grantor held title to the property. A limited warranty deed is the deed of choice for banks when selling foreclosed properties.
A warranty may be express or implied depending on what you bought.
Implied warranty
An implied warranty is one that arises from the nature of the transaction, and the inherent understanding by the buyer, rather than from the express representations of the seller.The warranty of merchantability is implied, unless expressly disclaimed by name, or the sale is identified with the phrase "as is
As is
As is is a legal term used to disclaim some implied warranties for an item being sold. Certain types of implied warranties must be specifically disclaimed, such as the implied warranty of title...
" or "with all faults." To be "merchantable", the goods must reasonably conform to an ordinary buyer's expectations, i.e., they are what they say they are. For example, a fruit that looks and smells good but has hidden defects would violate the implied warranty of merchantability if its quality does not meet the standards for such fruit "as passes ordinarily in the trade". In Massachusetts
Massachusetts
The Commonwealth of Massachusetts is a state in the New England region of the northeastern United States of America. It is bordered by Rhode Island and Connecticut to the south, New York to the west, and Vermont and New Hampshire to the north; at its east lies the Atlantic Ocean. As of the 2010...
consumer protection
Consumer protection
Consumer protection laws designed to ensure fair trade competition and the free flow of truthful information in the marketplace. The laws are designed to prevent businesses that engage in fraud or specified unfair practices from gaining an advantage over competitors and may provide additional...
law, it is illegal to disclaim this warranty on household goods sold to consumers etc.
The warranty of fitness for a particular purpose is implied when a buyer relies upon the seller to select the goods to fit a specific request. For example, this warranty is violated when a buyer asks a mechanic to provide snow tires and receives tires that are unsafe to use in snow. This implied warranty can also be expressly disclaimed by name, thereby shifting the risk of unfitness back to the buyer.
Lifetime warranty
A lifetime warranty is usually a guarantee on the lifetime of the product on the market rather than the lifetime of the consumer (the exact meaning should be defined in the actual warranty documentation). If a product has been discontinued and is no longer available, the warranty may last a limited period longer. For example:- the Cisco Limited Lifetime Warranty currently lasts for five years after the product has been discontinued.
- HP Networking products lifetime warranties for as long as you own the product.
Second-hand Product Warranty
The importance of the used/second-hand product market as a fraction of the total market (new + second-hand) has been growing significantly since the beginning of the twenty-first century. Second-hand products include products that have previously been used by an end user/consumer. Users change their products even if they are still in good condition. Some products such as computers and mobile phones have a short lifetime and technologies of these products are released to the market every day. As a result, the sale of new products is often tied to a trade-in, resulting in a market for second-hand products. For instance, in France, used car unit sales increased from 4.7 million to 5.4 million between 1990 and 2005, at the same time as new car sales declined from 2.3 million to 2.07 million units.Breach of warranty
A warranty is violated when the promise is broken; when goods are not as should be expected, at the time the sale occurs, whether or not the defect is apparent. The seller should honor the warranty by making a timely refund or a replacement. The date of delivery starts the time under the statute of limitationsStatute of limitations
A statute of limitations is an enactment in a common law legal system that sets the maximum time after an event that legal proceedings based on that event may be initiated...
for starting a court complaint for breach of warranty if the seller refuses to honor the warranty. This period is often overlooked where there is an "extended warranty" in which a seller or manufacturer contracts to provide the additional service of replacing or repairing goods that fail within the extended period. However, if the goods were defective at the time of sale, and the relevant statute of limitations has not expired, then existence or duration of any "extended warranty" is secondary: there was a breach of a primary warranty for which the seller may be liable.
It could be an unfair and deceptive business practice
Unfair business practices
Unfair business practices encompass fraud, misrepresentation, and oppressive or unconscionable acts or practices by business, often against consumers and are prohibited by law in many countries. For instance, in the European Union, each member state must regulate unfair business practices in...
(a statutory type of fraud
Fraud
In criminal law, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation...
) to attempt to avoid liability for breach of a primary warranty by claiming expiration of the irrelevant extended warranty. A statute of limitations on a contract claim may be shorter (or longer) than that of a tort claim, and some breach of warranty cases are filed late and are characterized as a fraud or other related tort.
For example, a consumer buys an item that was discovered to be broken or missing pieces before it was even taken out of the package. This is a defective product and can be returned to the seller for refund or replacement, regardless of what the seller's "returns policy" might state (with limited exceptions for second-hand or "as is" sales), even if the problem wasn't discovered until after the "extended warranty" expired. Similarly, if the product fails prematurely, it may have been defective when it was sold and could then be returned for a refund or replacement. If the seller dishonors the warranty, then a contract claim can be started in court.
