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In commercial and consumer transactions, a warranty is a collateral assurance or guarantee that certain facets of an article or service sold is as factually stated or legally implied by the seller, and that often provides for a specific remedy such as repair or replacement in the event the article or service fails to meet the warranty.[1] A breach of warranty occurs when the promise is broken, i.e., a product is defective or not as should be expected by a reasonable buyer.

In business and legal transactions, a warranty is an assurance by one party to the other party that certain 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, warranty deed is a promise that the buyer's title to a parcel of land will be defended.

A warranty may be express or implied.

Contents

Express warranty

An express warranty is a guarantee from the seller of a product that specifies the extent to which the quality or performance of the product is assured and states the conditions under which the product can be returned, replaced, or repaired. It is often given in the form of a specific, written "Warranty" document. However, a warranty may also arise by operation of law based upon the seller's description of the goods, and perhaps their source and quality, and any material deviation from that specification would violate the guarantee. For example, an advertisement describing a product is often full of express warranties; the product must substantially conform to what is advertised. Many advertisers insert disclaimers for this purpose (e.g., "actual color/mileage/results may vary", or "not shown actual size"). Commonly, written warranties will assure the buyer that an article is of good quality and against defects in "materials and workmanship." A warranty may also apply to services that are sold. For example, an automobile repair shop may guarantee its repair for a period of 90 days.

An express warranty can be made orally, in writing and without the intent of the seller to actually create the warranty. In the United States, a seller is allowed to assert statements of opinion of value, known as puffery, that the buyer cannot justly rely on as part of the basis for the bargain. For instance, "This hunting knife is the best knife in the world" is mere puffery, whereas a statement such as "This hunting knife will never need to be sharpened" can be construed to be an express warranty as long as the knife is only used for its intended purpose. In certain other countries (e.g. the UK, Canada, and Taiwan), consumer protection laws exist to prevent advertisers making untrue or unprovable statements.

The misuse of a famous trademark may also create an express warranty, the violation of which is called "passing off"; the source and quality of the goods is misrepresented.

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Warranty implementation

Some products come with a warranty promising repair or replacement for months, years, or life. In theory, one can return a product to the "dealer" for repair, but most stores that sell such products—and even the manufacturers—lack repair facilities. Car dealers have repair shops which are one of the main reasons many people buy new cars; computer dealers and consumer-electronics dealers had such shops into the 1990s, but most of these have disappeared. In practice, a product that fails within a month can be exchanged for a new one under the store's guarantee; or a product that fails after the store guarantee expires but before the manufacturer's expires can be exchanged by the manufacturer — the store guarantee and the manufacturer's warranty are mutually exclusive. There used to be repair shops that offered warranty service for small electric devices, such as electric razors or even lamps and toasters; but in the 1980s, most became mail-forwarding services that sent warrantied products to manufacturers for replacement; and most disappeared in the 1990s.[citation needed]

There are exceptions: some companies—notably Toshiba—actually repair products under warranty. Thomas Friedman tells how Toshiba worked out an arrangement with UPS to handle warranty work: a customer, who had originally ordered a computer directly from the Toshiba Website, can ship a malfunctioning computer to Toshiba via UPS. In fact, it never reaches Toshiba. Instead UPS maintains its own Toshiba-computer repair shops. When UPS picks up the user's computer, it ships it to the UPS shop, where it is repaired, tested, and returned to the user within a specified timeframe. In general, the user's software and data are preserved. [2]

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" 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.

Warranty of Title

Sometimes confused an as implied warranty, the warranty of title is not an implied warranty but a warranty wherein the seller of goods warrants that he has the right to sell the goods to the buyer. The warranty of title ensures to the buyer that the goods are not stolen, have patent infringements or already sold to someone else. This theoretically saves a buyer from having to "pay twice" for a product, if it is confiscated by the rightful owner, but only if the seller can be found and makes restitution.

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[3] (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.[4]

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, repair, or replacement. The sale starts the time under the statute of limitations for starting a court complaint for breach of warranty if the seller refuses to honour 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.

