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Disclaimer of Warranties its Curses and Cures

Consumers buy products because they believe that the products will end up serving the purpose they are supposed to serve: that according to Uniform Commercial Codes (UCC) words “fit for ordinary purposes for which such goods are used for. ” [West, 2005, p. 155] However, many are times when such products fail to conform to the expectations as promised by the manufacturer, causing great losses to the consumer. This calls for effective warranties that will protect the consumer from such losses.

Unfortunately, this has not been the case as manufacturers have succeeded in disclaiming the warranties hence frustrating the consumers. [West, 2005] The Curse Basically, a warranty statement will involve a one year protection period during which a consumer is assured of replacement or repair of the product in case of any defect. Unfortunately, the manufacturer is the sole judge who makes a decision as to whether a product is defective, and that the consumer is not given an opportunity to choose for repair or replacement of the defective product.

What more, the consumer incurs all the costs of labor and transportation during the replacement or repair incidents. These warranties are normally prepackaged together with the goods and therefore not available to the buyer at the very instant of purchase. For small items the buyer may get to read the warranty upon opening of the packaged item on reaching home, however, with large items it may take several days to do so. Moreover, there is no guarantee that the buyer will ever read the document, or even understand the content of the document.

It is under these circumstances that the manufacturers get to convince the buyers that warranty documents actually controls the liabilities between the two parties. [West, 2005] The Possible Cure Basically, a consumer assumes two positions in regards to the manufacturer’s warranty depending on whether the warranty contained a registration card or not. In the event of an absence of a registration card it will be more difficult to argue that there is in fact no valid warranty or disclaimer.

However, in both cases the manufacturer has purported to create a valid express warranty. Based on section 2-313(1)(a) of the UCC, an express warranty is any affirmation of fact or promise that a seller makes to the buyer in regards to the goods sold and which becomes part of the basis of the bargain. In order to be part of the basis of the bargain there must be mutual assent between the parties. Hence in warranty situations whereby the buyer lacks affirmative action then the mutual assent will also be lacking. [West, 2005]

Sometimes there is the need for additional terms to the contract, particularly when “conduct by both parties who recognized the existence of a contact is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. ” [p. 157] Such warranty modifications are deemed to be valid under section 2-209 of the Code even though it was a part of the bargain at the moment of purchase. Furthermore, section 2-313 provides that the time when words of description of affirmation are made is not consequential.

Express warranties may be deemed as invalid if they violate the provisions of section 2-316 of the Code. It provides that in order to disclaim any warranty the writing must be conspicuous and in warranty of merchantability, the term ‘merchantable’ must be mentioned. Conspicuousness has got two concepts, one requiring that the disclaimer must be conspicuous on the document itself, and the second one demanding that the buyer must be notified of the disclaimer. However, most court cases are decided using the second concept. For example, in Turner v.

Kunde, the plaintiff sought to compel the buyer to pay for cattle which were subsequently found diseased after the sale agreement; the court ruled that a disclaimer made after the agreement has been arrived at could not vary it. In Calumet Cheese Co. v. Pfizer & Co. , whereby the plaintiff-buyer claimed a breach of warranty action against Pfizer who had sold a defective additive that ruined plaintiff’s cheese, the court ruled that the declaimer being part of invoice was submitted after the contract was made, and hence was ineffective in imposing additional obligations on the buyer.

Other cases concluded on the wisdom that the conspicuous requirements of section 2-316 of the Code while still making claims that the extended disclaimer was not part of the bargain include Admiral Oasis Hotel Corp. v. Home Gas Industries Inc. , Cherokee Investments Co. v. Voiles, Zabriskie Chevrolet Inc v. Smith, Marion Power Shovel Co. v. Huntsman, Mack Trucks of Arkansas, Inc. v. Jet Asphalt and Rock Co. , and Tiger Motor Co. , Inc. v. McMurty. A striking commonality about these cases is that, they all show that the disclaimer is not favored by the courts and in characteristic consumer transactions will not be upheld.

The courts also declared a disclaimer void in two cases: Walsh v. Ford Motor Co. , and Ford Motor Co v. Pittman. [West, 2005] It can be argued that there would be a difficult situation if a registration card is not filled and returned as directed in good time: in such a situation it would seem as if there was no card in the first place. This is because when the registration card has been submitted it acts as an acceptance under section 2-207 of the Code or an agreement modifying the contract under section 2-209 of the Code.

Another notable aspect of the warranty document is that the manufacturer is always keen to limit the remedies available under section 2-719 of the Code. Furthermore, section 2-274 of the Code specifies that a buyer’s measure of the damages for a breach of warranty as: the difference at the time and place of acceptance between the value of goods accepted and value they would have had if they had been as warranted, unless special circumstances show proximated damages of a different amount, and in a proper case any incidental and consequential damages under the next section may also be recovered.

Additionally, based on policy of personal injury as stipulated in section 2-318 of the Code warranty documents are limited to the original purchaser only. [West, 2005] Based on provisions of section 2-302 of the Code on the doctrine of unconscionability, warranty documents are made to equalize or negate gross inequality in the parties bargaining positions. This is depicted by the number of cases that have been decided using the clause which include fraud, gross inequality of bargaining position, lack of meaningful choice, lack of understanding, excessive price, etc.

Moreover, “in order to obtain a holding of unconscionability it is imperative that there exists terms of unreasonably favorable to one party and that reasonableness or unreasonableness of the terms must be determined by factors other than the contract or clauses’ commercial purpose and effect,” [p. 171] as was in Williams v. Walker-Thomas Furniture Co. and Jefferson Credit Corp. v. Marcano.Lastly, the doctrine of caveat emptor presupposes some parity or equality between the bargaining parties as was in Jones v. Star Credit Corp. and in Star Credit Corp. v. Molina. [West, 2005]

References:

Miller, R. L. , & Jentz, G. A (2007). Business Law Today, Standard Edition. South Western College/West West, M. G. (2005). Disclaimer of Warranties – Its Curse and Possible Cure. The Journal Of Consumer Affairs, Vol. 5, No. 2, pp. 154 -173.

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