Warr 3rd ed, Contents

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CD-Rom Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xlv

art I General Warranty Law Principles

hapter 1 Introductory Materials

1.1 About This Manual. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.2 Overview of Consumer Warranty Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

1.2.1 Magnuson-Moss Warranty Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.2.2 UCC Article 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.2.3 UCC Article 2A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31.2.4 UCC Article 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31.2.5 Lemon Laws, Used Car Warranty Laws, Mobile Home Statutes, New

Home Warranty Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31.2.6 Unfair and Deceptive Acts and Practices (UDAP), Fraud . . . . . . . . . . . . . . 31.2.7 Strict Liability and Negligence; Common Law Warranty Law;

Cooling-Off Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41.2.8 Service Contract Statutes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

1.3 2003 Revisions to UCC Articles 2 and 2A . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41.3.1 History of the Revisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41.3.2 Revised Article 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41.3.3 Revised Article 2A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

1.4 Resources for Understanding and Interpreting Consumer Warranty Law . . . . . . . . 61.4.1 UCC Case Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61.4.2 Official Comments to the UCC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71.4.3 Legislative History of Individual State UCC Enactments . . . . . . . . . . . . . . 81.4.4 UCC Treatises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91.4.5 Magnuson-Moss Warranty Act, Lemon Laws, and UDAP Statutes. . . . . . . . 9

1.5 Scope Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91.5.1 Sale of Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91.5.2 Used Goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.5.3 Computer Software. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121.5.4 Services, Mixed Goods and Services Sales . . . . . . . . . . . . . . . . . . . . . . . 131.5.5 Mobile Homes, Houses, and Real Property. . . . . . . . . . . . . . . . . . . . . . . 131.5.6 Utility Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131.5.7 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141.5.8 Must Seller Be a Merchant?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141.5.9 Definition of Buyer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151.5.10 Requirement That Sale Be for ‘‘Personal, Family, or Household

Purposes’’ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151.5.11 Federal Preemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

1.5.11.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161.5.11.2 Medical Devices and Drugs . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

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1.5.11.3 Pesticides, Herbicides, and Veterinary Medicines . . . . . . . . . . . . 19

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Consumer Warranty Law

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1.5.11.4 Boats and Motor Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211.5.11.5 Other Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

1.6 Cumulation of Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231.6.1 Magnuson-Moss Warranty Act Does Not Preempt Other Warranty Laws. . . 231.6.2 Cumulation of Rights Under UCC and State and Federal Consumer

Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231.6.3 Common Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

1.7 Liberal Construction of Consumer Warranty Laws . . . . . . . . . . . . . . . . . . . . . . 251.7.1 Magnuson-Moss Warranty Act, Lemon Laws, and UDAP Statutes . . . . . . . 251.7.2 Uniform Commercial Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

1.7.2.1 Requirement of Liberal Construction . . . . . . . . . . . . . . . . . . . . . 261.7.2.2 Application of Policy to Consumer Transactions. . . . . . . . . . . . . . 261.7.2.3 Flexible Statutory Standards of the UCC. . . . . . . . . . . . . . . . . . . 27

1.7.3 Non-UCC Warranty Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 281.8 Warranty Law in a Nutshell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

1.8.1 Creation of Express and Implied Warranties . . . . . . . . . . . . . . . . . . . . . . 281.8.1.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 281.8.1.2 Express Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 291.8.1.3 Implied Warranty of Merchantability . . . . . . . . . . . . . . . . . . . . . 291.8.1.4 Implied Warranty of Fitness for a Particular Purpose. . . . . . . . . . . 301.8.1.5 Statutory Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 301.8.1.6 Extended Warranties, Service Contracts, and Mechanical

Breakdown Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 301.8.2 Restrictions on Enforcement of Consumer Warranties . . . . . . . . . . . . . . . 30

1.8.2.1 Warranty Disclaimers and ‘‘As Is’’ Sales. . . . . . . . . . . . . . . . . . . 301.8.2.2 Privity of Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311.8.2.3 Contractual Limitations on Buyer’s Remedies . . . . . . . . . . . . . . . 311.8.2.4 Notice of Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

1.8.3 Proving Breach of Warranty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311.8.4 Revocation of Acceptance and Other Self-Help Remedies. . . . . . . . . . . . . 311.8.5 Money Damages and Lemon Law Remedies. . . . . . . . . . . . . . . . . . . . . . 32

hapter 2 The Magnuson-Moss Warranty Act

2.1 Getting Started . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332.1.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332.1.2 Resources to Interpret the Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

2.2 Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 352.2.1 Covered Consumer Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

2.2.1.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 352.2.1.2 Whether Consumer Use Is Normal Use. . . . . . . . . . . . . . . . . . . . 352.2.1.3 Date of Product’s Manufacture . . . . . . . . . . . . . . . . . . . . . . . . . 372.2.1.4 Personalty Versus Realty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 372.2.1.5 Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

2.2.2 Only a ‘‘Consumer’’ May Enforce the Act . . . . . . . . . . . . . . . . . . . . . . . 382.2.3 Covered Written Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

2.2.3.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 392.2.3.2 Statements and Representations Not Meeting Definition of a

‘‘Written Warranty’’ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 402.2.3.3 General Assurances of Satisfaction Are Exempt from Some

Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 412.2.3.4 Do Express Warranties for Used Products Meet Definition of

‘‘Written Warranty’’? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 412.2.3.5 Basis of the Bargain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

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2.2.3.6 Must the Written Warranty Be Found in a Single Document? . . . . . 42

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2.2.3.7 Electronic Warranty Documents . . . . . . . . . . . . . . . . . . . . . . . . . 432.2.4 Parties with Obligations Under the Act . . . . . . . . . . . . . . . . . . . . . . . . . 43

2.2.4.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 432.2.4.2 Manufacturers and Distributors . . . . . . . . . . . . . . . . . . . . . . . . . 442.2.4.3 Dealers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 442.2.4.4 Creditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 452.2.4.5 Individuals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

2.2.5 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 462.2.5.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 462.2.5.2 How Consumer Leases Are Structured . . . . . . . . . . . . . . . . . . . . 472.2.5.3 The Leased Item Is a ‘‘Consumer Product’’ . . . . . . . . . . . . . . . . . 472.2.5.4 Lessee Must Meet One of Three Prongs of Definition of

‘‘Consumer’’. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 472.2.5.5 Lessee Who Is a ‘‘Buyer’’ Meets First Prong of Definition . . . . . . 482.2.5.6 Lessee to Whom the Product Is Transferred During the Duration

of an Implied or Written Warranty or Service Contract MeetsSecond Prong of Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

2.2.5.7 A Consumer Who Is Entitled to Enforce a Written or ImpliedWarranty or Service Contract Meets the Third Prong of theDefinition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

2.2.5.8 Can There Be a ‘‘Written Warranty’’ in a Consumer LeaseTransaction? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

2.2.6 Other Federal Regulation of Warranties . . . . . . . . . . . . . . . . . . . . . . . . . 512.3 Enforcement of Implied and ‘‘Written’’ Warranties; Regulation of Service

Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 522.3.1 Act Prohibits Breach of Implied Warranties Even When No Written

Warranty Provided . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 522.3.2 Prohibitions on Disclaimers and Modifications of Implied Warranties . . . . . 53

2.3.2.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 532.3.2.2 Service Contract Sale Prevents Disclaimers . . . . . . . . . . . . . . . . . 56

2.3.2.2.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 562.3.2.2.2 When does a dealer enter into a service contract? . . . . . . 562.3.2.2.3 Contrary case law . . . . . . . . . . . . . . . . . . . . . . . . . . . 572.3.2.2.4 When service contract regulated as insurance . . . . . . . . . 58

2.3.2.3 Permitted Restrictions on Duration of Implied Warranties . . . . . . . 582.3.2.3.1 Supplier who provides limited written warranty may

limit duration of implied warranties . . . . . . . . . . . . . . . 582.3.2.3.2 Durational limits must be reasonable, conscionable, and

properly displayed on face of warranty . . . . . . . . . . . . . 582.3.3 Restrictions on Limitations of Remedies . . . . . . . . . . . . . . . . . . . . . . . . 592.3.4 Act Prohibits Breaches of Written Warranties . . . . . . . . . . . . . . . . . . . . . 592.3.5 Act Eliminates Certain Horizontal Privity Requirements . . . . . . . . . . . . . . 602.3.6 Restrictions on Vertical Privity Requirements . . . . . . . . . . . . . . . . . . . . . 61

2.3.6.1 No Privity Required for Claim of Breach of Written Warranty . . . . 612.3.6.2 Does the Act Eliminate Vertical Privity Requirements for Breach

of Implied Warranties? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 612.3.7 Does the Act Eliminate Notice of Breach Requirement? . . . . . . . . . . . . . . 622.3.8 Regulation of Service Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

2.3.8.1 Definition of Service Contract . . . . . . . . . . . . . . . . . . . . . . . . . . 632.3.8.2 Enforcement of Service Contract Obligations; Other Regulation of

Service Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 642.3.8.3 Does the Act Apply to Service Contracts Regulated As

Insurance? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 642.4 Restrictions on Written Warranties (Both Limited and Full) . . . . . . . . . . . . . . . . 65

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2.4.1 Prohibition of Tie-Ins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65


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2.4.1.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 652.4.1.2 Scope of the Prohibition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 662.4.1.3 Application to ‘‘50-50’’ Warranties. . . . . . . . . . . . . . . . . . . . . . . 66

2.4.2 Manufacturer Can Not Be Final Judge of Warranty Dispute . . . . . . . . . . . 672.4.3 Warranty Registration Cards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 672.4.4 Extension of Warranties for Time Out of Service . . . . . . . . . . . . . . . . . . 672.4.5 Warrantor Responsible for Own Warranty . . . . . . . . . . . . . . . . . . . . . . . 68

2.5 Full Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 682.5.1 Distinguishing Full from Limited Warranties . . . . . . . . . . . . . . . . . . . . . 682.5.2 No Restrictions on Subsequent Owner’s Rights . . . . . . . . . . . . . . . . . . . . 682.5.3 Remedy Defects Within a Reasonable Time, Without Charge . . . . . . . . . . 69

2.5.3.1 Repair, Replace, or Refund . . . . . . . . . . . . . . . . . . . . . . . . . . . . 692.5.3.2 ‘‘Without Charge’’ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 692.5.3.3 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

2.5.4 Duration of Implied Warranty Can Not Be Limited . . . . . . . . . . . . . . . . . 712.5.5 Exclusion of Consequential Damages . . . . . . . . . . . . . . . . . . . . . . . . . . 712.5.6 Consumer Election of Refund or Replacement . . . . . . . . . . . . . . . . . . . . 712.5.7 Any Duty on Consumer Must Be Reasonable . . . . . . . . . . . . . . . . . . . . . 72

