Warranties, Product Liability and Consumer Law

Chapter 12

Express Warranties• A seller’s or lessor’s oral or written promise

in connection with a sales or lease agreement, as to the quality, description, or performance of the goods being sold or leased.

Express Warranties• Under the U.C.C., express warranties arise

when a seller indicates to the buyer that the goods conform to any affirmation or promise of fact made about the goods.

• “Sales talk” and matters of opinion or “puffing” are not considered warranties (includes statement of opinions and value of goods).

Magnusson-Moss Act• No written warranty is required, but if there

is it must comply.• For an express warranty to be a “full

warranty” it must provide unlimited repair or replacement of any defects at no charge to the consumer.

• Otherwise, a “limited warranty” is any warranty which does not meet all of the requisites for a full warranty.

Implied Warranties• A warranty imposed by law or by

implication or inference from the nature of the transaction or the relative bargaining positions or circumstances of the parties.

Implied Warranties• Good Title• No Liens• Fitness for a Particular Purpose

(These warranties apply to all sellers)

Implied Warranties• Merchantability (Fit for Normal Use)• No Infringements• Prior Dealings or Trade Custom(These warranties only apply to merchants)Merchant defined under the UCC as a person

who deals in the kind of good involved in the contract or a person who himself out as having a particular skill or knowledge peculiar to the practices or use of the goods

Disclaimers Of Warranties• Waiver of Express Warranty

–Any oral or written express warranty may be disclaimed by a clear and conspicuous written disclaimer which is called to the buyer’s attention at the time the contract is formed.

Disclaimers Of Warranties• Waiver of Implied Warranty

–Disclaimer must be clear and conspicuous

–AS IS or WITH ALL FAULTS–Specifically mention “merchantability” if

for implied warranty for merchantability

*Concept of unconscionability applies

Strict Product Liability• A manufacturer, distributor or seller of

goods will be strictly liable, regardless of intent or negligence, for any personal injury or property damage to consumers, users, and by-standers caused by the goods it manufactures, distributes or sells.

Strict Product Liability• Requirements -- Plaintiff must show:

– Product was defective when the defendant sells it

– Defendant is in the business of selling product– The product must be unreasonably dangerous– Proximate cause– Damages– Goods were not changed between the time that

they were sold and when injury occurs

Strict Product Liability

• Unreasonably Dangerous-

-The product is dangerous beyond the expectation of the ordinary consumer

-There was a commercially feasible less dangerous alternative that was not produced.

Can be due to: Manufacturing Defects

Design Defects , or

Inadequate Warning

Strict Product Liability• Defenses

–Product Misuse–Assumption of the Risk–Commonly known dangers–Knowledgeable user

Other Consumer Protection Laws• Deceptive Trade Practices Act (DTPA)

– Deceptive Advertising- occurs when a reasonable consumer would be misled by the ad

– “Bait and Switch” advertising

(fails to show the advertised item, fails to have sufficient quantity, fails to reasonably deliver, or discourages salespeople from selling

- FTC can issue cease and desist or require counteradvertising

Other Consumer Protection Laws

• Telemarketing -

- cannot use automatic dialer (or fax without permission

- must inform that it is a sales call

- must inform of total cost of goods and whether a sale is final and non-refundable

- must take consumer of call list if asked

Other Consumer Protection Laws

• Fair Packaging & Labeling Act–name of manufacture or distribution–net quantities and contents

Other Consumer Protection Laws

• Door-to-Door Sales- “cooling off period”• Mail order sales- must ship orders within

time specified in catalog and notify if they cannot

-Unsolicited sales attempts by shipping goods become gifts

Other Consumer Protection Laws

Truth in Lending Act (“TILA”)• Regulation Z

– requires disclosures in loan transactions, standardized interest rates, etc.

– applies to loan transactions with more than four installments

• Equal Credit Opportunity Act• Credit Card Rules

Other Consumer Protection Laws

• TILA Credit Card Rules

$50 Maximum for unauthorized use (0$ if Card improperly issued)

See new rules (page 383)

Other Consumer Protection Laws• Fair Credit Reporting Act

– right to see credit reports– right to include explanation

• Fair Debt Collection Practices Act –prohibits late night calls, contacts at

work, fake court proceedings, etc.

Warranties, Product Liability and Consumer Law

End of Chapter 12