News & Insights

Magnuson Moss & Implied Warranties
June 27, 2013
by Trevor Gasper

 

South Bend / Mishawaka, IN –

Introduction

When pursuing a claim based on the failure of a consumer product[1], one of the primary concerns is the cost, including attorneys’ fees, to obtain recovery.   When defending such a claim, the recoverability of fees and costs is a strong motivator of settlement.  While statutes like the Indiana Deceptive Consumer Sales Act (“IDCSA”)  provide a wonderful tool for an aggrieved consumer to obtain its reasonable attorneys’ fees and costs, in addition to other exemplary damages, such statutes are very often difficult to maintain as part of the inquiry is often times on the seller’s subjective belief.

For example, the IDCSA rightfully provides a cause of action where a manufacturer or seller of a consumer product represents a product to be of a particular standard, quality, grade, style, or model, if it is not and the supplier knows or reasonably should know that it is not.  Thus, to make out a claim, the consumer would need to prove: (1) an actual representation made by the seller; (2) the product was defective; and (3) the seller knew or should have known it was defective.  Predictably, even where a product is defective, a supplier will typically contend that it did not make any representation or that it did not know of the defect and has reasonable policies and procedures in place to ensure such defective product does not reach a consumer.   While not insurmountable, these types of contentions take additional time and money to prove.

As set forth more fully in this article, by “bootstrapping” the implied warranties available under Indiana’s Uniform Commercial Code (“IUCC”) with the Magnuson Moss Warranty Act, fees and costs are recoverable without the need to prove an actual representation and subjective knowledge of the seller.

Overview of the Magnuson Moss Warranty Act

The Magnuson-Moss Warranty Act is the federal law that governs consumer product[2] warranties. Under the Act, manufacturers and sellers of consumer products are required to provide consumers with detailed information about written warranty coverage[3] and are, in essence, legally bound to honor the terms of such warranties.

Accordingly, Magnuson-Moss is generally employed in lawsuits concerning the written warranty provided by a manufacturer or seller.  However, Magnuson-Moss should not be viewed as a narrow tool for violations of such written warranties.  Though the congressional intent of Magnuson-Moss was most certainly focused on eliminated deceptive written warranty practices, under a little utilized provision, the Act extends to the sale of all consumer products covered by state law implied warranties.

Section 2310(d) of the Act provides:

A consumer who is damaged by the failure of a supplier, warrantor, or service contractor to comply with any obligation under this title, or under a written warranty, implied warranty, or service contract, may bring suit for damages….

Accordingly, Magnuson-Moss is available even where the only warranty breach relates to an implied warranty.  The Act further states that “[t]he term ‘implied warranty’ means an implied warranty arising under State law . . . in connection with the sale by a supplier of a consumer product.”   As the Act also provides for an award of attorneys’ fees to the prevailing party, a violation of an implied warranty is a ticket to complete recovery under the Act.[4]

Indiana’s Implied Warranties

Under the IUCC, two primary implied warranties are extended in a typical consumer product transaction relating to the sale of a new product[5]: (1) the implied warranty of merchantability; and (2) the implied warranty of fitness for a particular purpose.

The implied warranty of merchantability boils down to a basic promise by the seller[6] that the product sold will do what it is supposed to do and that there is nothing significantly wrong with it.  This promise is made automatically each time a seller sells a product.  For example, if a phone retailer sells a smartphone, it is implicitly warranting the smartphone will do what smartphones are supposed to do—make phone calls, run applications, provide a conduit to the internet, etc.  If the smartphone does not make phone calls, then the smartphone is not fit for sale as a smartphone and the implied warranty of merchantability would be breached.

The implied warranty of fitness for a particular purpose is the basic promise by a seller that the advice given by the seller that a product is suitable for a particular purpose may be relied upon by the consumer.  For example, if a customer asks a paint retailer for a recommendation for a primer that will work on redwood siding, the retailer makes a recommendation, and the customer purchases the primer based on that recommendation, then a warranty of fitness for a particular purpose exists.  If the primer is not suitable for redwood siding, then this warranty of fitness for a particular purpose is breached.

Note, implied warranties are promises about the condition of the product at the time it is sold and the warranties do not necessarily assure that a product will last for any specific length of time.  Most certainly, the implied warranties do not cover issues created by misuse, ordinary wear, failure to follow directions, or improper maintenance.

Disclaimer or Modification of Implied Warranties

Under the Magnuson-Moss Warranty Act, the disclaimer of an implied warranty is prohibited where a written warranty is given.[7]  This is important and means that even where a written warranty is provided for a consumer product, the implied warranties discussed above will also attach to the product.

In cases where no written warranty is offered, a seller has to meet certain onerous requirements under the IUCC to properly disclaim the implied warranties.  In a typical consumer transaction where no formal contract is signed, it is near impossible for a seller to properly disclaim the implied warranties.

Conclusion

When pursuing a claim related to a defective consumer product, Magnuson-Moss should be part of a practitioner’s arsenal.[8]  If a product objectively fails the analysis of either implied warranty, then the warranty is breached.  By “bootstrapping” Magnuson-Moss to this breach of implied warranty, one can achieve a complete recovery (actual damages, all fees, and costs) without the need to be demonstrate the seller of the product knew or should have known that a product is defective.



[1] It is not the intent of this article to discuss claims related to product liability or personal injury related to the failure of any product.  The scope of this article is limited to claims for economic (non-personal injury) damages resultant from the failure of a consumer product to perform appropriately.

[2] In general, the term “consumer product” excludes products purchased for resale or for commercial purposes.  The warranty primarily extends to products that are generally purchased for personal, family, or household purposes.

[3] The Act does not require any business to provide a written warranty.  A business may determine whether to warranty its products in writing.  However, once it decides to offer a written warranty on a consumer product, then it must comply with the Act.

[4] The award of attorneys’ fees under the Magnuson-Moss Act, like an award of attorneys’ fees under the IDCSA, is largely discretionary.  However, in the Magnuson-Moss Act, Congress took the extra step of providing that fees should be awarded “unless inappropriate” which appears to limit a court’s ability to deny an award of fees.

[5] While implied warranties may extend to “used” products as well, these warranties differ from the warranties discussed below.

[6] The implied warranty does not extend to all sellers but is primarily limited to merchants who regularly sell products of the type sold.

[7] A seller may be able to limit the duration of any implied warranty to the duration of any actual written warranty offered.  As such, if a seller offers a 2  year full warranty, the implied warranties may also be limited to that 2 year period.

[8] Obviously, such a claim should stand as one claim among many others, including claims under the IDCSA.

 

See Also...

Home Improvement Contractors – Put it in Writing (It’s the Law)
August 23, 2016 - by Trevor Gasper

South Bend / Mishawaka, IN –  When parties to a contract fail to memorialize the terms of [...]
Read more >

The ABC’s for Secured Lenders Dealing With a Defaulting Borrower
July 22, 2016 - by Jeffery Johnson

South Bend / Mishawaka, IN – Each day lenders are faced with borrowers who default under [...]
Read more >

May Oberfell Lorber Partners Names to 2016 Super Lawyers Rising Star List
February 12, 2016

SOUTH BEND / MISHAWAKA, IN – May Oberfell Lorber is pleased to announce that Partners, Marcel [...]
Read more >

Print

Email

Facebook

Twitter

LinkedIn

Google+

SHARE