2.5.7.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 722.5.7.2 FTC Proposed Rules (Never Adopted) . . . . . . . . . . . . . . . . . . . . 722.5.7.3 Requirements That Consumer Notify Warrantor . . . . . . . . . . . . . . 732.5.7.4 Reasonable Use of Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . 732.5.7.5 Proof of Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

2.6 Disclosure Requirements for Written Warranties . . . . . . . . . . . . . . . . . . . . . . . 732.6.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 732.6.2 Exemptions from Disclosure Requirements. . . . . . . . . . . . . . . . . . . . . . . 742.6.3 Designation of Warranty As Full or Limited . . . . . . . . . . . . . . . . . . . . . . 742.6.4 Ten Terms Required to Be Disclosed. . . . . . . . . . . . . . . . . . . . . . . . . . . 75

2.6.4.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 752.6.4.2 Parties Who Can Enforce the Warranty . . . . . . . . . . . . . . . . . . . . 752.6.4.3 Warranty Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 762.6.4.4 Warranty Duration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 762.6.4.5 Warrantor’s Performance Obligations . . . . . . . . . . . . . . . . . . . . . 762.6.4.6 Consumer’s Duties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 772.6.4.7 Availability of Informal Dispute Settlement Mechanisms . . . . . . . . 772.6.4.8 Limitations on Implied Warranties . . . . . . . . . . . . . . . . . . . . . . . 782.6.4.9 Limitations on Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 782.6.4.10 Notice of State Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 782.6.4.11 Registration Cards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

2.6.5 Warranty’s Pre-Sale Availability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 782.6.5.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 782.6.5.2 General Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 792.6.5.3 Rules for Catalog and Mail Order Sales . . . . . . . . . . . . . . . . . . . 792.6.5.4 Door-to-Door Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 792.6.5.5 Internet Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

2.7 Magnuson-Moss Litigation and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 802.7.1 Violations Leading to Private Remedies . . . . . . . . . . . . . . . . . . . . . . . . . 802.7.2 Jurisdictional Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

2.7.2.1 $50,000 Amount in Controversy Requirement for Federal CourtJurisdiction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

2.7.2.2 Diversity Jurisdiction over Magnuson-Moss Claims . . . . . . . . . . . 832.7.2.3 Supplemental Jurisdiction over Magnuson-Moss Claims . . . . . . . . 832.7.2.4 Class Actions in Federal Court . . . . . . . . . . . . . . . . . . . . . . . . . 85

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2.7.2.4.1 Federal court jurisdiction over class actions under

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Magnuson-Moss jurisdictional grant . . . . . . . . . . . . . . . 852.7.2.4.2 Alternate grounds for federal court jurisdiction over

Magnuson-Moss class actions . . . . . . . . . . . . . . . . . . . 862.7.2.5 Removal to Federal Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 872.7.2.6 Mandatory Arbitration and the Magnuson-Moss Warranty Act . . . . 88

2.7.3 Preconditions to Suit Under Magnuson-Moss . . . . . . . . . . . . . . . . . . . . . 882.7.4 Pleading Damages and Other Elements . . . . . . . . . . . . . . . . . . . . . . . . . 892.7.5 Available Relief Under the Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

2.7.5.1 Actual Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 902.7.5.2 Personal Injury Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 912.7.5.3 Statutory, Punitive Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . 922.7.5.4 Revocation and Equitable Relief . . . . . . . . . . . . . . . . . . . . . . . . 93

2.7.6 Attorney Fees and Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 932.7.6.1 General Standards for Attorney Fees . . . . . . . . . . . . . . . . . . . . . 932.7.6.2 For What Activities Are Attorney Fees Available? . . . . . . . . . . . . 952.7.6.3 Fees When Magnuson-Moss Claim Is Not Pleaded or Is Not

Established . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 952.7.6.4 Determining the Amount of Attorney Fees . . . . . . . . . . . . . . . . . 962.7.6.5 Are Fees Available Under Magnuson-Moss for Work on Closely

Related State Claims? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 972.7.6.6 Fees If Case Is Settled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98

2.7.6.6.1 The Buckhannon decision and its definition of‘‘prevailing party’’ . . . . . . . . . . . . . . . . . . . . . . . . . . . 98

2.7.6.6.2 Does Buckhannon apply to Magnuson-Moss claims? . . . 1002.7.6.6.3 The format of settlements after Buckhannon . . . . . . . . . 1002.7.6.6.4 Fees when defendant moots the case by unilateral

action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1012.7.6.6.5 Buckhannon issues in state court. . . . . . . . . . . . . . . . . 102

2.7.6.7 Defendant’s Fees Not Recoverable . . . . . . . . . . . . . . . . . . . . . . 1022.7.6.8 Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102

2.7.7 Class Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1032.7.8 Statute of Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1042.7.9 Federal Agency Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105

2.8 Informal Dispute Resolution Mechanisms . . . . . . . . . . . . . . . . . . . . . . . . . . . 1052.8.1 Precondition to Suit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1052.8.2 Settlement with Warrantor Outside Dispute Mechanism . . . . . . . . . . . . . 1062.8.3 Warrantor’s Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1072.8.4 Disclosure of Mechanism Availability . . . . . . . . . . . . . . . . . . . . . . . . . 1072.8.5 Minimum Requirements for Qualifying Mechanisms . . . . . . . . . . . . . . . 107

2.8.5.1 Mechanism Organization and Qualification of Members. . . . . . . . 1072.8.5.2 Mechanism Operation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1082.8.5.3 Recordkeeping and Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . 108

2.8.6 Remedies If Mechanism Does Not Meet Minimum Requirements . . . . . . 1092.9 Effect on State Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109

2.9.1 No General Preemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1092.9.2 Preemption of State Disclosure Laws . . . . . . . . . . . . . . . . . . . . . . . . . . 110

hapter 3 Express Warranties

3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1133.2 Express Warranty by Affirmation of Fact or Promise . . . . . . . . . . . . . . . . . . . 114

3.2.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1143.2.2 ‘‘Any Affirmation of Fact or Promise’’. . . . . . . . . . . . . . . . . . . . . . . . . 114

3.2.2.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114

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3.2.2.2 Statements of Quality, Characteristics, or Condition. . . . . . . . . . . 115


x

3.2.2.3 Representations of Gas Mileage and Prior Repairs orMaintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117

3.2.2.4 Promises of Seller’s Future Actions or Product’s FuturePerformance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1173.2.2.4.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1173.2.2.4.2 Promises of seller’s future action . . . . . . . . . . . . . . . . 1173.2.2.4.3 Promises of future performance of the goods . . . . . . . . 118

3.2.2.5 Affirmation or Promise Created Orally, or by Advertisements,Brochures, or Labels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119

3.2.2.6 Pictures, Conduct, and the Product Itself As Affirmations of Fact . 1213.2.2.7 Opinion or Puffing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122

3.2.2.7.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1223.2.2.7.2 Buyer and seller’s sophistication as a factor . . . . . . . . . 1243.2.2.7.3 The bargaining context and contract language as factors. . 125

3.2.2.8 Does a Statement of Value Create a Warranty? . . . . . . . . . . . . . . 1253.2.3 ‘‘Made by the Seller to the Buyer’’ . . . . . . . . . . . . . . . . . . . . . . . . . . . 1253.2.4 Affirmation Must Relate to the Goods . . . . . . . . . . . . . . . . . . . . . . . . . 126

3.3 Express Warranty by Description of Goods . . . . . . . . . . . . . . . . . . . . . . . . . . 1273.4 Express Warranty by Sample or Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129

3.4.1 Sample and Model Distinguished . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1293.4.2 Creating Express Warranties by Model or Sample . . . . . . . . . . . . . . . . . 1293.4.3 Scope of the Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130

3.5 Basis of the Bargain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1313.5.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1313.5.2 Reliance Not Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1323.5.3 Presumption That Statements Are Part of Basis of Bargain . . . . . . . . . . . 1343.5.4 Parties’ Sophistication and Consumer’s Awareness of the Statement . . . . . 135

3.6 Can Post-Sale Statements Be Part of the Basis of the Bargain? . . . . . . . . . . . . 1353.6.1 Statements Made or Read at Delivery . . . . . . . . . . . . . . . . . . . . . . . . . 1353.6.2 Written Statements Provided at or Before Delivery That Are Not Read

Until After Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1363.6.3 Statements Made After Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138

3.6.3.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1383.6.3.2 Post-Sale Statements As Modifications of the Original Bargain . . . 138

3.6.3.2.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1383.6.3.2.2 Must the modification be in writing? . . . . . . . . . . . . . . 1403.6.3.2.3 Enforcing an oral modification even if statute of frauds

requires it to be in writing . . . . . . . . . . . . . . . . . . . . . 1413.7 Parol Evidence: Can Oral or Prior Written Statements Expand on a Written

Warranty? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1423.7.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1423.7.2 Determining Whether the Writing Was Intended to Be Final or Complete

and Exclusive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1433.7.2.1 Parties’ Intent As Primary Consideration . . . . . . . . . . . . . . . . . . 1433.7.2.2 Presumption That Contract Is Not Complete and Exclusive . . . . . 1443.7.2.3 Rejection of the Four Corners Test . . . . . . . . . . . . . . . . . . . . . . 1443.7.2.4 Importance of Surrounding Circumstances . . . . . . . . . . . . . . . . . 1453.7.2.5 Circumstances of the Writing Itself. . . . . . . . . . . . . . . . . . . . . . 1463.7.2.6 Parol Evidence Must Be Examined Before It Can Be Excluded . . 1473.7.2.7 Form Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1473.7.2.8 Post-Sale Conduct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1473.7.2.9 Question for Judge or Jury?. . . . . . . . . . . . . . . . . . . . . . . . . . . 147

3.7.3 Evidence of Consistent Additional Terms Is Admissible Even If ContractWas Intended to Be Final. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148

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3.7.3.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148

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3.7.3.2 Disclaimers May Not Be Inconsistent . . . . . . . . . . . . . . . . . . . . 1493.7.4 Evidence of Course of Dealing, Usage of Trade, or Course of

Performance Is Admissible to Explain or Supplement the Writing . . . . . . 1503.7.4.1 Admissibility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1503.7.4.2 Course of Dealing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1513.7.4.3 Course of Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1513.7.4.4 Trade Usage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151

3.7.5 Parol Evidence Rule Does Not Apply to Statements Made After theWriting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152

3.7.6 Parol Evidence Rule Does Not Protect Non-Parties to the Contract . . . . . 1523.7.7 Admissibility of Advertisements, Samples, or Models . . . . . . . . . . . . . . 1523.7.8 Parol Evidence Admissible to Interpret an Ambiguous Contract Term. . . . 1533.7.9 Parol Evidence That Relates to Fundamental Assumptions and

Conditions Precedent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1543.7.10 Parol Evidence Rule Does Not Affect Fraud, Mistake, and UDAP

Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1563.8 Effect of Seller’s Disclaimer of Responsibility for Oral Statements . . . . . . . . . . 156

