The Magnuson-Moss Warranty Act imposed important requirements on manufacturers and sellers that offer written warranties to consumers.
The Magnuson-Moss Warranty Act of 1975 imposed important disclosure requirements on sellers that provide written product warranties to consumers, addressed and sought to simplify the procedures for enforcing such warranties, and limited or proscribed certain common practices of product warrantors. This act, the first major federal effort to reform warranty law, represented the culmination of several years of federally prescribed studies of consumer-directed written warranties.
Prior to 1975, state law, in the form of the Uniform Commercial Code
The two most important implied warranties are the implied warranty of merchantability and the implied warranty of fitness for a particular purpose. The implied warranty of merchantability arises in sales by merchants or dealers in a particular type of good. It requires that the goods be fit for their ordinary use or purpose. For example, under the UCC, merchant sellers by implication warrant that automobiles are generally safe to drive and that washing machines are capable of washing clothes. In both cases, the sellers are warranting that their product meets general industry standards. The implied warranty of fitness for a particular purpose requires that sellers select appropriate goods in those cases in which buyers rely on the sellers’ expertise to do so. For example, a contractor needing a certain type of exterior paint to complete a project might inform the seller that he or she is relying on the seller’s expertise in identifying suitable paint. The implied warranty of fitness for a particular purpose would arise in that sale. If the paint is unfit for the stated purpose, then the seller has breached the implied warranty.
Although the UCC’s regime of express and implied warranties represented the most comprehensive product warranty rules ever adopted, a number of federal studies in the 1960’s and 1970’s revealed the UCC’s shortcomings, particularly in its rules related to written warranties. These studies suggested that some written warranties were so general that they communicated nothing about product quality, were often misleading, and were usually imposed by the product seller or manufacturer rather than being the result of bargaining between the seller and buyer.
The studies’ more specific observations identified some of the key problems with written warranties. For example, it became evident that in many sales of durable goods such as automobiles and large appliances, sellers were not communicating their warranties to buyers. Instead, buyers would often learn of a warranty after having received the product. The warranty in those cases was largely unimportant in the sale because the buyer knew nothing of it until after agreeing to purchase the product. In those cases in which the buyer knew of a written warranty, the seller often would include a disclaimer of implied warranties and/or a limitation of consequential damages (damages other than the reduced worth of a defective product; for example, the damages from a basement flood caused by a defective valve on a water heater). The net result of such a warranty was that the buyer would lack the benefits of the implied warranties and consequential damages.
Buyers often were confronted with conditions of qualification for warranty protection. These conditions might include a requirement to send a warranty card to a manufacturer to ensure coverage, a provision that the defective product be sent to a distant manufacturer for service, or a requirement that the buyer take the product to a local retailer for service despite the manufacturer’s unwillingness to compensate the retailer adequately for the services provided. Another conclusion of the federal studies was that many purchasers who enjoyed rights under the UCC’s warranty provisions were unwilling to litigate because the amount of the claim, often only the difference between the actual and warranted value of the product, would not justify pursuing an action against the manufacturer or seller of the product.
On January 4, 1975, Congress’s effort to correct these problems, the Magnuson-Moss Warranty Act, became law. In general, the act requires manufacturers and sellers who use written product warranties to disclose to purchasers the scope, effect, and limitations, if any, of a warranty; requires warrantors to establish informal dispute resolution programs for consumers who have claims based on written warranties; and prohibits warrantors from using a written warranty to disclaim the UCC’s implied warranties. It is important to note that the act does not require that product sellers make written warranties; it applies only to those sellers that elect to use such warranties.
The disclosure provisions of the Magnuson-Moss Warranty Act were likely its most significant provisions. These provisions were intended to respond to the less-than-clear language often used by sellers in their written warranties and to provide consumers with more information, with which they could make better choices. The most important disclosure requirement is that warrantors clearly label written warranties as either “full” or “limited.” A full warranty requires the warrantor or its designated representative to repair the defective product at no cost to the consumer, and, if repair is not possible, to replace the product at no cost. If the warrantor or its representative is unable to repair or replace the product, then the warrantor must refund the purchase price. The warrantor may specify the duration of the full warranty. The act classifies all warranties that fall short of the coverage of full warranties as limited warranties and requires that the warrantors label them as such.
The Magnuson-Moss Warranty Act requires that all consumer-directed written warranties be stated in clear and unambiguous language. Consumers should know the following information after reading the written warranty: which parts and repairs are covered by the warranty, whether any expenses are excluded from coverage, how long the warranty lasts, the necessary steps in obtaining repairs, what the company will do if the product fails, whether the warranty covers consequential damages, and any conditions or limitations on the warranty. The act also includes some important requirements and prohibitions. It requires that consumers be apprised of their written warranty options before the sale, compels warrantors that want to limit or avoid consequential damages to include conspicuous language to that effect in the written warranty, and proscribes the use of warranty cards and other devices that may pose obstacles to purchasers unless the written warranty itself includes such requirements. The act also prohibits a warrantor that makes a written full or limited warranty from disclaiming any implied warranties.
