Know Your Rights

LEGEND TEACHES THAT THE ANCIENT ROMANS APPLIED THE DOCTRINE of caveat emptor—Latin for “let the buyer beware.” The chief idea is that a buyer must assess the quality of a purchase before making it. If the product is defective or fails prematurely, the buyer has no recourse unless the seller wrongly concealed the product’s latent defects.

In fact, the legend is a fable. Legal historians now know that Roman law expected sellers to deal honestly and show good faith.

Nonetheless, caveat emptor became a cornerstone of English common law and was made a rule of American law by the U. S. Supreme Court in 1817. Happily, both England and the United States have moved away from the doctrine—which many people consider primitive, dishonest, and unfair given the complexity of modern products. When you think about it, how can a buyer truly assess in advance the quality of an automobile, or an iPod, or even a candy bar?

Although every purchase you make still requires a dollop of faith—and may lead to buyer’s remorse—everyday law gives you a range of remedies when a product you buy fails to meet your expectations or proves to be dangerous.

You may have seen the recent news reports about Al Dente’s lawsuit against the Owch Appliance Corporation. As one reporter wrote: “The poor man feels he’s lucky to be alive after surviving the blast that destroyed his kitchen. ‘Who knew,’ Al says, ‘that a simple pasta maker could cause so much damage.’”

Al Dente’s unusual story began when he purchased his first Pasta Phantom at Big-Box Kitchen Store. He tried to make a batch of linguine and discovered that the machine’s pasta dough feeder rotated backwards—probably (he guessed) because of a manufacturing defect.

Al brought the defective Pasta Phantom back to the Big-Box Kitchen Store and exchanged it (under the store’s fourteen-day exchange policy) for an identical unit.

The second machine produced flawless pasta for nearly a month, but then went up in a whiff of smoke caused by an apparent electrical short circuit somewhere in the innards of the appliance—probably another manufacturing defect.

This time, however, Big-Box Kitchen Store refused to exchange the contraption, explaining that after fourteen days, the customer must return a faulty product directly to the manufacturer. And so, Al shipped the frazzled pasta maker to Owch Appliance Corporation, who promptly sent him a second replacement machine.

When Al turned the new Pasta Phantom loose on a big batch of spaghetti, the machine exploded with sufficient oomph to cover his kitchen walls with pasta dough and send Al to the hospital. Paramedics were amazed that he lived to tell the tale.

As the reporter wrote in a follow-up story: “The victim’s attorney—standing alongside his hospital bed—said, ‘Mr. Dente intends to pursue appropriate legal action against Owch Appliances. The company clearly breached both express and implied warranties—and is also liable under the principles of product liability.’”

A warranty is a promise—typically about a product’s performance or quality—that the seller or manufacturer makes expressly (explicitly), or is implied (presumed to have made implicitly). Most express warranties are written (often on the box, or in a printed warranty certificate, or a statement in an advertisement). However, an express warranty can also be oral (for example, a statement or promise made by a salesperson). A buyer can ask the court (often a small claims court) to enforce a warranty whether it’s express, implied, written, or oral against a seller (and usually the manufacturer) of a product. A breach of warranty may give the purchaser the right to recover the cost of the item—and other damages caused by that breach of warranty.

An express warranty doesn’t have to include words like warrant, promise, or guarantee—any written or oral representation of fact or promise can be sufficient to establish an express warranty. Here are a few examples of express warranties:

“We will repair any manufacturing defects that become obvious during the first year of use by the purchaser.”

The Uniform Commercial Code (UCC) is a comprehensive body of statutes that regulate all manner of transactions involving personal property. Every state has enacted the complete UCC—except Louisiana, which chose to let its existing laws govern sales (the subject of the UCC’s Article II).

Before states passed the UCC, buyers of products could generally only rely on express warranties. One universal exception was the implied warranty of title, the unspoken promise that someone selling a product had the right to sell it.

Here and there, some courts honored other implied warranties—for example, that the sample of a product shown to a customer before a sale actually represented what the customer would receive. All implied warranties originate out of a buyer’s reasonable expectations to receive “fair value for money spent” (to quote a well-known phrase from common law), not because the seller made an explicit promise.

The UCC formally defined two important implied warranties that can arise in consumer-product transactions. These are the implied warranty of merchantability and the implied warranty of fitness for a particular purpose. Both provide significant consumer protections. Today, products sold throughout the United States come with one—or possibly both—implied warranties unless the seller specifically disclaims them (a practice that some states refuse to allow). In legal speak, the implied warranties are said to arise out of operation of law, unlike an express warranty (which is basically a contract between the seller and buyer).