3.8.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1563.8.2 Primacy of the Parties’ Actual Intent and Understanding. . . . . . . . . . . . . 1573.8.3 Has the Consumer Agreed to the Merger Clause? . . . . . . . . . . . . . . . . . 1583.8.4 Merger Clause Can Not Prevent Oral Statements from Interpreting

Ambiguous Contract Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1593.8.5 Merger Clause Ineffective If Inconspicuous, Unconscionable, in Bad

Faith, or Unfair or Deceptive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1603.8.6 Merger Clause Ineffective When Entire Contract Is Ineffective. . . . . . . . . 1603.8.7 Merger Clause Does Not Protect Non-Parties to the Contract. . . . . . . . . . 1603.8.8 Oral Claims Are Actionable Under Other Legal Theories Despite

Merger Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1613.8.9 Merger Clause Does Not Apply to Post-Sale Statements . . . . . . . . . . . . . 161

3.9 Seller Attempts to Disclaim or Nullify Express Warranties . . . . . . . . . . . . . . . 1613.9.1 Any Disclaimer of Express Warranties Is Ineffective . . . . . . . . . . . . . . . 1613.9.2 Nullification of Express Warranties Due to Buyer’s Pre-Sale Inspection . . 161

3.10 Does Express Warranty Conflict with Implied Warranties or Other ExpressWarranties?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163

3.10.1 Warranties Are to Be Construed to Cumulate Whenever Possible . . . . . . 1633.10.2 When Are Warranties Consistent? . . . . . . . . . . . . . . . . . . . . . . . . . . . 1643.10.3 When Warranties Are Inconsistent . . . . . . . . . . . . . . . . . . . . . . . . . . . 165

3.11 Express Warranties Under Proposed Revised Article 2 . . . . . . . . . . . . . . . . . 165

hapter 4 Implied Warranties

4.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1694.2 Implied Warranty of Merchantability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169

4.2.1 Nature of the Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1694.2.2 Parties Who Create Implied Warranty of Merchantability . . . . . . . . . . . . 171

4.2.2.1 Manufacturers and Other Non-Retailers . . . . . . . . . . . . . . . . . . . 1714.2.2.2 ‘‘Merchants’’. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1714.2.2.3 Merchant Must Be a Merchant with Respect to Goods of That

Kind . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1734.2.3 Standards for Determining If Good Is Merchantable. . . . . . . . . . . . . . . . 174

4.2.3.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1744.2.3.2 Fitness for Ordinary Purposes . . . . . . . . . . . . . . . . . . . . . . . . . 174

4.2.3.2.1 Ordinary purposes . . . . . . . . . . . . . . . . . . . . . . . . . . 1744.2.3.2.2 General meaning of fitness. . . . . . . . . . . . . . . . . . . . . 175

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4.2.3.2.3 Able to do ordinary job. . . . . . . . . . . . . . . . . . . . . . . 176

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4.2.3.2.4 Reasonable safety, efficiency, and comfort . . . . . . . . . . 1774.2.3.2.5 Standards for used goods. . . . . . . . . . . . . . . . . . . . . . 1784.2.3.2.6 Quality of similar goods . . . . . . . . . . . . . . . . . . . . . . 1794.2.3.2.7 Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1804.2.3.2.8 Government or industry standards . . . . . . . . . . . . . . . . 180

4.2.3.3 Adequately Contained, Packaged, and Labeled; in Conformitywith the Container or Label. . . . . . . . . . . . . . . . . . . . . . . . . . . 181

4.2.3.4 Passing Without Objection in the Trade. . . . . . . . . . . . . . . . . . . 1824.3 Implied Warranty of Fitness for a Particular Purpose . . . . . . . . . . . . . . . . . . . 182

4.3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1824.3.2 Elements of the Warranty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183

4.3.2.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1834.3.2.2 ‘‘The Seller’’. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1834.3.2.3 ‘‘At the Time of Contracting Has Reason to Know’’ . . . . . . . . . . 1844.3.2.4 ‘‘Any Particular Purpose’’ . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185

4.3.2.4.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1854.3.2.4.2 Case law finding ordinary purpose as particular

purpose. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1854.3.2.4.3 Case law finding ordinary purpose can not be

particular purpose. . . . . . . . . . . . . . . . . . . . . . . . . . . 1864.3.2.4.4 Advantages of particular purpose over merchantability

warranty when use is ordinary . . . . . . . . . . . . . . . . . . 1884.3.2.4.5 Re-characterization of ordinary use as particular use . . . 188

4.3.2.5 ‘‘And That the Buyer Is Relying’’ . . . . . . . . . . . . . . . . . . . . . . 1894.3.2.6 ‘‘On the Seller’s Skill or Judgment’’ . . . . . . . . . . . . . . . . . . . . . 1914.3.2.7 ‘‘To Select or Furnish Suitable Goods’’ . . . . . . . . . . . . . . . . . . . 1914.3.2.8 ‘‘Impliedly Warranted to Be Fit for Such Purpose’’ . . . . . . . . . . . 192

4.3.3 Seller’s Good Faith Is Irrelevant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1934.3.4 Existence of Warranty Is Factual Issue . . . . . . . . . . . . . . . . . . . . . . . . . 193

4.3.4.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1934.3.4.2 Parol Evidence Rule Not Applicable . . . . . . . . . . . . . . . . . . . . . 193

4.4 Effect of Pre-Sale Inspection. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1934.4.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1934.4.2 Ways to Avoid Pre-Sale Inspection Problems . . . . . . . . . . . . . . . . . . . . 195

4.4.2.1 Defects That Could Not Reasonably Have Been Discovered . . . . . 1954.4.2.2 More Than Casual Inspection Required . . . . . . . . . . . . . . . . . . . 1954.4.2.3 Post-Sale Inspections Irrelevant . . . . . . . . . . . . . . . . . . . . . . . . 1964.4.2.4 Necessity of Demand by Seller When Consumer Fails to Inspect

Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1964.4.2.5 Statutory Elimination of Pre-Sale Inspection As Grounds for

Avoiding Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1964.4.3 Dealing with Contract Clauses Stating That the Buyer Has Examined the

Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1974.4.4 Other Remedies If Pre-Sale Inspection Has Vitiated Implied Warranties . . 197

4.5 Warranty of Title. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1974.5.1 Nature and Creation of Warranty of Title . . . . . . . . . . . . . . . . . . . . . . . 1974.5.2 Defending the Buyer’s Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1994.5.3 Available Causes of Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200

hapter 5 Fourteen Ways to Defeat Warranty Disclaimers

5.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2015.2 No Disclaimer of Express Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2025.3 Magnuson-Moss Warranty Act Bars Implied Warranty Disclaimers . . . . . . . . . . 205

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5.3.1 Prohibition Against Disclaimers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205

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5.3.2 Permissible Limitation on the Duration of Implied Warranties . . . . . . . . . 2055.3.3 Magnuson-Moss Disclosure Requirements . . . . . . . . . . . . . . . . . . . . . . 206

5.4 State Statutory Restrictions on Implied Warranty Disclaimers. . . . . . . . . . . . . . 2065.4.1 Generally Applicable Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2065.4.2 Special Restrictions on Disclaimers in Used Car Sales . . . . . . . . . . . . . . 208

5.5 UCC Requires Use of the Word ‘‘Merchantability’’ or Language Such As‘‘As Is’’ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209

5.6 Only Party Drafting the Disclaimer Usually Protected. . . . . . . . . . . . . . . . . . . 2105.7 When Disclaimer Not Available Before Contract Is Signed . . . . . . . . . . . . . . . 2115.8 Disclaimer Must Be Conspicuous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212

5.8.1 General Requirement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2125.8.2 Definition of Conspicuous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2135.8.3 Type Size and Appearance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2145.8.4 Disclaimers on the Back of Contract . . . . . . . . . . . . . . . . . . . . . . . . . . 2175.8.5 Disclaimers Buried in Other Text or Under Inappropriate Headings . . . . . 2195.8.6 Disclaimers Found Outside the Contract. . . . . . . . . . . . . . . . . . . . . . . . 2205.8.7 Must ‘‘As Is’’ Disclaimers Be Conspicuous?. . . . . . . . . . . . . . . . . . . . . 2215.8.8 Special Conspicuousness Requirements of FTC Used Car Rule . . . . . . . . 2225.8.9 Reasonable Person Standard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2225.8.10 Effect of State Plain Language Laws . . . . . . . . . . . . . . . . . . . . . . . . . 2235.8.11 Electronic Documents As Disclaimers . . . . . . . . . . . . . . . . . . . . . . . . 223

5.9 Consumer Must Have Actual Knowledge of Disclaimer . . . . . . . . . . . . . . . . . 2255.10 Construction of Disclaimer Language to Protect Buyer . . . . . . . . . . . . . . . . . 227

5.10.1 When Contract Contains Ambiguities or Conflicting Clauses . . . . . . . . . 2275.10.2 Ambiguities When FTC Buyers Guide Is Used . . . . . . . . . . . . . . . . . . 2285.10.3 Ambiguities Created by Seller’s Conduct . . . . . . . . . . . . . . . . . . . . . . 229

5.11 ‘‘As Is’’ Disclaimer Invalid If ‘‘Circumstances Indicate Otherwise’’ . . . . . . . . 2295.11.1 General Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2295.11.2 Level of Consumer’s Understanding May Invalidate Disclaimer . . . . . . . 2305.11.3 Seller’s Conduct May Invalidate ‘‘As Is’’ Disclaimer . . . . . . . . . . . . . . 231

5.12 Unconscionability of Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2315.13 Disclaimer Invalid for Lack of Good Faith . . . . . . . . . . . . . . . . . . . . . . . . . 2325.14 Disclaimer May Not Affect Consumer’s Ability to Revoke Acceptance . . . . . . 2335.15 No Disclaimer of Tort, Deceptive Practices Statute, or Other Non-Warranty

Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2345.15.1 Tort Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2345.15.2 Statutory Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2365.15.3 Common Law and Equity Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . 237

hapter 6 Avoiding Vertical and Horizontal Privity Requirements

6.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2396.2 Vertical Privity and the Liability of Indirect Sellers . . . . . . . . . . . . . . . . . . . . 240

6.2.1 Reasons to Bring a Warranty Claim Against the Manufacturer . . . . . . . . . 2406.2.2 Manufacturers Liable to Consumers Under Their ‘‘Written Warranties’’ . . 2406.2.3 Manufacturer’s Liability for Express Warranties That Are Not

‘‘Written Warranties’’ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2416.2.4 Manufacturer’s Liability to Consumer for Implied Warranties . . . . . . . . . 244

6.2.4.1 Liability Under Federal Law . . . . . . . . . . . . . . . . . . . . . . . . . . 2446.2.4.2 Liability Under State Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244

