When Warranties Fail

While everyone has received a warranty on something that they have purchased, few stop to read “the fine print.” Reading one may cause you to wish that you had not. Typically, the warranty will provide that the manufacturer and/or distributor will “repair or replace,” at their option, the product or part of the product that is defective. Remember – a warranty is not a guarantee of perfection. It is a promise that if the product is defective, it will be repaired or replaced.

Typically, warranties carry language such as “this warranty is exclusive and in lieu of all other warranties.” That same warranty will tell you that the warrantor is not liable for any types of damages caused by the product defect other than the costs of repairing that defect.

There are two important points for consumers to understand. First, that limitation of damages does not apply to situations where the defective product causes a personal injury. Second, even where there is no personal injury, those limitations on remedies do not apply if the warranty “fails of its essential purpose.” Thus, if you take your car to the automobile dealership to get something repaired and they cannot repair it or cannot repair it in a reasonable time, the warranty may have failed of its essential purpose.

This applies to both consumer and non-consumer products. A federal statute – the Magnuson–Moss Warranty Act – provides the framework for consumers to file claims in State or Federal court for breaches of warranties involving consumer products. These products would include motor vehicles, recreational vehicles, and even manufactured homes. One nice feature of the Magnuson–Moss Warranty Act is that it provides for the recovery of attorney’s fees if you win. Many states have their own consumer laws which do the same thing.

As stated above, this also applies to non-consumer products. Our firm recently obtained a $450,000 verdict in a trial in Federal Court for a small business which purchased heavy equipment to use in the storm cleanup effort after Hurricane Katrina. Of the three machines that the company purchased, two were defective. One of those machines took approximately three months to fix and the other took almost eight months to fix. The jury found that the manufacturer, Ingersoll Rand, had breached the warranties and that the warranties failed of their essential purpose. The verdict represented the value of the equipment and the company’s lost profits.