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Satisfaction Guaranteed?

If you’re in the business of selling or manufacturing products, then you’re in the business of offering warranties — whether you realize it or not.

Basically, a warranty is a guarantee that an item is of a certain quality or has certain attributes. Offering written warranties makes good business sense. They help assure customers that you or the manufacturer will stand by the products you sell.

Implied Warranties

Every state has passed the Uniform Commercial Code (UCC) into law in one form or another. The law typically includes provisions about two types of implied warranties:

1. The implied warranty of merchantability. Unless properly disclaimed, this means the seller automatically warrants the goods are fit for the ordinary purposes they were designed for.

2. The implied warranty of fitness. This means the seller knows the goods are needed for a specific purpose or the buyer is relying on the seller to select suitable goods. In other words, you don’t sell running shoes when a customer asks for climbing shoes.

Implications and Disclaimers

To disclaim an implied warranty, you must conspicuously tell the consumer in writing. Many sales contracts include disclaimers in all capital letters. Some states ban disclaimers on sales for personal, family or household use. Consult with an attorney before making a disclaimer.

It also means you should be familiar with the federal Magnuson-Moss Act that governs consumer product warranties.

Warranties come in all shapes and sizes — implied, oral, written, full, limited and multiple. But the Magnuson-Moss Act covers only written warranties. The law also doesn’t cover oral warranties, warranties on services or warranties on products sold for resale and it doesn’t require written warranties.

The Magnuson-Moss Act doesn’t require written warranties but with or without a written document, state laws generally require implied warranties on every sale. This means that all the parts of a product work effectively and that the product does what it was designed to do. (See right-hand box below for more details about implied warranties.)

If, however, you offer a written guarantee, you must comply with Magnuson-Moss, and the law sets out three basic requirements:

  • The warranty must be titled as either “full” or “limited” on products costing more than $10.
  • Certain information about the coverage of the warranty must be stated in a single, clear document for products costing more than $15.
  • Warranties must be available where the items are sold so that consumers can read them before buying products that cost more than $15.

What type of warranty are you offering? A full warranty meets each of the following conditions:

1. There is no limit on the duration of implied warranties.

2. It covers all owners of the product during the warranty period, not just the first purchaser.

3. The product must be fixed at no cost to the buyer within a reasonable time after a complaint.

4. The owner does not have to do anything unreasonable to return the product (such as ship back a dishwasher).

5. A defective product must be replaced with a new one, or the purchase price refunded, if the product cannot be repaired after a reasonable number of attempts.

If your warranty doesn’t meet all of these conditions, it is limited. However, products can include elements of both types. For example, a lawnmower could have a full warranty on its engine and a limited warranty on the rest of the parts.

When offering warranties, consult with your attorney to ensure that you meet both federal and state law.

(In a Future Article: Mentioning Your Warranty in Advertising? The Federal Trade Commission Has Regulations that Must Be Followed.)