6.2.4.2.1 Analyzing state law . . . . . . . . . . . . . . . . . . . . . . . . . 2446.2.4.2.2 State law surveyed . . . . . . . . . . . . . . . . . . . . . . . . . . 2466.2.4.2.3 Distinctions between types of implied warranties. . . . . . 254

6.2.5 Manufacturer’s Liability Even When Privity Required . . . . . . . . . . . . . . 254

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Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2546.2.5.2 Dealer As Manufacturer’s Agent . . . . . . . . . . . . . . . . . . . . . . . 2556.2.5.3 Manufacturer As Direct Seller . . . . . . . . . . . . . . . . . . . . . . . . . 2566.2.5.4 Manufacturer’s Liability Based on Equitable Estoppel . . . . . . . . . 2576.2.5.5 Non-Warranty Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 257

6.2.6 Direct Seller’s Liability on Indirect Seller’s Warranty . . . . . . . . . . . . . . . 2576.2.7 Proving Breach of Warranty Against Indirect Seller . . . . . . . . . . . . . . . . 258

6.3 Horizontal Privity and the Claims of Nonbuyers . . . . . . . . . . . . . . . . . . . . . . 2596.3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2596.3.2 No Horizontal Privity Requirement When There Is a ‘‘Written Warranty’’

or Implied Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2596.3.3 State Law May Also Abandon Horizontal Privity . . . . . . . . . . . . . . . . . 260

6.3.3.1 Importance of State Law Standards. . . . . . . . . . . . . . . . . . . . . . 2606.3.3.2 Analysis of State Law Variations . . . . . . . . . . . . . . . . . . . . . . . 2606.3.3.3 Survey of State Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263

6.3.4 Privity May Not Be Required If Nonbuyer Is Assigned Buyer’sWarranty Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 265

6.3.5 Asserting Warranty Rights As a Third Party Beneficiary . . . . . . . . . . . . . 2656.3.6 Horizontal Privity Not Required for Non-Warranty Claims . . . . . . . . . . . 2666.3.7 Contractual Limitations on Nonbuyers’ UCC Rights . . . . . . . . . . . . . . . 266

hapter 7 Establishing Breach of Warranty: Notice, Standards, Proof, andDefenses

7.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2697.2 Notice of Breach. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 269

7.2.1 General Requirement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2697.2.2 When Notice of Breach Is Not Required . . . . . . . . . . . . . . . . . . . . . . . 2707.2.3 Reasonable Time Within Which to Give Notice of Breach . . . . . . . . . . . 271

7.2.3.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2717.2.3.2 Longer Time Allowed in Consumer Cases . . . . . . . . . . . . . . . . . 2737.2.3.3 Second Notice After Repair Attempt. . . . . . . . . . . . . . . . . . . . . 275

7.2.4 Contractual Specification of Time to Give Notice . . . . . . . . . . . . . . . . . 2767.2.5 Form and Content of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 277

7.2.5.1 Minimal Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2777.2.5.2 Tactical Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 280

7.2.6 Notice of Breach to Indirect Sellers and by Nonbuyers. . . . . . . . . . . . . . 2807.2.6.1 Indirect Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2807.2.6.2 Nonbuyers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 281

7.3 Warranty Standards and Nonconformity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2817.3.1 The Perfect Tender Rule and the Seller’s No-Fault Liability . . . . . . . . . . 2817.3.2 Standards for Nonconformity Vary with the Type of Warranty . . . . . . . . . 2827.3.3 Future Performance Versus Present Characteristic Warranties. . . . . . . . . . 2837.3.4 General Versus Specific Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . 2837.3.5 Defects That Have Not Yet Caused a Malfunction . . . . . . . . . . . . . . . . . 2847.3.6 Nonconformity with Express Warranties . . . . . . . . . . . . . . . . . . . . . . . . 287

7.3.6.1 Present Characteristics Express Warranties . . . . . . . . . . . . . . . . . 2877.3.6.1.1 Specific warranties created by affirmation of fact. . . . . . 2877.3.6.1.2 General warranties created by affirmation of fact . . . . . . 2897.3.6.1.3 Warranties created by pictures, models, or samples . . . . 2897.3.6.1.4 Nonconformity must exist at time of delivery . . . . . . . . 290

7.3.6.2 Future Performance Express Warranties. . . . . . . . . . . . . . . . . . . 2917.3.6.2.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 291

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7.3.6.2.2 Characterizing express warranties as future performance

Contents

warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2927.3.6.2.3 Interpretation of future performance express warranties . 2937.3.6.2.4 Duration and conditions of future performance

warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2947.3.6.3 Interpretation of Express Warranties . . . . . . . . . . . . . . . . . . . . . 294

7.3.7 Nonconformity with Implied Warranty of Merchantability. . . . . . . . . . . . 2967.3.7.1 Standards for Nonconformity . . . . . . . . . . . . . . . . . . . . . . . . . . 2967.3.7.2 Nonconformity Must Exist at Delivery . . . . . . . . . . . . . . . . . . . 297

7.3.8 Implied Warranty of Fitness for a Particular Purpose . . . . . . . . . . . . . . . 2987.4 The Buyer’s Burden of Proof and Use of Circumstantial Evidence . . . . . . . . . . 299

7.4.1 The Buyer’s Burden of Proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2997.4.2 Circumstantial Evidence of Defective Condition: Proof of Cause

Unnecessary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3017.5 Proving Condition at Delivery. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305

7.5.1 Eyewitness Testimony of Performance . . . . . . . . . . . . . . . . . . . . . . . . . 3057.5.1.1 Eyewitness and Expert Testimony Compared . . . . . . . . . . . . . . . 3057.5.1.2 Early Detection Adds Credibility to Eyewitness Testimony. . . . . . 3057.5.1.3 Problems of Using Eyewitness Testimony Against Indirect Sellers. . 307

7.5.2 Evidence of Proper Use and Maintenance; Negating Other Causes . . . . . . 3077.5.3 Admissions by Seller or Manufacturer . . . . . . . . . . . . . . . . . . . . . . . . . 3097.5.4 Evidence of Repairs by the Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3097.5.5 Evidence That Replacement Parts Work Well . . . . . . . . . . . . . . . . . . . . 3107.5.6 Evidence of Similar Claims by Others . . . . . . . . . . . . . . . . . . . . . . . . . 3107.5.7 Government Investigation of Products or Sellers . . . . . . . . . . . . . . . . . . 3117.5.8 Expert Testimony . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 312

7.6 Statute of Limitations As a Defense to Breach of Warranty . . . . . . . . . . . . . . . 3127.6.1 The UCC Limitations Period: Four Years After Tender of Delivery . . . . . 3127.6.2 Defining When Delivery Occurs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3147.6.3 UCC Limitations Period for Future Performance Warranties . . . . . . . . . . 315

7.6.3.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3157.6.3.2 Use of a Specific Time Period Can Create a Future Performance

Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3187.6.3.3 Does Limitation of Remedy to Repair or Replace Create a Future

Performance Warranty?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3197.6.3.4 Does Future Performance Exception Apply to Implied

Warranties? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3207.6.4 Revised Article 2’s Statute of Limitations. . . . . . . . . . . . . . . . . . . . . . . 3217.6.5 Seller’s Repair Attempts or Other Conduct May Toll the Limitations

Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3227.6.6 Fraudulent Concealment Tolls the Limitation Period. . . . . . . . . . . . . . . . 3247.6.7 A Timely Action That Is Dismissed May Be Refiled Within Six Months. . . 3247.6.8 Warranty Defenses to Seller’s Collection Action Can Be Raised After

the Limitations Period Has Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . 3257.6.9 Effect of Contract Provision Shortening the Limitation Period . . . . . . . . . 3257.6.10 Limitations Periods for Non-UCC Claims . . . . . . . . . . . . . . . . . . . . . . 326

7.7 Other Defenses to Breach of Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3277.7.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3277.7.2 Buyer’s Conduct As the Cause of Damage . . . . . . . . . . . . . . . . . . . . . . 327

7.7.2.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3277.7.2.2 Buyer’s Negligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3287.7.2.3 Assumption of Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3297.7.2.4 Misuse of the Product. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3317.7.2.5 Failure to Abide by Directions for Use . . . . . . . . . . . . . . . . . . . 332

7.7.3 Noncompliance with Conditions to Warranty Coverage. . . . . . . . . . . . . . 334

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7.7.4 Expiration of Express Warranty Period. . . . . . . . . . . . . . . . . . . . . . . . . 335

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7.7.4.1 Determining When Warranty Expires . . . . . . . . . . . . . . . . . . . . 3357.7.4.2 Defects Reported But Not Repaired Before Period Expires. . . . . . 3357.7.4.3 Defects Not Discovered Until After Period Expires . . . . . . . . . . . 3357.7.4.4 Defects Discovered During But Reported After Warranty Period . . 337

hapter 8 UCC Self-Help Remedies: Cancellation of the Sale; DeductingDamages from the Outstanding Balance

8.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3398.1.1 Overview of UCC Self-Help Remedies . . . . . . . . . . . . . . . . . . . . . . . . 3398.1.2 Differences Between Rejection and Revocation of Acceptance. . . . . . . . . 3398.1.3 Limitations on Rejection and Revocation . . . . . . . . . . . . . . . . . . . . . . . 3408.1.4 Law Versus Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340

8.2 Buyer’s Rejection of the Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3418.2.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3418.2.2 Acceptance by Failure to Reject After Reasonable Opportunity to Inspect . . 342

8.2.2.1 Timeliness of Inspection and of Notice of Rejection . . . . . . . . . . 3428.2.2.2 Length of Reasonable Opportunity to Inspect . . . . . . . . . . . . . . . 3438.2.2.3 Contractual Specification of Time to Inspect . . . . . . . . . . . . . . . 3458.2.2.4 Time Period Extended by Seller’s Conduct . . . . . . . . . . . . . . . . 3468.2.2.5 Seasonable Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 346

8.2.3 Acceptance by Buyer’s Signification of Acceptance . . . . . . . . . . . . . . . . 3468.2.3.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3468.2.3.2 Repairing the Goods As Acceptance . . . . . . . . . . . . . . . . . . . . . 3478.2.3.3 Use of the Goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3478.2.3.4 Payment for the Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3478.2.3.5 Resale of the Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 348

8.2.4 Buyer’s Acceptance by Acts Inconsistent with Seller’s Ownership . . . . . . 3488.2.5 Notice of Rejection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350

8.2.5.1 Notice Must Be Timely . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3508.2.5.2 Form of Notice of Rejection . . . . . . . . . . . . . . . . . . . . . . . . . . 3518.2.5.3 Practical Tips for Giving Notice. . . . . . . . . . . . . . . . . . . . . . . . 3528.2.5.4 Content of Notice of Rejection. . . . . . . . . . . . . . . . . . . . . . . . . 352