THE PUFFING DEFENSE

The salesman tells you, “This is the best widget in the world” and “It will last a lifetime.” You purchase the gizmo, take it home, and discover that it’s less effective at widging than other widgets you own—and will probably wear out before the really good widgets you own. Can you argue that the salesman made an express promise? Probably not—because he was really engaged in puffing. Everyday law tolerates exaggerations in selling that are little more than personal opinions. A reasonable buyer (like you) should recognize that “this is the best widget in the world” is probably not a factual statement. However, puffery can’t include an outright lie or communicate apparent facts. Suppose the salesman said, “this widget weighs less and operates at a higher speed than any other widget you can buy.” A court would likely consider the salesman’s statement an express warranty—a legally enforceable promise.

The implied warranty of merchantability—says that the product, when used for its ordinary purpose, will reasonably conform to an ordinary buyer’s expectations and meets the standard of quality as passes ordinarily in the trade. The buyer can also expect that the product be adequately packaged and labeled—and that it fulfills any promises made on the label:

A customer who buys a box of corn flakes can reasonably expect them to be intact within the box, resemble the photo on the box, and be edible.

A buyer who buys a movie on a DVD can presume he or she has purchased the film depicted on the label and that the disk will load and play in an ordinary DVD player.

A person who buys an ordinary bicycle can expect it to be rideable on ordinary pavement and be capable of carrying a rider of average weight (but probably not a rider who weighs 400 pounds).

To disclaim this implied warranty, a seller must declare that the product is being sold as is or with all faults, or must specifically state that “no warranty of merchantability is made.”

The implied warranty of merchantability only applies to a merchant (a person or company who makes a business of selling goods) who regularly sells the product in question—for example, the supermarket that sold the box of corn flakes I mentioned earlier. If you gave up eating corn flakes and sold the remaining box in your pantry to a neighbor, there’d be no implied warranty of merchantability.

The implied warranty of fitness for a particular purpose arises when the buyers rely on the seller to provide a product that can perform a specific, nonordinary purpose. For example, if a seller assured the heavyweight bicyclist (see above) that a particular bicycle would carry his weight, this would create an implied warranty of fitness for that purpose. If the bicycle subsequently failed, the customer could sue the seller for breach of implied warranty.

the seller knows that the buyer will rely on the seller’s skill and knowledge to furnish an appropriate product (often a good assumption when the seller is a specialist, such as an electronics retailer, antiques dealer, or a bike shop);

A seller can disclaim this implied warranty (in states that allow disclaiming) by expressly stating that “no warranty of fitness for a particular purpose is made.” Also, the implied warranty doesn’t arise if the buyer is as knowledgeable as the seller—or if the buyer gives the seller particular specifications for a product.

Keep in mind also that these implied warranties haven’t eliminated a buyer’s responsibility to be cautious—to make a reasonable inspection of a product before purchase. In fact, a customer’s failure to check out a product before reaching for his or her wallet can be a defense in a suit brought to enforce the warranty.

In many states, the statute of limitations (see Chapter 2) for suing a seller for breach of an implied warranty is four years. This doesn’t mean that an implied warranty will last four years, or that a seller promises that every product will work well or be trouble free for a period of four years.

Suing a seller for breach of the implied warranty of merchantability requires the buyer to show that the unspoken promise was breached at the time of sale or delivery—that the product the buyer received was not fit for sale (or for a specific purpose) when it was sold. Durability is one of the fitness factors that a court will consider; a product is expected to have normal durability—a characteristic that depends on its nature and price.

When Al Dente’s first pasta maker failed, he brought it back to Big-Box Kitchen Store and exchanged the faulty appliance for another Pasta Phantom—an acceptable resolution to Al. Most states do not require that a retailer provide a cash refund for a defective item; the store can replace or repair a defective product, provide a credit, or exchange the dud for an identical item.

However, stores must post their returns policy conspicuously so a buyer can see it before he or she makes a purchase. Printing the policy only on the receipt—as some stores do—violates the before purchase notice requirement.

When his second pasta maker failed a month later, Al brought it back to Big-Box Kitchen Store, but the smiling lady at the customer-service counter refused to take it back. She politely told Al that the store had a straightforward returns policy: Any products that proved to be defective more than fourteen days after purchase had to be returned to the manufacturer for refund, repair, or replacement. Al grumbled a bit, but agreed.

What happened to Al Dente happens to countless other consumers—a store tells the purchaser of a defective product that its returns policy places the burden of dealing with the problem on the buyer’s shoulders.

