Consumer rights Reforming statutory implied conditions and warranties

European Union

Relevant legislation

The law with respect to implied conditions and warranties into contracts for supply of consumer goods is set out in the CSD.

The CSD applies to contracts for the sale of consumer goods by a seller to a consumer. These definitions describe the scope of the CSD, although few Member States have restricted their implementing legislation to the exact scope specified by the CSD and most go beyond its scope in some respects.

Consumer goods

Consumer goods are defined as any tangible movable item, with the exception of:

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  goods sold by way of execution or otherwise by authority of law;
  
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  water and gas where they are not put up for sale in a limited volume or set quantity; and
  
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  electricity.
  

Member States may exclude from this definition second hand goods sold at public auction where consumers have the opportunity of attending the sale in person. However, the CSD applies to contracts for the supply of consumer goods to be manufactured or produced.

Conformity with contract

Consumer goods must be in conformity with the contract of sale. Goods are deemed to be in conformity with the contract if, at the moment of delivery to the consumer:

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  they comply with the description given by the seller and possess the qualities of the product which the seller has held out to the consumer as a sample or model;
  
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  they are fit for the purposes for which goods of the same type are normally used;
  
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  they are fit for any particular purpose for which the consumer requires them and which was made known to the seller at the time of conclusion of the contract, and accepted by the seller; and
  
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  their quality and performance are satisfactory, given the nature of the goods and taking into account the public statements made about them by the seller, the producer or their representative.
  

The seller is liable to the consumer for any lack of conformity which exists when the goods are delivered to the consumer and which becomes apparent within a period of two years unless, at the moment of conclusion of the contract of sale, the consumer knew or could not reasonably have been unaware of the lack of conformity.

If the goods are not in conformity with the public statements made by the producer or their representative, the seller will not be liable to the consumer if they show that:

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  they did not know and could not reasonably know the statement in question;
  
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  they corrected the statement at the time of sale; or
  
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  the decision to buy the goods could not have been influenced by the statement.
  

Any lack of conformity resulting from incorrect installation of the consumer goods is deemed to be equivalent to lack of conformity of the goods if installation forms part of the contract of sale of the goods and the goods were installed by the seller or under their responsibility. This applies equally if the product, intended to be installed by the consumer, is installed by the consumer and the incorrect installation is due to a shortcoming in the installation instructions.

Any lack of conformity becoming apparent within six months of delivery will be presumed to have existed at the time of delivery, unless proof to the contrary is furnished or this presumption is incompatible with the nature of the goods or the nature of the lack of conformity.

Remedies for lack of conformity

When a lack of conformity is notified to the seller, the consumer will be entitled to ask:

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  for the goods to be repaired or replaced free of charge within a reasonable period and without major inconvenience to the consumer; or
  
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  for an appropriate reduction to be made to the price, or for the contract to be rescinded, if repair or replacement is impossible or disproportionate, or if the seller has not remedied the shortcoming within a reasonable period or without major inconvenience to the consumer.
  

The consumer is not entitled to have the contract rescinded if the lack of conformity is minor.

When the final seller is liable to the consumer because of a lack of conformity resulting from an act of commission or omission by the producer, a previous seller in the same chain of contracts or any other intermediary, the final seller will be entitled to pursue remedies against the person responsible.

Implied warranties as to services

Implied warranties as to services are regulated by laws in force in each Member State of the EU. Otherwise, any services provided as part of a sale of goods are treated as part of the supply of goods and are subject to the CSD provisions.

United States

Relevant legislation

American consumers are protected through a combination of national, state and local governmental and private agencies.

The principal, but not the only, US consumer protection agency at the federal level is the United States Federal Trade Commission (FTC). The FTC works alone, and in concert with other federal agencies, to administer a wide variety of consumer protection laws and it derives its consumer protection authority principally from subsection 5(a) of the Federal Trade Commission Act (15 USC) (FTC Act), which prohibits ‘unfair or deceptive acts or practices in or affecting commerce’.