8.2.6 Any Nonconformity Is Sufficient to Reject . . . . . . . . . . . . . . . . . . . . . . 3538.2.7 Seller’s Right to Cure After Buyer’s Rejection . . . . . . . . . . . . . . . . . . . 354

8.2.7.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3548.2.7.2 Distinguishing Cure Before and After Time for Performance Has

Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3548.2.7.2.1 Differing cure requirements depending on whether time

has expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3548.2.7.2.2 Determining whether time for performance has expired . . 354

8.2.7.3 Seller Must Give Seasonable Notice of Intention to Cure . . . . . . . 3558.2.7.4 Cure Before Time of Performance Has Expired and the Shaken

Faith Doctrine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3558.2.7.5 Cure Before Time of Performance by Replacing a Defective Part . . 3568.2.7.6 If Contract Period Has Expired, Seller Can Cure Only If It

Has Reasonable Grounds to Believe Cure Will Be Acceptableto the Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3578.2.7.6.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3578.2.7.6.2 Notice from the buyer . . . . . . . . . . . . . . . . . . . . . . . . 3578.2.7.6.3 Greater monetary value . . . . . . . . . . . . . . . . . . . . . . . 3578.2.7.6.4 Minor defects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3578.2.7.6.5 Seller’s ignorance of defect . . . . . . . . . . . . . . . . . . . . 358

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8.2.7.7 Seller’s Deadline to Effect a Cure. . . . . . . . . . . . . . . . . . . . . . . 358

Contents

8.2.7.8 Cost of Returning Goods to Seller to Allow a Cure. . . . . . . . . . . 3608.2.7.8.1 Seller bears the expense . . . . . . . . . . . . . . . . . . . . . . 3608.2.7.8.2 Effect of contract requirement that consumer return

goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3608.2.7.8.3 Cure not contingent on seller first paying buyer’s

damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3608.2.7.9 Effect of Buyer’s Refusal to Allow Rightful Cure . . . . . . . . . . . . 361

8.3 Revocation of Acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3618.3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3618.3.2 Substantial Impairment of Value of Goods to Buyer . . . . . . . . . . . . . . . . 362

8.3.2.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3628.3.2.2 Is the Test Objective or Subjective? . . . . . . . . . . . . . . . . . . . . . 3638.3.2.3 Rationale for Subjective View of Substantial Impairment . . . . . . . 3648.3.2.4 Application of the Subjective View. . . . . . . . . . . . . . . . . . . . . . 3668.3.2.5 Failure to Repair As a Substantial Nonconformity. . . . . . . . . . . . 3678.3.2.6 Nonconformity Need Not Involve Breach of Warranty. . . . . . . . . 368

8.3.3 Buyer’s Justification for Having Accepted the Nonconforming Goods . . . . 3688.3.3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3688.3.3.2 Acceptance Based on Reasonable Assumption of Repair . . . . . . . 3698.3.3.3 Buyer Unaware of Nonconformity at Time of Acceptance . . . . . . 370

8.3.4 Reasonable Time for Revocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3708.3.5 Condition of Goods at Revocation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3748.3.6 Notice of Revocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375

8.3.6.1 Timeliness of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3758.3.6.2 Form of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3758.3.6.3 Content of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3768.3.6.4 Sending the Notice to Third Parties . . . . . . . . . . . . . . . . . . . . . 377

8.3.7 Seller’s Cure After Revocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3788.3.7.1 No Right to Cure Under the UCC . . . . . . . . . . . . . . . . . . . . . . 3788.3.7.2 Cure After Acceptance Pursuant to Subsequent Agreement

Between Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3798.3.7.3 Cure Based on Contractual Limitation on Remedies . . . . . . . . . . 379

8.3.8 Canceling the Sale Against the Indirect Seller . . . . . . . . . . . . . . . . . . . . 3798.3.8.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3798.3.8.2 Precedent Allowing Revocation Against the Indirect Seller. . . . . . 3818.3.8.3 Precedent Disallowing Revocation Against the Indirect Seller . . . . 3818.3.8.4 Tactics to Optimize Chances of Revoking Against the Indirect

Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3828.3.9 Overcoming Judicial Resistance to Revocation of Acceptance . . . . . . . . . 383

8.4 What the Buyer May Do with the Goods After Cancellation . . . . . . . . . . . . . . 3838.4.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3838.4.2 Holding the Goods for Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3848.4.3 Returning the Goods to the Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . 386

8.4.3.1 Advantages and Disadvantages of Returning the Goods . . . . . . . . 3868.4.3.2 Steps to Protect the Buyer Who Returns the Goods. . . . . . . . . . . 3868.4.3.3 Providing Clear Title to the Goods . . . . . . . . . . . . . . . . . . . . . . 3868.4.3.4 Strategy When Seller Refuses to Accept Return of the Goods. . . . 387

8.4.4 Selling the Goods When Buyer Has Made Payments or IncurredExpenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3888.4.4.1 Right to Sell the Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3888.4.4.2 When Has Buyer Made Payments or Incurred Expenses . . . . . . . 3888.4.4.3 Advantages in Selling the Goods . . . . . . . . . . . . . . . . . . . . . . . 3898.4.4.4 Applying the Sale Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . 3898.4.4.5 Sale Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 389

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8.4.5 Buyer’s Rights When Seller or Creditor Also Retains Security Interest in

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the Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3908.4.5.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3908.4.5.2 Reselling the Goods When the Seller Itself Has a Security

Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3908.4.5.2.1 Canceling the contract terminates the seller’s security

interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3908.4.5.2.2 Reselling the goods when the seller holds the security

interest and has not filed a financing statement . . . . . . . 3918.4.5.2.3 Reselling the goods when the seller has filed a

financing statement or has noted a lien on a titledocument . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 391

8.4.5.3 Reselling the Goods When an Assignee Has a Security Interest . . 3928.4.5.4 Reselling the Goods When a Third-Party Direct Lender Has a

Security Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3938.4.5.4.1 When the seller arranged the loan or referred the buyer

to the lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3938.4.5.4.2 When the buyer independently arranged the loan. . . . . . 394

8.4.5.5 Revocation of Acceptance After Repossession . . . . . . . . . . . . . . 3958.4.6 Using the Goods—Does It Negate Cancellation? . . . . . . . . . . . . . . . . . . 395

8.4.6.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3958.4.6.2 Continued Use of a Mobile Home . . . . . . . . . . . . . . . . . . . . . . 3968.4.6.3 Continued Use of a Motor Vehicle . . . . . . . . . . . . . . . . . . . . . . 3988.4.6.4 Continued Use of Other Consumer Products . . . . . . . . . . . . . . . 4008.4.6.5 Strategies to Protect the Buyer Who Uses the Goods. . . . . . . . . . 4008.4.6.6 Seller’s Set-Off for Buyer’s Continued Use . . . . . . . . . . . . . . . . 401

8.5 Deducting Buyer’s Damages from the Outstanding Balance . . . . . . . . . . . . . . . 4018.5.1 When May the Buyer Deduct Damages? . . . . . . . . . . . . . . . . . . . . . . . 4018.5.2 Avoiding Repossession When Buyer Deducts Damages . . . . . . . . . . . . . 4028.5.3 Deductions from Installment Payments. . . . . . . . . . . . . . . . . . . . . . . . . 4038.5.4 Practical Problems with Withholding Installment Payments . . . . . . . . . . . 4048.5.5 Buyer Must Notify Seller Concerning Deduction of Damages . . . . . . . . . 4048.5.6 Deducting Damages for Breach of Manufacturer’s Warranty When Direct

Seller Has Disclaimed Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 405

hapter 9 Ten Ways to Avoid Contractual Limitations on Remedies

9.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4079.2 Contract Language Must Unambiguously Limit the Consumer’s Remedies . . . . . 4079.3 Has the Consumer Agreed to the Remedy Limitation? . . . . . . . . . . . . . . . . . . 4099.4 Claims Unaffected by Contractual Remedy Limitations . . . . . . . . . . . . . . . . . . 410

9.4.1 Claims Against Manufacturer or Dealer When Only the Other PartyLimits the Consumer’s Remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 410

9.4.2 Express Warranty Claims Not Covered by the Limitation of Remedies . . . 4109.4.3 Implied Warranty Claims Not Covered by the Limitation of Remedies . . . 4109.4.4 Tort and Consumer Protection Claims . . . . . . . . . . . . . . . . . . . . . . . . . 410

9.5 When Limited Remedy ‘‘Fails of Its Essential Purpose’’ . . . . . . . . . . . . . . . . . 4119.5.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4119.5.2 Application to Repair or Replace Remedies . . . . . . . . . . . . . . . . . . . . . 4139.5.3 Effect of Failure of Repair or Replace Remedy on Seller’s Limitation of

Incidental or Consequential Damages. . . . . . . . . . . . . . . . . . . . . . . . . . 4169.5.4 Limitations on Incidental or Consequential Damages When Goods Were

Purchased to Guard Against the Very Damage Being Limited . . . . . . . . . 4189.6 Unconscionability of Limitation of Remedies . . . . . . . . . . . . . . . . . . . . . . . . 419

9.6.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 419

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9.6.2 No Limitation of Consequential Damages When Unconscionable . . . . . . . 419

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9.6.3 Factors Used to Determine Unconscionability of a Limitation ofRemedies Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 420

9.7 Inconspicuousness of Limitations Provision Will Defeat Its Effect . . . . . . . . . . 4239.7.1 Federal Law Requires Any Remedy Limitation to Be Conspicuous If

‘‘Written Warranty’’ Provided . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4239.7.2 UCC Requirements Concerning Conspicuous Disclosure. . . . . . . . . . . . . 4239.7.3 Effect of State Plain Language Statute . . . . . . . . . . . . . . . . . . . . . . . . . 424

9.8 Seller’s Post-Sale Conduct May Waive the Contractual Limitation . . . . . . . . . . 4249.9 State Law Restrictions on Limitation of Remedy Clauses . . . . . . . . . . . . . . . . 4249.10 Seller’s Bad Faith . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4259.11 Remedy Limitations That Make Warranty Unfair or Deceptive . . . . . . . . . . . . 425

hapter 10 UCC Damages

10.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42710.2 Comparison Between Cancellation and Keeping the Goods . . . . . . . . . . . . . . 42710.3 Buyer’s Direct Damages upon Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . 427

10.3.1 Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42710.3.2 Recovery of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42810.3.3 Cover: Cost of Substitute Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . 429

10.3.3.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42910.3.3.2 Goods Qualifying As Substitutes . . . . . . . . . . . . . . . . . . . . . . 43010.3.3.3 Requirements of Good Faith and Reasonableness . . . . . . . . . . . 43110.3.3.4 Delay in Effectuating Cover. . . . . . . . . . . . . . . . . . . . . . . . . . 43110.3.3.5 Offset for Expenses Saved in Consequence of Breach . . . . . . . . 431