Is this legal? Probably not—in the sense that while few retailers offer their own express warranties for the products they sell, the buyer can sue the retailer under the seller’s implied warranties (unless the retailer conspicuously disclaims the warranties, something most stores won’t do, even where state law allows them to escape liability).

Lacking a valid disclaimer, an obviously defective product (say, an item doesn’t work when brought home and taken out of the box) can be returned to the seller for refund or replacement.

Similarly, a product that fails prematurely was arguably defective when it was sold and can also be returned for a refund or replacement—regardless of the seller’s posted returns policy to the contrary.

However, buyers prefer to avoid the hassle of launching a legal battle (even in small claims court) and often (like Al Dente) take the easy way out when faced with a seemingly ironclad returns policy. They send the product back to the manufacturer.

When Al did this, he realized that he was taking advantage of Owch Appliance Corporation’s written warranty.

When Al Dente’s third Pasta Phantom arrived, he actually took a moment to scan the Express Warranty card that was tucked into the instruction manual. Once again—probably for the thousandth time—Al wondered why the words on this card were almost identical to other product warranties he’d perused (but not actually read). Is there one law firm that specializes in writing product warranties? Do manufacturers plagiarize each other’s paperwork?

No. And no. The reason that written warranties are so similar is that they must comply with the Magnuson-Moss Warranty Act—a federal law enacted in 1975 that shapes written warranties on consumer products. (Magnuson-Moss doesn’t cover oral warranties.) The act is administered by the Federal Trade Commission (FTC), which also issues appropriate rules and regulations about written warranties.

WARRANTY SUITS IN A FEDERAL COURT

Because Magnuson-Moss is a federal act, consumers can—in theory—sue manufacturers for breach of warranty in federal courts. In practice, though, the act requires that federal claims have an amount in controversy of more than $50,000 or be a class action involving more than one hundred claimants (a class action is a lawsuit brought by one plaintiff on behalf of many parties who all have the same complaint against a common defendant). Consequently, most unhappy customers sue in state courts. Magnuson-Moss also provides that consumers can recover court costs and reasonable attorney’s fees—a strong incentive for manufacturers to resolve disputes out of court.

Magnuson-Moss doesn’t require a manufacturer to provide a written warranty to buyers. However, customers have come to expect written warranties on all but the least expensive products—and so most manufacturers believe that written warranties are necessary to effectively market their products.

If a company does decide to provide a written warranty, FTC regulations and provisions of the Magnuson-Moss Act snap into action. For starters, a written warranty must be a single, clear, and easy-to-read document—available to customers before a sale is made—that contains specific information, written in language that won’t confuse the average consumer. The required statements include many familiar topics:

The length of warranty (during what period the warrantor will perform its obligations under the warranty)

Products and parts covered by—or excluded from—the warranty (for example, batteries and other consumable components are often not covered by warranties)

What the warrantor will do in the event of a defect or malfunction (for example, repair, replace, provide an equivalent product)

What the buyer must do to take advantage of the warranty—such things as required documentation (for example, sales receipt), procedures for returning a product, locations of service centers, and costs (if any) that fall on the buyer

Any exclusions of—or limitations on—other remedies (such as claims for consequential damages caused by the failed product)

Third, the Act does not apply to warranties on services. Only warranties on goods are covered. However, if your warranty covers both the parts provided for a repair and the workmanship in making that repair, the Act does apply to you.

Magnuson-Moss covers only warranties on consumer products (specifically, “tangible personal property normally used for personal, family, or household purposes”). The act does cover warranties on products that become fixtures (see Chapter 9) when installed in a house, such as curtain rods or a dishwasher.

A manufacturer can choose whether to provide a full warranty or a limited warranty. The FTC (and Magnuson-Moss) define a full warranty as follows:

2. Warranty services are provided to anyone who owns the product during the warranty period (for example, coverage is not limited to the first buyer).

3. Warranty services are provided free of charge (including such costs as returning the product or removing and reinstalling the product when necessary).

4. If, after a reasonable number of tries, the manufacturer can’t repair the product, the consumer receives (at his or her choice) either a replacement or a full refund.

5. Consumers are not generally required to do anything as a precondition for receiving warranty service, except notifying the manufacturer that service is needed.

Any warranty that doesn’t include these features—for example, buyers may be required to ship the product to a service center at their expense—becomes a limited warranty and must be labeled as such.

A manufacturer can create a warranty that is full for a defined period of time and then becomes limited for an additional period, or full for some parts of a product and limited for others. Either of these is called a multiple warranty.