To encourage the resolution of consumer warranty claims, the Magnuson-Moss Warranty Act requires all product warrantors to establish internal means of informal dispute resolution for these claims. Although the act does not require resort to informal resolution, it encourages consumers to use this method. If a consumer makes reasonable efforts to comply with the warrantor’s wishes and if the warrantor is unable to remedy the consumer’s claim adequately, then the consumer has the right, if he or she prevails in a later lawsuit against the warrantor, to recover from the warrantor the reasonable value of attorney fees and court costs arising from the litigation.
The Magnuson-Moss Warranty Act has had a varied but generally positive effect on consumer-directed warranty transactions. For example, the act’s disclosure provisions appear to have had their intended effect of providing consumers with information so that they can make better purchasing decisions. After passage of the act, the federal government commissioned several studies to examine its effect. In general, the findings suggested that consumers were pleased with the warranty information required by Magnuson-Moss and used this information to make informed choices among comparable products.
Additional studies sought to determine whether and to what extent the act influenced potential warrantors. The findings suggested that product manufacturers and sellers were not more reluctant to make written warranties after the act. In fact, it appeared that many product marketers sought to use the act’s requirements to their advantage by offering full warranties to consumers. The studies also suggested that warranties appearing after passage of the act were more readable and included more product information than did their predecessors. Finally, the studies revealed that virtually all warrantors were complying with the act’s prohibition against implied warranty disclaimers, but warrantors were more inclined to include conspicuous limitations of consequential damages in their written warranties.
The act’s provision prohibiting warrantors from using their written warranties to disclaim implied warranties has had a significant influence on both warrantors and consumers. Perhaps the single most deceptive practice before the adoption of Magnuson-Moss was a warrantor’s assertion of product quality through a written warranty coupled with an almost contradictory provision disclaiming the UCC’s implied warranties of merchantability and fitness for a particular purpose. The written warranty would suggest to most reasonable consumers that the product was of good quality, would include language that often restricted the consumer’s options in case the product was less than advertised, and then would eliminate resort to implied warranties, which provided the only other recourse should the written warranty fail for some reason.
Despite the act’s attempt to simplify the dispute process, dispute resolution remained the biggest problem for consumers wishing to pursue warranty actions against product warrantors. Whether the product deviates from a written warranty or is of poor quality continued to be a key issue in warranty disputes. Although the Magnuson-Moss Warranty Act improved the dispute process and encouraged warrantors to cure the problem, the act did not, and likely could not, eliminate frivolous consumer claims, unreasonable warrantor reactions to legitimate claims, and high litigation costs for those cases in which both sides strongly support their positions and are therefore unwilling to resolve their dispute in an informal manner.
-
Arthur Young & Company. Warranties Rules Consumer Baseline Study. Washington, D.C.: U.S. Government Printing Office, 1979. Comprehensive technical study of the effects of Magnuson-Moss. Excellent and methodologically sound work intended for serious researchers. -
Jasper, Margaret. What If the Product Doesn’t Work? Warranties and Guarantees. Dobbs Ferry, N.Y.: Oceana, 2003. Clearly written layperson’s almanac to laws and federal agencies that deal with consumer concerns and safety. -
Reitz, Curtis R. Consumer Protection Under the Magnuson-Moss Warranty Act. Philadelphia: American Law Institute-American Bar Association Committee on Continuing Professional Education, 1978. Comprehensive, readable treatment of the legal environment that provoked the adoption of Magnuson-Moss. -
Schmitt, Jacqueline, Lawrence Kanter, and Rachel Miller. Impact Report on the Magnuson-Moss Warranty Act: A Comparison of Forty Major Consumer Product Warranties from Before and After the Act. Washington, D.C.: U.S. Government Printing Office, 1980. An excellent and brief (thirty-three pages) early source on the impact of Magnuson-Moss. Focuses on industry reaction to the act and whether the act influenced sellers. Discusses such issues as continued use of written warranties, whether new warranties are limited or full, and intelligibility of warranties. -
U.S. Federal Trade Commission. A Businessperson’s Guide to Federal Warranty Law. Washington, D.C.: U.S. Government Printing Office, 1987. Twenty-three-page primer on the provisions of the Magnuson-Moss Warranty Act. A particularly good source for those who receive written warranties and want to know their rights.
Nixon Signs Law to Protect Consumer Safety
Bridgestone/Firestone Announces Massive Recall