10.3.4 No Cover: Difference in Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43110.3.5 Expenses of Holding and Reselling . . . . . . . . . . . . . . . . . . . . . . . . . . 43210.3.6 Offset for Buyer’s Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 432

10.3.6.1 Is an Offset Authorized? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43210.3.6.2 Calculating the Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 433

10.4 Buyer’s Direct Damages When No Cancellation. . . . . . . . . . . . . . . . . . . . . . 43510.4.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43510.4.2 Difficulties in Proving Value of Goods . . . . . . . . . . . . . . . . . . . . . . . . 43710.4.3 Cost of Repair As a Measure of Damages. . . . . . . . . . . . . . . . . . . . . . 43810.4.4 Resale Price As a Measure of Damages . . . . . . . . . . . . . . . . . . . . . . . 44110.4.5 Buyer’s Testimony As a Measure of Damages . . . . . . . . . . . . . . . . . . . 44210.4.6 Expert Testimony of Extent of Buyer’s Damages . . . . . . . . . . . . . . . . . 44310.4.7 Blue Books and Other Market Compilations . . . . . . . . . . . . . . . . . . . . 44410.4.8 Use of Requests for Admissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44510.4.9 Subjective Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44510.4.10 When Seller Did Not Have Title to Goods Sold . . . . . . . . . . . . . . . . . 445

10.5 Buyer’s Incidental and Consequential Damages (Whether or Not BuyerCancels). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 446

10.5.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44610.5.2 Incidental Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44710.5.3 Consequential Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 449

10.5.3.1 Economic Loss Consequential Damages . . . . . . . . . . . . . . . . . 44910.5.3.1.1 General standards . . . . . . . . . . . . . . . . . . . . . . . . . . 44910.5.3.1.2 Substitute transportation and housing, lost wages. . . . . 45010.5.3.1.3 Financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 45110.5.3.1.4 Damage to the consumer’s credit rating . . . . . . . . . . . 45310.5.3.1.5 Damage due to repossession of the goods. . . . . . . . . . 453

10.5.3.2 Consequential Damages Based on Injury to Person or Property . . 45410.5.3.3 Mental Anguish Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . 454

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10.5.3.4 Damages for Inconvenience, Aggravation, Loss of Time . . . . . . 456

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10.5.4 Proving Incidental and Consequential Damages . . . . . . . . . . . . . . . . . . 45710.6 Punitive Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45710.7 Attorney Fees As Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 459

hapter 11 Deception, Unfairness, Unconscionability, Lack of Good Faith, andFraud

11.1 State UDAP Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46111.1.1 Application of UDAP Statutes to Warranty Problems . . . . . . . . . . . . . . 461

11.1.1.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46111.1.1.2 Advantages of a UDAP Claim . . . . . . . . . . . . . . . . . . . . . . . . 46111.1.1.3 Advantages of a UCC Claim . . . . . . . . . . . . . . . . . . . . . . . . . 463

11.1.2 Standards of Deception and Unfairness. . . . . . . . . . . . . . . . . . . . . . . . 46411.1.3 Breach of Warranty or Service Contract As a UDAP Violation. . . . . . . . 46411.1.4 Unfair and Deceptive Conduct After Warranty Breach . . . . . . . . . . . . . 46711.1.5 Defective Product As a UDAP Violation . . . . . . . . . . . . . . . . . . . . . . 46711.1.6 Misrepresentations About Warranties . . . . . . . . . . . . . . . . . . . . . . . . . 46811.1.7 Misrepresentation or Nondisclosure of Condition or Features of Product . . 47111.1.8 Violation of Other Warranty Statute . . . . . . . . . . . . . . . . . . . . . . . . . . 471

11.2 UCC Unconscionability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47211.2.1 Introduction and Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47211.2.2 Unconscionability Is a Question of Law for the Court; Hearing

Requirement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47311.2.3 Unconscionable at Time Contract Is Made; Contract’s Commercial

Setting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47411.2.4 Standards for Determining Unconscionability . . . . . . . . . . . . . . . . . . . 475

11.2.4.1 UCC Does Not Define Unconscionability. . . . . . . . . . . . . . . . . 47511.2.4.2 Uniform Consumer Sales Practices Act Standards . . . . . . . . . . . 47511.2.4.3 Procedural Unconscionability . . . . . . . . . . . . . . . . . . . . . . . . . 475

11.2.4.3.1 Consumer and commercial cases distinguished . . . . . . 47511.2.4.3.2 Lack of understanding of contract terms . . . . . . . . . . . 47711.2.4.3.3 Standard form contracts . . . . . . . . . . . . . . . . . . . . . . 47811.2.4.3.4 Preying on the buyer’s weaknesses . . . . . . . . . . . . . . 478

11.2.4.4 Substantive Unconscionability . . . . . . . . . . . . . . . . . . . . . . . . 47911.2.4.5 Relation of Procedural to Substantive Unconscionability. . . . . . . 480

11.2.5 Unconscionability of Warranty Disclaimers . . . . . . . . . . . . . . . . . . . . . 48111.2.6 Unconscionability of Limitations of Remedies Clauses . . . . . . . . . . . . . 48211.2.7 Proving Unconscionability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48311.2.8 Remedies for Unconscionable Clauses . . . . . . . . . . . . . . . . . . . . . . . . 484

11.2.8.1 Whole Contract May Be Ruled Unenforceable . . . . . . . . . . . . . 48411.2.8.2 Offensive Term Ruled Unenforceable . . . . . . . . . . . . . . . . . . . 48411.2.8.3 Limiting the Effect of the Offensive Term . . . . . . . . . . . . . . . . 48411.2.8.4 Availability of Monetary Damages . . . . . . . . . . . . . . . . . . . . . 485

11.3 Good Faith Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48511.3.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48511.3.2 Merchants Must Meet Higher Standard of Conduct . . . . . . . . . . . . . . . 48611.3.3 Good Faith Applies to Conduct Initiating the Sale and to Contract

Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48711.3.4 Common Law Duty of Good Faith . . . . . . . . . . . . . . . . . . . . . . . . . . 48811.3.5 Remedies for Seller’s Lack of Good Faith. . . . . . . . . . . . . . . . . . . . . . 48811.3.6 Bad Faith and Unconscionability Distinguished . . . . . . . . . . . . . . . . . . 490

11.4 Common Law Fraud and Related Torts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49011.4.1 Relevance to Warranty Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 490

11.4.1.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 490

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11.4.1.2 Advantages Over Warranty Claims . . . . . . . . . . . . . . . . . . . . . 491

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11.4.1.3 Advantages of Misrepresentation Claims Over UDAP Claims . . . 49511.4.2 Intentional Misrepresentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 495

11.4.2.1 Elements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49511.4.2.2 Can Economic Loss Be Recovered for Intentional Misrepre-

sentation? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49511.4.3 Negligent Misrepresentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 498

11.4.3.1 Nature of the Tort . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49811.4.3.2 Is Economic Loss Recoverable for Negligent Misrepresentation? . . 49911.4.3.3 Recklessness As an Alternative . . . . . . . . . . . . . . . . . . . . . . . 501

11.4.4 Innocent Misrepresentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50111.4.5 Concealment or Nondisclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 502

11.4.5.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50211.4.5.2 Half Truths . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50211.4.5.3 Seller’s Superior Means of Ascertaining the Truth . . . . . . . . . . . 50311.4.5.4 Affirmative Concealment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50511.4.5.5 Statutory Duty to Disclose . . . . . . . . . . . . . . . . . . . . . . . . . . . 507

11.4.6 Justifiable Reliance and the Buyer’s Opportunity to Inspect . . . . . . . . . . 50711.4.7 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 509

11.4.7.1 Measure of Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50911.4.7.2 Punitive Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51011.4.7.3 Rescission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 510

11.4.8 Pleading and Practice Tips . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 510

hapter 12 Negligence and Strict Liability in Tort

12.1 Utility of Tort Theories in Consumer Warranty Cases . . . . . . . . . . . . . . . . . . 51312.2 Are Economic Damages Recoverable Under Negligence and Strict Liability

Claims? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51512.2.1 When Economic Damages Not Recoverable . . . . . . . . . . . . . . . . . . . . 51512.2.2 Economic Damages May Be Allowed in Consumer But Not Commercial

Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52012.2.3 Recovery for Economic Injury When Damage Linked to Accident,

Personal Injury, or Property Damage . . . . . . . . . . . . . . . . . . . . . . . . . 52112.2.4 Repairs and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52312.2.5 Breach of Statutory Duty or When Special Relationship Involved. . . . . . 52312.2.6 Distinguishing Economic Loss from Property Damage . . . . . . . . . . . . . 524

12.3 Elements of Strict Liability in Tort . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52812.3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52812.3.2 Strict Liability Can Apply to Retailers, Manufacturers, and Lessors . . . . 52912.3.3 Products Covered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53012.3.4 Defective Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53312.3.5 The Unreasonably Dangerous Requirement . . . . . . . . . . . . . . . . . . . . . 53412.3.6 Causation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53712.3.7 Use in a Normal or Foreseeable Manner. . . . . . . . . . . . . . . . . . . . . . . 538

12.4 Elements of the Negligence Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53912.4.1 Duty to Conform to a Reasonable Standard of Conduct . . . . . . . . . . . . 539

12.4.1.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53912.4.1.2 Establishing the Standard of Normal Care . . . . . . . . . . . . . . . . 54112.4.1.3 Standard of Care As to Design and Manufacture. . . . . . . . . . . . 54112.4.1.4 Standard of Care As to Inspection for Defects and Preparation

for Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54212.4.1.5 Standard of Care to Warn the Consumer of Defects or Dangers

in Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54312.4.2 Failure to Act in Conformity with the Standard . . . . . . . . . . . . . . . . . . 544

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12.4.3 Proximate Cause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 545

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12.4.4 Actual Loss or Damage to the Consumer’s Interests . . . . . . . . . . . . . . . 54612.4.5 Defenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 546

hapter 13 Litigating Warranty Cases

13.1 Evaluating and Framing the Case. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54913.1.1 Initial Contacts with the Client . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54913.1.2 Obtain and Analyze All Relevant Documents . . . . . . . . . . . . . . . . . . . 55013.1.3 Go Behind the Written Documents . . . . . . . . . . . . . . . . . . . . . . . . . . 55013.1.4 Develop the Buyer’s Circumstances . . . . . . . . . . . . . . . . . . . . . . . . . . 55113.1.5 Characterize the Warranties in the Most Favorable Way . . . . . . . . . . . . 551

13.2 Strategic Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55113.2.1 Should the Buyer Allow the Seller an Opportunity to Cure? . . . . . . . . . 55113.2.2 Should the Buyer Cancel the Sale or Keep the Goods? . . . . . . . . . . . . . 55213.2.3 How to Deal with Secured Creditors . . . . . . . . . . . . . . . . . . . . . . . . . 55213.2.4 Use of the Goods After Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . 55313.2.5 Avoiding Spoliation of Evidence Problems . . . . . . . . . . . . . . . . . . . . . 55313.2.6 Provide Complete and Timely Notice to the Seller . . . . . . . . . . . . . . . . 55513.2.7 Consumer Publicity Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 556