State governments act as both consumer law enforcement agencies and consumer advocates. In most states, state attorneys general are charged with enforcing state consumer protection law. Each state has some form of consumer protection law, and numerous are modelled after the FTC Act and forbid ‘unfair and deceptive’ trade practices. In addition, state ‘lemon laws’ streamline the remedy procedure for consumers who purchase a defective new or used car.

At the state level, consumers may use both common law and statutory causes of action to seek redress. Present common law actions provide consumers protection through torts for deceit, fraud, misrepresentation, and breach of warranty. If successful in court, a consumer may receive damages for out-of-pocket losses, rescission of the transaction at issue, damages to ensure the consumer receives the benefit of the bargain, or even punitive damages.

Breach of implied warranties

When a product fails to meet a consumer’s expectations, yet no misrepresentations about the product were made, the breach of warranty cause of action may protect the consumer from losses. Most states use the structure of the Uniform Commercial Code (UCC) to protect consumers through express and implied warranties. Express warranties are explicit promises that the manufacturer or seller will stand behind the product sold.³¹⁷ These may be either written or oral. A more standard level of protection exists in the implied warranties of merchantability and fitness for a particular purpose.

For example, the UCC necessitates that all merchant sold goods are, at a bare minimum ‘fit for the ordinary purposes for which such goods are used’.³¹⁸ This protects consumers against product defects. In order to receive protection through an implied warranty of merchantability, the good in question must be purchased from a merchant, or someone with some level of expertise and skill with the product.

The implied warranty of fitness for a particular purpose is a promise by the seller that when the customer relies on the seller’s advice that a product can be used for some specific purpose, it will be fit for that purpose.³¹⁹

When a product fails to conform to an express or implied warranty, the consumer may either keep the product and seek damages or return the product for a refund. In most cases consumers choose the latter action. If a consumer retains the product, they may seek difference in value between the good in hand and the warranted good.

Magnuson Moss Warranty Act

The federal government also affords consumers warranty protection through the Magnuson Moss Warranty Act (15 USC § 2301 et seq) (MMWA). Although it does not require warranties for consumer products, the MMWA requires manufacturers and sellers to provide consumers with detailed information about warranty terms and conditions before they buy goods.

Such regulation is meant to reduce confusion about warranty terms while increasing warranty coverage transparency and clarity. It does not require manufacturers and sellers to offer written warranties, but if warranties are offered the manufacturer or seller must provide certain specified information about the warranty terms, such as whether it is a ‘full’ warranty or a ‘limited’ warranty.³²⁰ The MWWA promotes competition among suppliers in relation to the price, quality and service packages of warranties by enabling consumers to compare warranty terms and conditions before they decide to purchase, and to choose the product that offers the best combination of price, quality and warranty that suits their needs.

The MMWA is aimed at providing consumers with access to reasonable and effectual remedies where there is a breach of warranty on a consumer product. It provides for alternative dispute settlement procedures and for actions brought by the government and by private parties.

Further, the federal government has the power to take injunctive action against a supplier or warrantor who fails to meet the requirements of the Act. Consumers may seek restoration in the courts for alleged violations of the MMWA. Consumers who have been injured by the noncompliance of a supplier may pursue their action in a state court if the amount in controversy is between $25 and $50,000, or by way of a class action in state court if the number of class plaintiffs is less than 100. One of the essential aids to the effectiveness of MMWA is that a prevailing plaintiff may recover reasonable costs of suit, including attorney fees.

Restrictions on disclaimers or modifications

No supplier may disclaim or modify any implied warranty to a consumer with respect to a consumer product if:

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  the supplier makes any written warranty to the consumer with respect to the consumer product; or
  
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  at the time of sale, or within 90 days thereafter, the supplier enters into a service contract with the consumer which applies to the consumer product.
  

Limitation on duration

Implied warranties may be limited to the duration of a written warranty of reasonable duration, if such limitation is conscionable and is set out in clear and unmistakable language and prominently displayed on the face of the warranty.