“MUST I Offer a Guarantee on My Products? If So, What Must it Entail?” Dissecting and Deciphering U.S. Warranty Law

Here is a summary of what the U.S. requires when offering guarantees (referred to as "warranties") on consumer products. (International readers, please investigate these in your own locality.) Please note, I am neither a lawyer nor expert on this topic, and I do not work for the FTC. I simply researched this for quite some time, and thought that you might benefit from my findings. Check with an authority — or the FTC itself — for any clauses below that you don’t understand.

Also, the info below applies to written (not oral) warranties, and it appears that it also only applies to tangible, consumer products, not intangibles nor services. [I don't see how that makes sense (or is a good thing) though, so if someone out there knows why that is, I'd love to hear it.]

I gathered this info from the FTC website itself, and tried to put it in a format that the average non-legal person could understand.

Here goes it…

— What IS a "Warranty" as Defined by the FTC?

Warranties are your promise, as a merchant, to stand behind your product.

— Two Types of Warranties

The law recognizes two types of warranties: implied and express . There are also two types of implied warranties.

1. The implied warranty of "merchantability" is a merchant’s promise that the goods sold will do what they are supposed to do, and that there is nothing significantly wrong with them. The implied warranty of "fitness for a particular purpose" is a promise that you make when your customer relies on your advice that a product can be used for some specific purpose.
2. Express warranties, on the other hand, are promises that you make (voluntarily) about your product, or about your commitment to remedy the defects and malfunctions that some customers may experience. In other words, a satisfaction guarantee of sorts.

For more information and examples of these terms, see the FTC’s "Understanding Warranties" article segment at:

http://www.ftc.gov/bcp/conline/pubs/buspubs/warranty.shtm#understanding

— Are Warranties Mandatory for Consumer Products? If So, for How Long?

When selling consumer products, you can choose not to offer a written warranty, in which case the law in most states allows you to also avoid the otherwise mandatory implied warranty for that product. In order to do that, you need to make it perfectly clear to your customers, (in writing), that you release all responsibilities and obligations, should the product malfunction or be determined to be defective.

As such, you must *specifically indicate* that you don’t warrant "merchantability" (see the definition above), and/or indicate that you’re selling the product "with all faults" or "as is."

And if a written warranty IS offered for a product, you must also offer an implied warranty on the same product, to be in accordance with the above. (Well, it automatically applies — you can’t disclaim it in that instance.)

Note: A few states have special laws on how you need to phrase an "as is" clause, while other states don’t allow the sale of "as is" consumer products at all. (For specific information on how your state treats "as is" disclosures, consult your attorney.)

There are no time limitations on implied warranties , (which are automatically required and enforced by the government at the point of sale ).

However, the state statutes of limitations for breach of either an express OR implied warranty are generally four years from the date of purchase. This means that a consumer has four years to discover and seek a remedy for problems that were present in the product at the time it was sold (and for the "normal durability" of that product).

Obviously, this doesn’t cover damage due to consumer misuse, natural wear and tear, etc. It simply states that the product must do what it was intended to do for the average "life" of the product.

— Requirement for Consumer Products Over $10

For all consumer products over $10, the warranty must be "designated" as either "Full" or "Limited". There’s a set of 5 questions to use as a litmus test for whether you should describe your warranty as Full or Limited. See them here:

http://www.ftc.gov/bcp/conline/pubs/buspubs/warranty.shtm#makingwarranties

Also, you’re not required to choose one designation for your ENTIRE warranty. Meaning, part of your warranty can be Full, and the other part can be Limited. Again, please see the URL above for details.

— Requirement for Consumer Products Over $15

For all consumer products over $15, the warranty must be made available PRIOR to sale. Please see the below URL for specifics as to how it must be disclosed:

http://www.ftc.gov/bcp/conline/pubs/buspubs/warranty.shtm#makingwarranties

— If You DO Offer Written Warranties, They MUST Follow These Three Basic Requirements…

1. As a warrantor, you must designate ("title") your warranty as either "full" or "limited."
2. As a warrantor, you must state your warranty’s coverage terms in a single , clear, and easy-to-read document.
3. As a warrantor or a seller, you must ensure that warranties are available where your warranted consumer products are sold so that consumers can read them before buying.

For information on what all these requirements entail, see:
http://www.ftc.gov/bcp/conline/pubs/buspubs/warranty.shtm#Magnuson-Moss

— What if I’m Selling Services, Commercial Products, or other NON-Consumer Products…?

Something called the "Magnuson-Moss Act" requires manufacturers and sellers of consumer products to provide consumers with detailed information about warranty coverage. YOU ARE EXEMPT from the stipulations under the act if you’re offering a product for RESALE, *or* if you’re offering a product for COMMERCIAL USE or PURPOSES. The act only applies to you if you sell Consumer products (personal/family/household items). The Act doesn’t expect or require commercial product sellers to warranty their products.

(Sup wit dat…!?)

There are also the following related points, reiterated with brevity, for clarity:

1. NO BUSINESS is required to offer an written warranty, regardless of its type. You can choose not to at your discretion.
2. Oral warranties are NOT covered by the Magnuson-Moss act, so above stipulations under the Act do not apply.
3. You are NOT required to offer an Express warranty for ANY type of goods/services (Consumer, Commercial, etc.).
4. If you don’t offer a written warranty, the law in most states dictates that you can also disclaim implied warranties as well. But you must do so in writing, specifically indicating that you do not warrant "merchantability".
5. TIP: You can’t avoid responsibility for personal injury caused by a defect in your product, even if you sell it "as is." If it proves to be defective or dangerous, causing personal injury to someone, you still may be liable for damages. Selling the product "as is" doesn’t eliminate THIS liability.

You can get the supplement to The Businessperson’s Guide to Federal Warranty Law from the FTC’s page here: http://www.ftc.gov/bcp/conline/pubs/buspubs/warranty.shtm#addsources . They state that the info on that page is just "the basics", and that you can get the additional referenced guide for further details.

WHEW!

Pretty intense to be "basic" … don’tcha think!?

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 Respected Business & Marketing author H.T. Major has nearly a decade of collective experience fine-tuning the art of creating effective, efficient business websites that SELL, and boosting the conversion of existing sites. Now she offers supremely affordable website, photo, & business design services that are not only about creating "pretty pictures", but about creating RESULTS: visit ChumpChangeWebDesign.com.

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