Magnuson-Moss prohibits any manufacturer who offers a written warranty from disclaiming or modifying the implied warranties of merchantability and fitness for a particular purpose available in the state. The only exception to this rule is that manufacturers who offer a limited written warranty can restrict the duration of implied warranties to the same time period as the limited warranty.

Magnuson-Moss also forbids most warranty provisions that tie warranty protection to future sales requirements. For example, the maker of an MP3 music player can’t state in its written warranty that the warranty will become void unless the owner uses batteries sold by the manufacturer. Nor can a car manufacturer tie the validity of its written warranty to a requirement that routine maintenance be performed only by its own dealer network. However, a manufacturer can recommend that all service be performed by authorized service providers and can state that improperly performed maintenance will void the warranty. (Tie-ins may be allowable if a manufacturer can show that its parts or its factory service are uniquely required because of the special nature of the product.)

Magnuson-Moss allows manufacturers to require that customers use informal dispute resolution before launching a lawsuit. However, the Act defines resolution mechanisms that are considerably different than the alternative dispute resolution approaches you read about in Chapter 1. For example, the mechanism must

be able to settle disputes independently—without influence from the parties involved;

provide each party an opportunity to present its side, to submit supporting materials, and to rebut points made by the other party;

issue non-binding decisions (either party must be free to take the dispute to court if dissatisfied with the decision), although companies may agree to be bound by the decision;

Given the costs to the manufacturer of establishing such a mechanism, it’s not surprising that few everyday written warranties include informal dispute resolution.

Finally, the FTC requires that every written warranty include a boilerplate statement to notify consumers that state law often impacts customer rights under warranty:

This warranty gives you specific legal rights, and you may also have other rights which vary from state to state.

Al Dente could have requested another replacement—possibly even a full refund—under the terms of the limited warranty that accompanied the Pasta Phantom. He and his lawyer took a different path: They filed a products liability lawsuit against Owch Appliance Corporation.

The doctrine of products liability imposes strict liability (liability for damages, without requiring proof of negligence; see Chapter 4) on a manufacturer who sells a product that causes injury when the product is used in a reasonable manner.

Al Dente, for example, used the correct pasta flour and followed every instruction in the user’s guide when he tried to make spaghetti with his third Pasta Phantom. He did everything right—and apparently acted in a completely reasonable manner—yet the machine exploded.

Over a period spanning more than one hundred years, courts in the United States and other common-law countries moved away from the notion of caveat emptor—“let the buyer beware”—and adopted the principle that a manufacturer is liable for latent defects if products in their original condition cause injury when used in their normal and proper way.

A latent defect is a hidden defect that will cause a product failure but which a consumer can’t be expected to find, even if he or she conducts a thorough inspection before purchasing the product. Latent defects are common today because the products we buy are complicated and made of unusual materials. An average consumer can’t examine a product and determine whether or not it poses a danger. (In most cases, opening a product to thoroughly inspect its innards will void the warranty; and in others, a thorough inspection will ruin the product, as it has to be taken apart completely.)

A product used in its original condition means that nothing has been done to the product after it has left the manufacturer. This ensures that the defect that caused the failure that injured the user was not created by someone who modified the product after it was manufactured and shipped.

Used in the normal and proper way is a fairly obvious requirement. A manufacturer shouldn’t be blamed for an injury if a product is knowingly used incorrectly. I emphasize knowingly, because—as we’ll see—the manufacturer has a duty to anticipate common misuse of a product and warn against it.

I have written about the liability of manufacturers, but in fact, every party involved in the stream of commerce can be held responsible under the doctrine of products liability. This includes the manufacturer, distributor, and wholesaler, plus the retailer that actually sold the faulty product to the injured consumer. Some states, however, bar product liability suits against retailers, unless they somehow altered the product before selling it.

In design defect cases, a manufacturer designs a product in a way that creates unreasonable danger and risk of harm to the user. A truly simple illustration is a hammer that has a reinforced plastic handle. Imagine that a hammer maker introduces a new, cheaper model with a handle made of inexpensive nonreinforced plastic that can’t withstand the stress of repeated hammer blows.

A customer buys a hammer; the flimsy handle shatters in normal use; the heavy steel hammer head injures the user. Clearly, the hammer left the factory as an inherently dangerous product: Its design wasn’t appropriate for the hammer’s intended use. Every hammer made according to this design is an injury waiting to happen.

Design defects are likely to appear soon after new products are introduced and widely sold.