- See also product liabilityProduct liabilityProduct liability is the area of law in which manufacturers, distributors, suppliers, retailers, and others who make products available to the public are held responsible for the injuries those products cause...
where liability for a defect causing a personal injury may go well beyond a warranty period, based upon negligent design or manufacture, or even strict liabilityStrict liabilityIn law, strict liability is a standard for liability which may exist in either a criminal or civil context. A rule specifying strict liability makes a person legally responsible for the damage and loss caused by his or her acts and omissions regardless of culpability...
.
U.S.A & Canada
In retail business, a warranty (or "extended warrantyExtended warranty
An extended warranty, sometimes called a service agreement, a service contract, or a maintenance agreement, is a prolonged warranty offered to consumers. The extended warranty may be offered by the warranty administrator, the retailer or the manufacturer. Extended warranties cost extra and for a...
") commonly refers to a guarantee of the reliability of a product under conditions of ordinary use. It is called "extended" warranty because it covers defects that could arise some time after the date of sale. Should the product malfunction within a stipulated amount of time after the purchase, the manufacturer or distributor is typically required to provide the customer with a replacement, repair, or refund. Such warranties usually do not cover "acts of God", owner abuse, malicious destruction, commercial use, or anything, for that matter, outside of a mechanical failure incurred with normal personal usage. Most warranties exclude parts that normally wear out, and supplies that must be periodically replaced as they are normally used up (e.g., tires and lubrication on a vehicle). An extended warranty may be included in the purchase price, or optionally extended for an additional fee, and may have yearly extensions as well as ambiguous terms like "lifetimes" of the product.
- A manufacturer or distributor may be required to carry reserve funds on its financial balance sheet to cover potential services or refunds that may arise for any products still covered "under warranty".
Third-party warranty providers offer optional "extended warranty" agreements for a multitude of products, considered a contract of insurance for that product. Third parties are sold through a range of smaller, self-insured companies as well as larger, well known store chains, such as Best Buy
Best Buy
Best Buy Co., Inc. is an American specialty retailer of consumer electronics in the United States, accounting for 19% of the market. It also operates in Mexico, Canada & China. The company's subsidiaries include Geek Squad, CinemaNow, Magnolia Audio Video, Pacific Sales, and, in Canada operates...
and Circuit City. As with other types of insurance, the companies are gambling that the products will be reliable, that the warranty will be forgotten, or that any claims made can be handled inexpensively. Some third party companies provide their own support such as JTF Business Systems; these companies will remove the defective part and send it back to the manufacturer for replacement.
Extended warranties are not usually provided through the manufacturer but are extended through independent administrators. In some circumstances it may work to the consumer's benefit having an assurance to the product from a company outside of place of purchase and/or service. For instance, when an auto warranty is provided through a car dealership
Car dealership
A car dealership or vehicle local distribution is a business that sells new or used cars at the retail level, based on a dealership contract with an automaker or its sales subsidiary. It employs automobile salespeople to do the selling...
, it's usually a sub-contracted warranty (often from the retailer with the lowest offer), where vehicle repairs are negotiated to a lower rate, often compromising the service, labor and parts to a lower standard. Many times these types of warranties require an unexpected out-of-pocket expense at the time of repair, such as:
-unexpected services provided outside of the warranty terms
-uncovered parts and labor rates
-paying the full balance while a reimbursement is arranged through dealership/warranty claims offices.
Some mechanics and dealer service centers might put off, or defer the needed repair until the dealership's warranty has expired so that their (in-house) warranty will no longer be bound to cover the cost of repair, or so that the ordinary (higher) shop rate will apply.
- Most U.S. consumers with a combined total asset value of $4800+ (standard electronics, luxury electronics, antiques and collectibles, furnishings, automobile, home, etc.) or consumers averaging a combined household income of less than $122,000 per year, have 86% more likeliness of increasing the market value of their product, home, or vehicle, and are likely to triple their savings (cost of warranty extension vs. cost of proper service and repair on property exceeding $4800 in value) when owning a federally bonded and insured warranty. ~drp.report2007
Legal aspects of warranties and disclaimers
In the United StatesUnited States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, the rights and remedies of buyers and sellers of goods are governed by the Article 2 of Uniform Commercial Code
Uniform Commercial Code
The Uniform Commercial Code , first published in 1952, is one of a number of uniform acts that have been promulgated in conjunction with efforts to harmonize the law of sales and other commercial transactions in all 50 states within the United States of America.The goal of harmonizing state law is...
(UCC) as it has been adopted with variations from state
U.S. state
A U.S. state is any one of the 50 federated states of the United States of America that share sovereignty with the federal government. Because of this shared sovereignty, an American is a citizen both of the federal entity and of his or her state of domicile. Four states use the official title of...
to state. The UCC governs both express and implied warranties. It also covers the extent to which sellers may disclaim
Disclaimer
A disclaimer is generally any statement intended to specify or delimit the scope of rights and obligations that may be exercised and enforced by parties in a legally recognized relationship...
certain types of warranties (e.g., warranty of merchantability or fitness for a particular purpose, or even disclaim all warranties in the case of goods sold "as is
As is
As is is a legal term used to disclaim some implied warranties for an item being sold. Certain types of implied warranties must be specifically disclaimed, such as the implied warranty of title...