13.3 Pleading Warranty Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55613.3.1 Plead Both UCC and Non-UCC Claims . . . . . . . . . . . . . . . . . . . . . . . 55613.3.2 Pleading Multiple UCC Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55813.3.3 Specificity of Warranty Allegations . . . . . . . . . . . . . . . . . . . . . . . . . . 55813.3.4 Pleading Revocation or Rejection . . . . . . . . . . . . . . . . . . . . . . . . . . . 55813.3.5 Pleading Notice of Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55913.3.6 Pleading the Existence and Terms of the Warranty . . . . . . . . . . . . . . . . 55913.3.7 Pleading Privity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55913.3.8 Pleading Incidental and Consequential Damages . . . . . . . . . . . . . . . . . 55913.3.9 Determining What Parties to Name As Defendants. . . . . . . . . . . . . . . . 560

13.3.9.1 Manufacturers and Dealers . . . . . . . . . . . . . . . . . . . . . . . . . . 56013.3.9.2 Institutions That Finance the Sale . . . . . . . . . . . . . . . . . . . . . . 56013.3.9.3 Distributors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 560

13.3.10 Warranty Class Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56113.3.10.1 Jurisdictional Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56113.3.10.2 Certifying the Class . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 561

13.3.11 The Seller’s Answer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56213.4 The Enforceability of Binding Arbitration Agreements . . . . . . . . . . . . . . . . . 562

13.4.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56213.4.2 The Enforceability of Arbitration Clauses in a Nutshell. . . . . . . . . . . . . 563

13.4.2.1 State Law Restrictions on Arbitration . . . . . . . . . . . . . . . . . . . 56313.4.2.2 Is the Arbitration Agreement Valid Under Ordinary Contract

Principles? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56313.4.2.3 Conflict with Federal Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 56313.4.2.4 Interpreting the Arbitration Clause Narrowly . . . . . . . . . . . . . . 564

13.4.3 Effect of Arbitration Clause When Consumer Cancels the Transaction orWithholds Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 564

13.4.3.1 Arbitration Clause Does Not Apply to Self-Help Remedies SuchAs Rejection, Revocation, or Withholding Payments . . . . . . . . . 564

13.4.3.2 Does Consumer’s Cancellation of the Contract Invalidate theArbitration Requirement? . . . . . . . . . . . . . . . . . . . . . . . . . . . 564

13.4.4 Arbitration Requirement’s Disclosure in Written Warranties and ServiceContracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 565

13.4.4.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56513.4.4.2 Eleventh Circuit Requires Disclosure in Written Warranty . . . . . 565

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13.4.4.3 Alabama Courts View Eleventh Circuit Decision As No Longer

Contents

Binding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56613.4.4.4 Significance That Mandatory Arbitration Must Be Disclosed in

Written Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56613.4.4.5 Does Disclosure Requirement Extend to Service Contracts and

Extended Warranties? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56713.4.5 Does Magnuson-Moss Act Prohibit Merchant’s Designation of

Arbitration Service Provider? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56813.4.6 Does Magnuson-Moss Act Prohibit All Binding Arbitration of Written

Warranty Claims? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56813.4.6.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56813.4.6.2 The Act’s Implementing Regulations . . . . . . . . . . . . . . . . . . . . 56813.4.6.3 Magnuson-Moss Case Law Prohibiting Binding Arbitration . . . . 57013.4.6.4 Case Law Finding Binding Arbitration Permissible Under

Magnuson-Moss Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57013.4.6.5 Implications If Magnuson-Moss Act Overrides the FAA. . . . . . . 571

13.5 Discovery. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57113.5.1 Interrogatories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57113.5.2 Document Requests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57213.5.3 Depositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57213.5.4 Deposition of the Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 572

13.6 Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57413.6.1 Inspection by the Buyer’s Expert . . . . . . . . . . . . . . . . . . . . . . . . . . . . 574

13.6.1.1 Timing of the Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57413.6.1.2 Selection of a Qualified Expert. . . . . . . . . . . . . . . . . . . . . . . . 57413.6.1.3 Conduct of the Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . 576

13.6.2 Inspection by the Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57713.7 Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 578

13.7.1 Negotiating a Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57813.7.2 Mediation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57913.7.3 Settlement Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 580

13.7.3.1 Expenses to Include in Settlement Demand . . . . . . . . . . . . . . . 58013.7.3.2 Protecting Against Delay in Payment . . . . . . . . . . . . . . . . . . . 58013.7.3.3 Protecting the Consumer’s Credit Record . . . . . . . . . . . . . . . . . 58013.7.3.4 Confidentiality Clauses and Exculpatory Clauses. . . . . . . . . . . . 580

13.7.4 Protecting Against the Defendant’s Bankruptcy . . . . . . . . . . . . . . . . . . 58113.7.5 Effect of Settlement upon Other Parties . . . . . . . . . . . . . . . . . . . . . . . 58113.7.6 Preserving Attorney Fees Under Fee-Shifting Statutes. . . . . . . . . . . . . . 582

13.8 Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58213.8.1 Most Elements of Warranty Cases Are Questions for the Trier of Fact . . 582

13.8.1.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58213.8.1.2 Fact Questions in Breach of Express Warranty . . . . . . . . . . . . . 58213.8.1.3 Fact Questions in Breach of Implied Warranties . . . . . . . . . . . . 58313.8.1.4 Fact Questions When Buyer Has Canceled. . . . . . . . . . . . . . . . 58413.8.1.5 Other Fact Questions in Warranty Cases . . . . . . . . . . . . . . . . . 58413.8.1.6 Questions of Law in Warranty Cases. . . . . . . . . . . . . . . . . . . . 585

13.8.2 Jury Selection. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58513.8.3 Evidence Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 586

13.8.3.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58613.8.3.2 Recall Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58613.8.3.3 Introduction of Government or Industry Standards. . . . . . . . . . . 58613.8.3.4 Evidence of ‘‘As Is’’ Clauses in Fraud Cases . . . . . . . . . . . . . . 58613.8.3.5 Use of Word ‘‘Lemon’’ at Trial . . . . . . . . . . . . . . . . . . . . . . . 58713.8.3.6 Evidence of Other Bad Acts . . . . . . . . . . . . . . . . . . . . . . . . . 58713.8.3.7 Subsequent Remedial Measures . . . . . . . . . . . . . . . . . . . . . . . 588

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13.8.3.8 Demonstrative Evidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . 588

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13.8.3.9 History of Vehicle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58813.8.4 Admissibility of Expert Testimony Under the Daubert Rule . . . . . . . . . 588

13.8.4.1 The Gatekeeping Function Established by Daubert . . . . . . . . . . 58813.8.4.2 Factors in the Court’s Evaluation of Expert Testimony . . . . . . . . 59013.8.4.3 Discovery of the Expert’s Opinion . . . . . . . . . . . . . . . . . . . . . 59313.8.4.4 Burden of Proof and Conduct of the Daubert Hearing . . . . . . . . 59413.8.4.5 Timing of the Inquiry into Admissibility . . . . . . . . . . . . . . . . . 595

13.8.5 Presenting the Testimony of the Plaintiff’s Expert . . . . . . . . . . . . . . . . 59513.8.6 Cross-Examining the Opponent’s Expert Witness . . . . . . . . . . . . . . . . . 596

13.8.6.1 General Rules for Cross-Examining the Opponent’s ExpertWitness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 596

13.8.6.2 Bringing Out Testimony That Supports the Consumer . . . . . . . . 59613.8.6.3 Discrediting the Opposing Expert on Cross-Examination . . . . . . 596

13.8.7 Trial Themes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59713.8.7.1 Tie the Facts to the Policies Behind Applicable Law . . . . . . . . . 59713.8.7.2 Stress the Reasonableness of the Buyer’s Conduct. . . . . . . . . . . 597

13.8.8 Jury Forms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59713.9 Attorney Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 598

art II Warranty Law Applied to Specific Consumer Contexts

hapter 14 New Vehicles and Motor Homes: Lemon Laws, Other Remedies

14.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60114.2 Lemon Laws: Repair, Replace, or Refund . . . . . . . . . . . . . . . . . . . . . . . . . . 601

14.2.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60114.2.2 Lemon Laws Are Constitutional . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60214.2.3 Scope of New Car Lemon Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . 603

14.2.3.1 Types of Vehicles Covered . . . . . . . . . . . . . . . . . . . . . . . . . . 60314.2.3.2 Motor Homes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60414.2.3.3 Demonstrators and Low-Mileage Used Cars . . . . . . . . . . . . . . . 60514.2.3.4 Leased Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60614.2.3.5 Out-of-State Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60714.2.3.6 Covered Car Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60814.2.3.7 Defendants Covered by New Car Lemon Laws. . . . . . . . . . . . . 608

14.2.3.7.1 Manufacturers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60814.2.3.7.2 Dealers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 609

14.2.4 Defects Covered by New Car Lemon Laws. . . . . . . . . . . . . . . . . . . . . 61014.2.4.1 Breach of Express Warranties. . . . . . . . . . . . . . . . . . . . . . . . . 61014.2.4.2 Defects Not Covered by Manufacturer’s Express Warranty;

Implied Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61114.2.4.3 Manufacturer’s Obligation for Dealer Warranties and Actions . . . 61114.2.4.4 Exceptions for Abuse, Neglect, or Unauthorized Modifications . . 61114.2.4.5 Requirement That Nonconformity Cause Substantial Impairment . . 612

14.2.4.5.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61214.2.4.5.2 Is the standard subjective or objective? . . . . . . . . . . . 61314.2.4.5.3 Specific impairments found to be substantial . . . . . . . . 61414.2.4.5.4 Proving substantial impairment and the existence of

a defect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61814.2.4.6 Effect of Continued Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . 619

14.2.5 Notice Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62014.2.5.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62014.2.5.2 How Notice Delivered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 620

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14.2.5.3 Timing and Content of Notice . . . . . . . . . . . . . . . . . . . . . . . . 620

Contents

14.2.5.4 Consequences of Failure to Provide Notice . . . . . . . . . . . . . . . 62114.2.6 Manufacturer’s Repair Attempts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 622

14.2.6.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62214.2.6.2 Costs of Transporting Car to Manufacturer. . . . . . . . . . . . . . . . 62214.2.6.3 Number of Repair Attempts or Time Out of Service Allowed . . . 623

14.2.6.3.1 Nature of the requirement . . . . . . . . . . . . . . . . . . . . 62314.2.6.3.2 What constitutes a repair attempt . . . . . . . . . . . . . . . 62314.2.6.3.3 Determining the number of days out of service . . . . . . 62414.2.6.3.4 Effect of presumption of reasonable number of repair

attempts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62514.2.7 Time Restrictions on Lemon Law Applicability . . . . . . . . . . . . . . . . . . 62514.2.8 The Replacement or Refund Remedy . . . . . . . . . . . . . . . . . . . . . . . . . 626

