A Brief Review of Product Warranties for Sellers and Buyers

All of us have bought products that have come with warranties.  Likewise, most of us, at one time or another, have made claims under warranties.  Nevertheless, how such warranties work and the interaction of various "warranty laws" is not always obvious.

Even if you did not receive a piece of paper with the word "warranty" across the top, a warranty very likely came with your last purchase of a new product.  Under the laws of most states, including Pennsylvania, certain implied warranties cover your purchase of products.  Two such implied warranties are the implied warranty of merchantability and the implied warranty of fitness.  An implied warranty of merchantability is a promise that, among other things,  the goods  being sold by a merchant are fit for the ordinary purposes for which such goods are used and that the product conforms to any promises or statements made on the container or label.  Conversely, there is an implied warranty of fitness.  This warranty provides that a seller warrants that a product is good for a  particular purpose when the seller has exercised some skill or judgment in furnishing the goods to the buyer.

Under these implied warranties, a claim may be brought within 4 years of purchase, unless the time limit is modified by agreement.  Damages, such as recovery of purchase price, incidental costs,  and, when such damages are foreseeable, lost profits, may be recovered.  If someone (not just the buyer) is hurt by a product, the warranty may also serve as a means of recovery against the seller for personal injury.

Not all warranties are implied.  Written warranties, which the law calls express warranties, play an important part in commercial life. An express warranty can specify, among other things,  who is covered, how long the warranty lasts, what defects are covered, what the claim procedure is, and in some cases, who can service or repair the product. A written warranty may also limit damages recoverable by the buyer (normally, for example, consequential damages are limited).  Finally, a written warranty can also, in non-consumer cases, "disclaim" the implied warranties described above.  For this reason, a limited written warranty in a commercial case can be worse than no written warranty at all.

Treatment of buyers of consumer goods under a written warranty is  more favorable, largely because of a federal law called the Magnuson-Moss Warranty Act.  This Act provides many valuable protections  for a consumer purchaser buying products with a written warranty.   For example:

• The warranty must be clearly written.  
• The seller cannot disclaim the implied warranties that are available to the customer under state law.  As a result, a buyer should never get less coverage than the implied warranties provide.  A seller can, however, limit the duration of the implied warranties to less than four years even in the consumer setting.
• The express warranty cannot specify, under most circumstances, that only the seller's service department can repair or service the product.  A seller can of course suggest that a buyer use its repair or maintenance department but failure to do so cannot by itself void the warranty; however, improper or incorrect maintenance or repair by a third party (for example, maintenance not done pursuant to factory procedures) can void the warranty.
• Unless the seller can demonstrate (to a court or to the Federal Trade Commission) that only its replacement parts successfully can be used to repair and operate the product, a seller cannot void a warranty simply because a buyer used replacement parts not made by the seller.
• Warranty terms cannot be deceptive.   For example, you cannot promise a "warranty" and then in the fine print specify that really nothing is covered by it.  There are countless variations on this theme, and whether a warranty is "deceptive" is something a court would ultimately have to decide.

Most warranty disputes do not culminate in a lawsuit -- especially in the consumer setting; the purchase price usually cannot justify the suit.  However, in an effort to offset the cost prohibitiveness of such suits, both Pennsylvania and federal law provide that, under the right circumstances, a successful consumer plaintiff may recover attorneys' fees and triple damages (under the Pennsylvania Consumer Protection Law) and attorneys' fees and court costs (under the Magnuson-Moss Act).

Notwithstanding the details of the applicable federal and state laws, whether you are a seller offering a warranty or a buyer benefitting from one, there is no substitute for carefully reading your warranty.  If you are a seller whose warranty policy is in need of review, or a buyer contemplating a potential claim, we would be happy to help.

-- Rod Fluck