See also product liability 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 liability.

U.S.A & Canada

In retail business, a warranty (or "extended warranty") 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 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.

  • 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

The *true literature of an insured service agreement is the most important facet into determining the quality of your Extended Auto Warranty. A fully insured auto warranty, while sometimes found at wholesale rates or similar, can be worth the price difference, if any. The true literature is a contract that is written on your behalf and MUST include YOUR name and MUST include YOUR Product ID Number (PIN) or Vehicle ID Number (VIN) in the paperwork. This is your true literature, and when dealing with any contracts there are always different "Terms & Conditions," so be sure to only deal with companies that will provide this service contract (often requires an active application). This type of warranty company is noticeably different when compared to most sub-contracted, in-house, retailed, and third-party warranty companies, simply because it will cover the higher shop rate and may permit the customer to select a different mechanic outside of dealership as well as nationwide. Insured warranties often pay for the cost of repair, labor rates and parts used, before the vehicle has even been serviced (up-front payment), leaving the owner with just the low co-payment/deductible when picking up the repaired vehicle or product.

Legal aspects of warranties and disclaimers

In the United States, 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.

"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 is 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 car warranty extends from a minimal 1 year, more common 3 year and extended 5 years. While some car manufacturers 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. One can usually buy a warranty from an insurance company or insurance coverholder, such as Carchex and US Fidelis. The term extended warranty is generally misleading. Non-manufacturer based warranties are technically called motor vehicle service agreements or service contracts. In states which license service contract companies, those companies are required to not sell them as warranties.

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

References

  1. ^ Bush, Coleman (1915). Uniform business law: with business forms and illustrative cases. The H. M. Rowe company. http://books.google.com/books?id=MH0aAAAAYAAJ&pg=PA84&dq=%22collateral+assurance%22&lr=&ei=SRXzSurxAo3mMJPMpEA&client=firefox-a#v=onepage&q=%22collateral%20assurance%22&f=false. 
  2. ^ The World is Flat: A Brief History Of The Twenty-first Century. Friedman, Thomas, Farrar, Straus, Reese, and Giroux, 2005.
  3. ^ http://www.usatoday.com/money/perfi/columnist/lamb/0004.htm
  4. ^ "Cisco Limited Lifetime Hardware Warranty Terms". http://www.cisco.com/en/US/docs/general/warranty/English/LH2DEN__.html. Retrieved 2008-09-10. 

External links


1911 encyclopedia

Up to date as of January 14, 2010
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From LoveToKnow 1911

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Simple English

In commercial and consumer transactions, a warranty is an obligation that an article or service that is sold has the quality the buyer can reasonably expect from the seller.

That often means that there must be remedy, that means repair or replacement if the article or service is not as good as the warranty says. It is breach of warranty when the promise is broken, i.e., a product is defective or not as good as should be expected by a reasonable buyer.

In business and legal transactions, a warranty is an assurance by one party to the other party that certain facts or conditions are true or will happen; the other party is allowed to rely on that assurance and seek some type of remedy if it is not true or followed.

A warranty may be express or implied.

Contents

Express warranty

An express warranty is typically a guarantee from the seller of a product that specifies the extent to which the quality or performance of the product is assured and states the conditions under which the product can be returned, replaced, or repaired.

Implied warranty

An implied warranty is one that arises from the nature of the transaction, and the understanding by the buyer. 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".

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. 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).

Many people do not realize that extended warranties are not always provided through the manufacturer, but in some circumstances it may work to the consumer's benefit. For instance, when an auto warranty is provided through a dealership from the manufacturer, repairs on the vehicle are reimbursed at a lower negotiated rate.

Legal Aspects of Warranties and Disclaimers

In the United States, 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.

Car warranty

A car warranty extends from a minimal 1 year, more common 3 year and extended 5 years.

Home Warranty

A home warranty protects against the high costs of home and appliance repair by offering insurance coverage for appliances and equipments in the house.

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