Warranties Essay

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A warranty is a guarantee by a seller or manufacturer that a good will work as designed, advertised, and explicitly or implicitly promised, and that it will do so for a particular period of time. In conventional usage in North America, “warranty” usually refers specifically to a repair, replace, or refund guarantee, built into the cost of the product; when such a warranty is extended for an additional fee, it will often cover such circumstances as are beyond the fault of the manufacturer, including repairs necessitated by consumers’ errors. From an accounting perspective, a warranty is a contingent liability: an expense that might be paid; companies usually have a good sense of what each warranty costs them, when averaged out.

Express Warranties

Express warranties are those that are explicitly spelled out, whether extended or otherwise. They explain the terms under which they are honored: the conditions under which a return can be made, the period of time during which a return can be made, and the process and results of return. Depending on the warranty and the reason for the return, returned items may be exchanged for a working copy of the product, repaired, or refunded wholly or in part. Some items can be returned to the store, where they were purchased, others must be returned to the manufacturer. Generally a warranty can be expected to cover defects of manufacture and damage incurred in transit or in the store. Warranties generally do not cover consumer disappointment, which seems obvious, but the line between a defective product and a disappointing one can be narrow. An impressive knife advertised on television and shown cutting tin cans in half is defective if it arrives with the blade nicked or the handle broken; if it arrives, is put to use, and cuts a tin can in half but is useless thereafter, it’s only disappointing.

In American law, certain types of statements in advertising and promotional materials are protected from being read as express warranty—the legal term is puffery. Improvable superlatives or subjective truths are puffery—if a candy bar is not “the world’s best” candy bar or a consumer dislikes the soft drink that the advertisement said taste tests favored, the company is not bound to grant a refund. Statements made as testimonials fall under the umbrella of puffery as well, as do portrayals of a product having clearly impossible effects: such as deodorant spray causing women to chase its users down the street. The claims that must be substantiated, and which count as express warranty, are those that could be proven quantifiably. A disposable razor with “the most blades of any razor in the world” must indeed have more than its competitors, and “the most caffeinated soft drink” must have the federal maximum amount of caffeine per ounce. Legal departments in companies or their advertising agencies often examine the wording of any advertisements to keep their ducks in a row.

Implied Warranties

Implied warranties are those assurances that can be “taken as a given” even when they are not spelled out. In most countries this includes the warranty of fitness for a particular purpose and the warranty of merchantability, which are very similar: the principle of both is that, whether the seller says anything about the product or not, the buyer is reasonable to assume that a product by its nature is appropriate for some certain end.

A knife, whether or not it can cut a tin can, is meant to cut something. Tires are meant to bear the weight of automobiles and the friction of the road without falling apart. DVD players are meant to play DVDs. These items must fulfill those purposes whether or not any advertising or promotional material or packaging has said anything about them, because of their nature. In the United States, the warranty of merchantability holds products to a higher standard than the warranty of fitness does, but applies only to professional sellers, while fitness is applicable to all goods sold. For housing, there is an additional implied warranty, that of habitability—that is, no one putting an apartment up for lease can claim to be surprised that the lessee intends to live in it; the apartment must meet habitable standards.

An implied warranty can be disclaimed. The disclaimer must be specific—stores, especially secondhand stores, may specify that items are sold “as is,” which is more common than the older and less appealing “with all faults.” The federal Uniform Commercial Code in the United States requires that the implied warranty of merchantability can be disclaimed only explicitly—and must use the word “merchantability” in the disclaimer in order to leave no doubt as to its intent. Some states further restrict a seller’s ability to disclaim implied warranty. Doing so does not necessarily prevent a sale; a car that does not run can be sold as parts, changing the nature of what the warranty of merchantability implies, rather than trying to get around it.

Repair is a less common remedy than it used to be. Rare are the neighborhood shops that trafficked in little more than repair work, collecting their fee from the customer for repairs not covered by warranty and from the manufacturer for repairs that were. Rare, too, are the manufacturers that repair their own products, outside of the automobile and computer hardware industries; should a DVD player fail during its warrantied period, it will likely be replaced with a working model.

Extended Warranties

Extended warranties are sometimes called service agreements or service plans, which reflects their nature. They are usually offered for computers, home electronics, and expensive appliances. While an ordinary warranty promises a product of a certain quality, an extended warranty is essentially a form of insurance for the consumer, with the premium paid up front in a lump sum. Should anything go wrong with the product, the issuer of the extended warranty will fix or replace it. Extended warranties cover, in general, damage or defects that result in the course of normal use; misuse, such as using a microwave oven as an aquarium, may invalidate an extended warranty.

Extended warranties are often offered by third parties—sold at the store level, such as chain electronics and department stores, rather than at the manufacturer level. The cost can be as much as half the cost of the item but is usually closer to one quarter. Extended warranties may cover parts, labor, or both, and may or may not require the product to be mailed in to a service center.

Bibliography:

  1. Melvin Aron Eisenberg, Contracts (Gilbert Law Summaries, 2002);
  2. Phyllis H. Frey and Martin A. Frey, Essentials of Contract Law (Delmar Cengage Learning, 2000);
  3. Robert A. Hillman, Principles of Contract Law (West, 2004).

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