Warranties

Warranties are promises that a business owner makes to stand behind his products or services, and to protect consumers against damages or injuries caused by defective products. A warranty is also a limited promise made by a manufacturer or seller of a product that guarantees some aspect of the product.

There are several types of warranties, and it is important to understand your business's responsibilities under each type of warranty.

Express Warranties

An express warranty is an explicit warranty made by a manufacturer or seller.

There are several ways to make an express warranty, but the most common way is to make a written or oral representation of fact or promise. The exact terms "warrant" or "guarantee" need not be used to create an express warranty.

For example, if your company's television infomercial offers a suitcase that will "hold up to four cubic feet of clothing," you're expressly warranting that the suitcase will hold that amount of clothing.

Implied Warranty

An implied warranty means you've promised that the product will work the way it is supposed to work.

Examples of an implied warranty include:

• A buyer expects that a new car will run and will stop when the brakes are applied
• A buyer assumes that a new computer monitor will display text and graphics

An implied warranty is also called an implied warranty of merchantability. The implied warranty arises silently out of the transaction itself.

Warranty of Fitness

A warranty of fitness for a particular purpose arises when the seller knows the buyer is going to use the product for a special purpose, and the buyer relies on the seller's knowledge and recommendations when selecting a product.

For example, suppose a customer comes into your hardware store and asks for a saw that will cut a three-inch steel bar. Your sales assistant tells the customer that a particular saw will do that job, and sells him the saw. If the saw can't do that job (even if it is otherwise a very good saw), then your business has broken the warranty of fitness for a particular purpose.

Exclusion or Limitation of Warranties

Your business can exclude or limit a warranty only by using clear language stating that warranties are limited or excluded. It's very difficult to exclude express warranties, precisely because they are express. In other words, as a seller, you can't say in big letters on the box "this lawnmower will also chip wood," and take back the warranty in the fine print on the form inside the box. It's also difficult to exclude an implied warranty if your company is trying to deny its duty to provide a product free of defects.

But exclusions and limitations can limit the length of the warranty and restrict the remedy or recourse the consumer has when the warranty is broken.

Examples include:

• Your company may limit the length of the warranty to one year
• If the warranty is in effect, your company may require a consumer to return a defective product so your business has a chance to correct the defect
• Your business may also limit the warranties to exclude subsequent purchasers of the product

Federal Protection

The Magnuson-Moss Warranty Act is the federal law governing written consumer warranties. The Act requires the seller to give the consumer complete information about the warranty so that the consumer can understand it and compare its terms to warranties offered on competing products and services. A consumer can bring a lawsuit against a business that violates the Act, and can recover the costs of the lawsuit and attorney's fees if the consumer prevails.

Questions to Consider When Writing a Warranty

If your company offers a written warranty on a product or service, make sure your warranty answers the following questions:

• What is and is not covered under the warranty?
• What is the time period of the warranty coverage?
• How will your company fix problems that arise under the warranty coverage?
• What steps must a customer take to resolve a problem?
• How are a customer's rights affected by applicable state law?

Questions for Your Attorney

A small business attorney can help you understand your business's legal obligations in regard to warranties, and can help write warranties that satisfy state and federal laws. Among the questions to ask your attorney are:

• Do you have previous experience working on warranties?
• What do my employees and I have to understand about warranties?
• How can we make sure that we're adhering to state and federal warranty laws?
• How much do you charge for your services?

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