General warranty policies and agreements

October 28, 2014

document reviewWhile specific requirements must be adhered with respect to consumer warranties, warranty issues arise in any sale and purchase of goods transaction.  The scope of the duties and obligations to the customer with respect to service and support is generally defined by warranties provided in connection with the original sale of the product. Since repairs covered by product warranties are essentially part of the purchase price, and cannot be charged for separately, manufacturers and distributors must carefully craft warranty provisions in the sale agreement. For general discussion, see Sale of Goods (§§ 120:22 et seq.).

The seller of the product, be it the original manufacturer or one of the distributors, should develop standard terms for the warranties relating to the product. See Master Form at § 88:49. When drafting warranties, consideration must be given to the impact of the Uniform Commercial Code (§ 88:41) (“UCC”), as well as the Magnuson-Moss Warranty Act (§ 88:42) in the case of consumer goods. From the perspective of the party responsible for complying with the warranties, a well-drafted clause will cover the following issues:

  • A specific statement of any express warranties relating to the performance and quality of the product, coupled with an appropriate disclaimer of any other express warranties;
  • A conspicuous disclaimer of any implied warranties of merchantability and fitness for a particular purpose;
  • A concise specification of the period during which any warranties would be applicable (e.g., 90 days from the date of sale);
  • A description of the purchaser’s remedies for any breach of warranty, which should be exclusive and in lieu of any remedies available under the default provisions of the UCC.

While manufacturers and distributors will customarily disclaim any implied warranty of merchantability, the express warranties provided with the product will usually incorporate a number of the indicators of merchantability recognized in the UCC. Thus, for example, the warranties will often confirm that the product will:

  • Pass without objection in the trade under the contract description;
  • Be of fair or average quality within the description in the case of fungible goods (for example, grain);
  • Be fit for the ordinary purposes for which such goods are used, although not necessarily the specific purposes of the customer;
  • Run, within the agreement’s permitted variations, of even kind, quality, and quantity;
  • Be adequately contained, packaged, and labeled; and
  • Conform to the promises or affirmations of fact made on the container or label, if any.

Express warranties (§ 88:40) can appear in a number of places, and marketing and sales personnel should be warned about the legal effect of statements made during negotiations with customers.  In order to ensure that the warranty policies of the company are clear it is recommended that a single comprehensive statement of product warranties be created and conspicuously posted on the company website. See specialty form at § 88:115.50.  Invoices for products sold by the company should either replicate the statement of product warranties precisely in its entirety, or clearly cross-reference to the website and incorporate the posted policy by reference.

Companies should also develop internal procedures for administration of warranty policies (§§ 88:22 et seq.). This may include, among other things, a requirement that customers complete and return a warranty information form as a condition to effectiveness of the warranty coverage. See specialty form at § 88:115.