PACKAGING DEFECTS

Packaging defects represent a subcategory of design defects. Consider the many different containers in your home designed to be childproof because they contain inherently dangerous items that cannot be made child-safe in themselves—prescription pharmaceuticals, over-the-counter drugs, pesticides, poisons, sharp blades, flammable liquids, and others. If a manufacturer fails to provide this simple precaution and a curious child is harmed, a jury is likely to decide that the risk of injury outweighed the small increased costs of secure packaging.

Another kind of design defect occurs when the manufacturer leaves out adequate protection against foreseeable injuries that are likely to occur. For example, because rear-end collisions happen so often, automakers have to design fuel tanks (and car bodies) so that routine accidents don’t result in fatal fuel tank fires.

Similarly, a potentially dangerous power tool—a circular saw, for example—must be equipped with a blade guard to protect the user from accidental contact with a moving blade.

A manufacturing defect is introduced—usually by accident—when a perfectly well-designed product is manufactured incorrectly. Think of our plastic-handled hammer again, but this time imagine that the designer specified a heavy-duty reinforced plastic for the handle. The company produced tens of thousands of good hammers, but then, a small batch of hammers is made with the wrong kind of plastic. They begin to fail—and cause injury to consumers. This is a classic manufacturing defect. Here, too, there’s no way for a buyer to recognize the potential danger before he or she uses the product.

A warning defect case (also called a marketing defect case) is a products liability claim that alleges that a well-designed, well-manufactured product is unreasonably dangerous because of inadequate instructions, warnings, and labels.

To illustrate these different problems, consider a children’s swing set—the kind of playtime structure you’ll find in millions of backyards. The typical swing set is purchased as a box of metal and plastic parts, several plastic pouches full of bolts, nuts, and other hardware—and the all-important sheet of assembly instructions.

First, imagine that the assembly instructions are written in such a confusing manner that a reasonable person might mix up several important bolts when putting the parts together—and create an unstable and unsafe swing set. This is a fairly common marketing defect.

Next, assume that the manufacturer of the swing set knows that if more than three children swing at the same time, there’s a good chance that their combined weight could cause the unit to tip over. However, the instructions for use don’t warn of this potential danger. This, too, is a marketing defect.

Finally, let’s say that the metal eye bolts that support the individual swings are not strong enough to carry the weight of an adult—even though the swing seats are wide enough for adults to sit on. If the instructions (or warning labels) fail to warn that the swing set is dangerous when used by “swingers” above a certain weight, that would also be considered a marketing defect.

Some critics say that marketing-defect lawsuits illustrate the worst aspects of everyday law. Is it fair to blame the manufacturer of a folding chair because it collapsed when a large, heavy man—not warned of the obvious danger—used it as an ad hoc ladder? What happened to personal responsibility?

The answer is that personal responsibility is alive and well, but that the cost of providing warnings to foolish users—silly though they may seem to the rest of us—is negligible compared to the costs of the injuries that result from misuse of a product.

And so, the users’ guides accompanying some firearms sold in the United States include the following caution, “warning: do not touch the trigger until you are actually ready to fire.”

Products liability laws require that product warnings be conspicuous enough to catch the attention of an average user and must be written so as to be readily comprehensible to the average person. Many user guides and warning labels incorporate icons and key phrases in other languages because of the high likelihood that non-English-speaking people will use the product.

EXPRESS WARRANTIES AND
PRODUCT LIABILITY

When a manufacturer faces a product liability lawsuit, the company can raise a number of defenses to show that the company isn’t at fault:

The absence of prior accidents (for example, more than one million Pasta Phantoms have been sold; this is the first and only explosion). This might help to convince a jury that Owch has done everything possible to design and manufacture a safe product, that there were no design and/or manufacturing flaws, and that Al Dente must have done something to trigger the explosion.

The product was altered after leaving the manufacturer (for example, Al Dente “souped up” his pasta maker with a more powerful motor).

The product was unreasonably—and unforeseeably to Owch—misused by the plaintiff (for example, earlier that day, Al Dente had used his Pasta Phantom as a step ladder and cracked the housing, or he had employed the machine to mix up a small batch of concrete and gummed up the works).

The plaintiff understood the danger—but continued to use the product (for example, Al Dente knew that the Pasta Phantom was not operating properly when he made the “deadly” batch of spaghetti). Perhaps Al had seen smoke billowing out of the housing, or perhaps the machine had been making shrieking noises for several days—either symptom an indication that something was amiss inside the Pasta Phantom. Owch will argue that Al should not have used the obviously faulty machine to make that final batch of pasta.

Some of these defenses are stronger than others. A jury is much more likely to exonerate Owch if Al Dente modified or seriously misused his Pasta Phantom—two happenstances clearly out of the manufacturer’s control.