."
Whereas in the U.S. warranties are generally provided in writing subject to control of the laws, in other countries warranties may be governed by specific statutes. For example, a country's law may provide that goods are assured by the seller for a period of 12 months and may provide other specific rights and remedies in the event of a product failure. However, even in the U.S. there are specific laws that may provide warranties or warranty-like assurances to buyers. For example, many states have statutory warranties on new home construction, and many have so-called "lemon laws" governing new motor vehicles with repeated defects.....
"Representations and Warranties"
In complex commercial transactions, buyers and sellers may make specific representations and warranties to each other. In common parlance, these are known as "reps and warranties." These are statements by which one party gives certain assurances to the other, and on which the other party may rely. In this context, a representation is commonly a declaration of a specific fact that can be verified to be true or not, e.g., "seller represents that it is a corporation duly organized and validly existing under the laws of the state of Delaware." Here, a warranty may be more of an assurance, e.g. "supplier warrants that all of its employees working on this project will be subject to confidentiality agreements that include the ability of supplier to seek injunctive relief for breach." Often there are specific remedies or consequences specified if the representations and warranties are not accurate or are not fulfilled. For example, a seller may represent and warrant that it has full ownership title in the item being sold, and that there is no legal impediment to the seller proceeding with the transaction. Should it turn out that the seller did not have complete title or was subject to another agreement that restricted the sale, and should these facts impact the buyer's ownership or cause it expense, the buyer would have remedies under the agreement to seek relief from the seller. Parties to these transactions typically seek representations and warranties to cover issues over which they are concerned. Because of the consequences of making representations and warranties, parties will typically try to limit the extent of any that they make. The tension between these two points of view will help to shape the negotiations between the parties as to the terms and conditions of the deal.Car warranty
A new car factory warranty extends from a minimal 1 year, more common 3 year and extended 5 years. While some car manufacturer warranties have gone as far as 10 years. Crate Engine manufacturers also give warranties based on the manufacturers' and workmanship warranties.Some companies also offer extended warranties or used car warranties for vehicles up to 12 years old. The term extended warranty. Non-manufacturer based warranties are technically called motor vehicle service agreements or service contracts.
Home Warranty
A Home Warranty protects against the high costs of home and appliance repair by offering home warranty coverage for houses, town homes, condominiums, mobile homes, and new construction homes. When a problem occurs with a covered appliance or mechanical system such as an air conditioning unit or furnace, a service technician repairs or replaces it. The homeowner pays for a service call fee and the home warranty company pays the balance for the repair or replacement of the covered item.See also
- Business law
- Consumer protectionConsumer protectionConsumer protection laws designed to ensure fair trade competition and the free flow of truthful information in the marketplace. The laws are designed to prevent businesses that engage in fraud or specified unfair practices from gaining an advantage over competitors and may provide additional...
- Due diligenceDue diligence"Due diligence" is a term used for a number of concepts involving either an investigation of a business or person prior to signing a contract, or an act with a certain standard of care. It can be a legal obligation, but the term will more commonly apply to voluntary investigations...
representations and warranties - Extended warrantyExtended warrantyAn extended warranty, sometimes called a service agreement, a service contract, or a maintenance agreement, is a prolonged warranty offered to consumers. The extended warranty may be offered by the warranty administrator, the retailer or the manufacturer. Extended warranties cost extra and for a...
as an extra or prolonged warranty offered to consumers - Financial Global Monetary Warranty (FGMW)
- Magnuson-Moss Warranty ActMagnuson-Moss Warranty ActThe Magnuson–Moss Warranty Act is a United States federal law, . Enacted in 1975, it is the federal statute that governs warranties on consumer products. The Act was sponsored by Senator Warren G. Magnuson of Washington and U.S. Rep John E...
protection for voided warranties or denied claims based on modifications of the warranted product (United States) - SuretySuretyA surety or guarantee, in finance, is a promise by one party to assume responsibility for the debt obligation of a borrower if that borrower defaults...
(Guarantee) - Warranty deedWarranty deedA general warranty deed is a type of deed where the grantor guarantees that he or she holds clear title to a piece of real estate and has a right to sell it to the grantee . The guarantee is not limited to the time the grantor owned the property—it extends back to the property's origins. A General...
in land transactions - Warranty tollingWarranty tollingWarranty tolling refers to a legal requirement, in some jurisdictions, that the timeframe provided in a product warranty shall be tolled to protect the consumer from unfairly being deprived of its protections....