||The examples and perspective in this article deal primarily with the United States and do not represent a worldwide view of the subject. (September 2010)|
In contract law, a warranty has various meanings but generally means a guarantee or promise1 which provides assurance by one party to the other party that specific facts or conditions are true or will happen. This factual guarantee may be enforced regardless of materiality2 which allows for a legal remedy if that promise is not true or followed.
Although warranties are used in many contractual circumstances, they are a common feature in consumer law for automobiles or real estate purchases. For example, new car sales typically include a factory warranty which guarantees against the malfunction of the car for a certain time period. In real estate transactions, a general warranty deed may promise good title to a parcel of land while a limited warranty provides a limited guarantee of good title.
A warranty may be express or implied, depending on whether the warranty is explicitly provided (typically written) and the jurisdiction. Warranties may also state that a particular fact is true at one point in time or that the fact will be continue into the future (a "promissory" or continuing warranty).
Warranties provided in the sale of goods (tangible products) vary according to jurisdiction, but commonly new goods are sold with implied warranty that the goods are as advertised. Used products, however, may be sold "as is" with no warranties.
In the United States, various laws apply, including provisions in the Uniform Commercial Code which provide for implied warranties.3 However, these implied warranties were often limited by disclaimers. In 1975 the Magnuson–Moss Warranty Act was passed to strengthen warranties on consumer goods.4 Among other things, under the law implied warranties cannot be disclaimed if an express warranty is offered, and attorney fees may be recovered.4 In some states statutory warranties are required on new home construction, and "lemon laws" apply to motor vehicles.
Implied warranties are unwritten promises that arise from the nature of the transaction, and the inherent understanding by the buyer, rather than from the express representations of the seller. In the United States, Article 2 of the Uniform Commercial Code (which has been adopted with variations in each state) provides that the following two warranties are implied unless they are explicitly disclaimed (such as an "as is" statement):
- 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. For example, a fruit that looks and smells good but has hidden defects may violate the warranty 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.
- The warranty of fitness for a particular purpose is implied unless disclaimed 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.
In the United States, the Magnuson–Moss Warranty Act of 1976 provides for enforcement of a satisfaction guarantee warranty. In these cases, the advertiser must refund the full purchase price regardless of the reason for dissatisfaction.5
A lifetime warranty is usually a guarantee on the lifetime of the product on the market rather than the lifetime of the consumer, although it can be defined in various ways.6 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.7
- HP Networking products lifetime warranties last for as long as you own the product.8
Warranties are violated when the promise is broken or the goods are not as expected. The seller may honor the warranty by making a refund or a replacement. The statute of limitations depends on the jurisdiction and contractual agreements. In the United States, the Uniform Commercial Code § 2-725 provides for a four-year time limit, which can be limited to one year by contract, starting from the date of delivery or if future performance is guaranteed from the date of discovery. Refusing to honor the warranty may be an unfair business practice. In the United States, breach of warranty lawsuits may be distinct from revocation of contract suits; in the case of the breach of warranty, the buyer's item is repaired or replaced while breach of contract involves returning the item to the seller.9
In addition to standard warranties on new items, third-parties or manufacturers may sell extended warranties (also called service contracts). These extend the warranty for a further length of time. However, these warranties have terms and conditions which may not match the original terms and conditions. For example, these may not cover anything other than mechanical failure from normal usage. Exclusions may include commercial use, "acts of God", owner abuse, and malicious destruction. They may also exclude parts that normally wear out such as tires and lubrication on a vehicle.
These types of warranties are provided for various products, but automobiles and electronics are common examples. Warranties which are sold through retailers such as Best Buy may include significant commission for the retailer as a result of reverse competition.10 For instance, an auto warranty from a car dealership may be subcontracted and vehicle repairs may be at a lower rate which could compromise the quality of service. At the time of repair, out-of-pocket expenses may be charged for unexpected services provided outside of the warranty terms or uncovered parts.
Statements of fact in a contract or in obtaining the contract are considered to be either warranties or representations. Traditionally, warranties are factual promises which are enforced through a contract legal action, regardless of materiality, intent, or reliance.2 Representations are traditionally precontractual statements which allow for a tort-based action if the misrepresentation is negligent or fraudulent.11 In U.S. law, the distinction between the two is somewhat unclear;2 warranties are viewed as primarily contract-based legal action while negligent or fraudulent misrepresentations are tort-based, but there is a confusing mix of case law in the United States.2 In modern English law, sellers often avoid using the term 'represents' in order to avoid claims under the Misrepresentation Act 1967, while in America 'warrants and represents' is relatively common.12 Some modern commentators suggest avoiding the words and substituting 'state' or 'agree', and some model forms do not use the words;11 however, others disagree.13
New car factory warranties commonly range from one year to five years and in some cases extend even 10 years, with typically a mileage limit as well.14
In the United Kingdom, types of warranties have been classified as either a:
- original manufacturer warranty,
- insurance warranty underwritten and regulated as insurance or
- obligor warranty, typically written by a car dealership or garage.15
In the United Kingdom, the Financial Services Authority (FSA), which began to regulate insurance contracts in this context in 2005, determined that additional warranties sold by car dealerships are "unlikely to be insurance".16 Insurance warranties may offer greater protection to the consumer.15
A home warranty protects against the 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.
Warranty data consists of claims data and supplementary data. Claims data are the data collected during the servicing of claims under warranty and supplementary data are additional data such as production and marketing data.17 This data can help determine product reliability and plan for future modifications.17
- Business law
- Consumer protection
- Due diligence representations and warranties
- Extended warranty as an extra or prolonged warranty offered to consumers
- Financial Global Monetary Warranty (FGMW)
- Magnuson-Moss Warranty Act protection for voided warranties or denied claims based on modifications of the warranted product (United States)
- Surety (Guarantee)
- Warranty deed in land transactions
- Warranty tolling
- Hogg M. (2011). Promises and Contract Law: Comparative Perspectives, p. 48. Cambridge University Press.
- West GD, Lewis WB. (2009). Contracting to Avoid Extra-Contractual Liability—Can Your Contractual Deal Ever Really Be the "Entire" Deal? The Business Lawyer.
- Warranties in Sales of Goods. LexisNexis Study Outlines.
- 12 Reasons to Love the Magnuson-Moss Act. Journal of Texas Consumer Law. Reprinted with permission from the National Consumer Law Center.
- Andreoni J. (2005). Trust, Reciprocity, and Contract Enforcement: Experiments on Satisfaction Guaranteed.
- Lifetime Warranties. Warranty Week. WebCite Archive.
- "Cisco Limited Lifetime Hardware Warranty Terms". Retrieved 2008-09-10.
- "HP Networking warranty information". Retrieved 2011-08-26.
- Davis T. (2009). UCC Breach of Warranty and Contract Claims: Clarifying the Distinction. Baylor Law Review.
- Baker T, Siegelman P. (2013). Protecting Consumers from Add-On Insurance Products: New Lessons for Insurance Regulation.
- Primack MA. (2009). Representations, Warranties and Covenants: Back to the Basics in Contracts. National Law Review.
- Ferara LN, Philips J, Runnicles J. (2007). Some Differences in Law and Practice Between U.K. and U.S. Stock Purchase Agreements. Jones Day Publications.
- Telman J. (2012). Representations and Warranties. ContractsProf Blog.
- Insurance & Non-Insurance - What is the Difference?. WarrantyExpert.co.uk FAQ.
- What is a contract of insurance?. Financial Services Authority.
- Wu S. (2012). Warranty Data Analysis: A Review. Quality and Reliability Engineering International.