14.2.8.1 When Is the Remedy Triggered?. . . . . . . . . . . . . . . . . . . . . . . 62614.2.8.2 Must Defect Still Exist at Time of Hearing?. . . . . . . . . . . . . . . 62714.2.8.3 Who Chooses Between Replacement and Refund?. . . . . . . . . . . 62714.2.8.4 Effect of Consumer’s Inability to Return Car . . . . . . . . . . . . . . 62814.2.8.5 Is a Replacement Vehicle Comparable? . . . . . . . . . . . . . . . . . . 62814.2.8.6 No Allowance for Use When Consumer Receives a

Replacement Vehicle. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62914.2.8.7 How to Calculate a Refund . . . . . . . . . . . . . . . . . . . . . . . . . . 629

14.2.8.7.1 Components of the refund . . . . . . . . . . . . . . . . . . . . 62914.2.8.7.2 Trade-in vehicles and negative equity . . . . . . . . . . . . 63014.2.8.7.3 Incidental and consequential damages . . . . . . . . . . . . 63114.2.8.7.4 Refund calculations for leased vehicles . . . . . . . . . . . 631

14.2.8.8 Deduction from Refund for Reasonable Use Allowance . . . . . . . 63114.2.8.9 Effect of a Third Party Lender or Lessor on Replace or Refund

Remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63214.2.8.10 Responsibility for Post-Cancellation Accidents . . . . . . . . . . . . 633

14.2.9 Informal Dispute Resolution When Manufacturer Does Not GrantProper Relief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 633

14.2.9.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63314.2.9.2 Whether the Decision Is Binding on the Manufacturer and

Consumer; Appellate Review . . . . . . . . . . . . . . . . . . . . . . . . . 63414.2.9.3 Can the Mechanism Award the Consumer Attorney Fees? . . . . . 63514.2.9.4 Mechanism Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63514.2.9.5 Federal Preemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63614.2.9.6 Constitutional Challenges by Manufacturers to Dispute

Resolution Mechanisms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63714.2.9.7 Tips on Preparing for Dispute Resolution. . . . . . . . . . . . . . . . . 638

14.2.10 Judicial Enforcement of Replace or Refund Remedy. . . . . . . . . . . . . . 63814.2.10.1 Dispute Resolution As a Precondition . . . . . . . . . . . . . . . . . . 63814.2.10.2 Effect of Dispute Resolution on Judicial Enforcement . . . . . . . 63914.2.10.3 The Proper Court and Right to a Jury . . . . . . . . . . . . . . . . . . 63914.2.10.4 Limitations on Judicial Replace or Refund Remedy . . . . . . . . . 64014.2.10.5 Availability of Damages Under Lemon Laws . . . . . . . . . . . . . 640

14.2.10.5.1 When lemon law does not explicitly afford adamages remedy . . . . . . . . . . . . . . . . . . . . . . . . . . 640

14.2.10.5.2 Lemon laws that provide for damages . . . . . . . . . . . 64114.2.10.5.3 Relation to other remedies . . . . . . . . . . . . . . . . . . . 642

14.2.10.6 Effect of Limitation of Damages Clause. . . . . . . . . . . . . . . . . 64214.2.10.7 Multiple and Punitive Damages and Civil Penalties . . . . . . . . . 64214.2.10.8 Lemon Law Attorney Fees and Expert Witness Fees . . . . . . . . 643

14.2.10.8.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64314.2.10.8.2 When fees not available under lemon law. . . . . . . . . 645

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14.2.10.8.3 Fees in settled lemon law cases. . . . . . . . . . . . . . . . 645


x

14.2.10.8.4 Calculating the fees . . . . . . . . . . . . . . . . . . . . . . . . 64514.2.10.8.5 Expert witness fees . . . . . . . . . . . . . . . . . . . . . . . . 646

14.3 Revocation Under the UCC As Alternative to Lemon Law Remedy . . . . . . . . 64614.3.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64614.3.2 New Car Defects That Breach Merchantability Warranty. . . . . . . . . . . . 64614.3.3 Is the Impairment Substantial Enough to Allow Revocation? . . . . . . . . . 649

14.3.3.1 Serious Defects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64914.3.3.2 Cumulative Effect of Minor Defects . . . . . . . . . . . . . . . . . . . . 65014.3.3.3 Amount of Time Car Unusable. . . . . . . . . . . . . . . . . . . . . . . . 65114.3.3.4 Defect Need Not Interfere with Car’s Operation . . . . . . . . . . . . 65114.3.3.5 Is One Minor Defect Sufficient? . . . . . . . . . . . . . . . . . . . . . . . 651

14.4 The Damage Remedy Under the Lemon Law and Alternative Theories . . . . . . 65114.4.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65114.4.2 Lemon Law Does Not Preempt Other Damage Claims . . . . . . . . . . . . . 65214.4.3 Magnuson-Moss and UCC Damage Claims. . . . . . . . . . . . . . . . . . . . . 652

14.4.3.1 Availability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65214.4.3.2 Punitive Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 652

14.4.4 UDAP and Tort Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65314.4.5 Claims Under Special State Motor Vehicle Statutes . . . . . . . . . . . . . . . 653

14.5 Latent Defects Discovered After Lemon Law Remedy Expires . . . . . . . . . . . . 65514.5.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65514.5.2 Defects Discovered During Written Warranty Period . . . . . . . . . . . . . . 65514.5.3 Defects Discovered After Warranty Period Has Expired . . . . . . . . . . . . 655

14.5.3.1 Service Contract Coverage. . . . . . . . . . . . . . . . . . . . . . . . . . . 65514.5.3.2 Secret Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65514.5.3.3 Implied and Express Warranties Extending Beyond the

Written Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65614.5.3.4 Failure to Disclose Defect As a UDAP Violation . . . . . . . . . . . 65714.5.3.5 Strict Liability and Negligence . . . . . . . . . . . . . . . . . . . . . . . . 65714.5.3.6 Federal Motor Vehicle Recalls . . . . . . . . . . . . . . . . . . . . . . . . 657

14.6 Undisclosed Damage to New Cars Before Delivery to the Consumer. . . . . . . . 65814.7 Warranty Issues in Gray Market Vehicle Sales . . . . . . . . . . . . . . . . . . . . . . . 65914.8 Special Problems in Motor Home Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . 660

14.8.1 Lemon Law Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66014.8.2 Dealing with the Multiple Manufacturers of the Vehicle . . . . . . . . . . . . 66114.8.3 Preserving the Consumer’s Choice of Forum . . . . . . . . . . . . . . . . . . . . 66214.8.4 Motor Home Defects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66214.8.5 Trial Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 664

14.9 Practice Pointers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66414.9.1 Investigation of the Car Defect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66414.9.2 Inspection of the Car for Automobile Safety . . . . . . . . . . . . . . . . . . . . 66614.9.3 Pleadings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66614.9.4 Discovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 666

14.9.4.1 Document Requests, Interrogatories, and Requests forAdmissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 666

14.9.4.2 Depositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66714.9.4.2.1 Selection of deponents. . . . . . . . . . . . . . . . . . . . . . . 66714.9.4.2.2 Deposing the manufacturer’s representative. . . . . . . . . 66714.9.4.2.3 Deposing the dealer’s service manager . . . . . . . . . . . . 66814.9.4.2.4 Deposing the service technicians . . . . . . . . . . . . . . . . 66914.9.4.2.5 Deposing the defense expert . . . . . . . . . . . . . . . . . . . 669

14.9.5 Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66914.9.6 Evidence and Proof Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67014.9.7 Collecting the Judgment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 670

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Chapter 15 Used Cars

Contents

15.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67115.2 Almost All Used Cars Carry a Warranty of Good Title . . . . . . . . . . . . . . . . . 67115.3 Express Warranties Still Apply in ‘‘As Is’’ Used Car Sales . . . . . . . . . . . . . . 672

15.3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67215.3.2 Manufacturer Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 672

15.3.2.1 Unexpired Manufacturer Warranties . . . . . . . . . . . . . . . . . . . . 67215.3.2.2 Manufacturer Express Warranties on Lemon Buybacks and

‘‘Certified’’ Used Cars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67215.3.3 The Dealer’s Express Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 673

15.3.3.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67315.3.3.2 Express Warranties Written on Sales Documents . . . . . . . . . . . . 67315.3.3.3 Dealer Certified Used Car Programs . . . . . . . . . . . . . . . . . . . . 67315.3.3.4 Express Written Warranties Mandated by Statute. . . . . . . . . . . . 67415.3.3.5 Express Warranties by Description . . . . . . . . . . . . . . . . . . . . . 67415.3.3.6 Effect of the FTC Used Car Rule . . . . . . . . . . . . . . . . . . . . . . 67515.3.3.7 The Dealer’s Oral Warranties . . . . . . . . . . . . . . . . . . . . . . . . . 675

15.4 Preserving Implied Warranties Even in ‘‘As Is’’ Used Car Sales . . . . . . . . . . . 67615.4.1 Creation of Implied Warranties in Used Car Sales . . . . . . . . . . . . . . . . 67615.4.2 No Disclaimer of Implied Warranties When Dealer Provides Written

Warranty or Enters into Service Contract . . . . . . . . . . . . . . . . . . . . . . 67615.4.2.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67615.4.2.2 No Disclaimer When Dealer Provides Written Warranty. . . . . . . 67615.4.2.3 No Disclaimer When Dealer Enters into Service Contract. . . . . . 677

15.4.3 Using UCC Requirements to Defeat Implied Warranty Disclaimers. . . . . 67715.4.4 Effect of FTC Used Car Rule on Implied Warranty Disclaimers . . . . . . . 67815.4.5 Used Car Lemon Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 678

15.4.5.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67815.4.5.2 Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67915.4.5.3 Duration of Statutory Warranty. . . . . . . . . . . . . . . . . . . . . . . . 68015.4.5.4 Statutory Warranty Coverage . . . . . . . . . . . . . . . . . . . . . . . . . 68115.4.5.5 Omission or Disclaimer of Statutory Warranties . . . . . . . . . . . . 68115.4.5.6 The Consumer’s Notice and the Dealer’s Attempt to Cure . . . . . 68215.4.5.7 Replacement Cars, Refunds . . . . . . . . . . . . . . . . . . . . . . . . . . 68215.4.5.8 Private Enforcement of Used Car Lemon Law Rights . . . . . . . . 68315.4.5.9 Coverage of Used Cars Under New Car Lemon Laws . . . . . . . . 684

15.4.6 Other Minimum Statutory Standards for Used Cars . . . . . . . . . . . . . . . 68415.4.7 The Effect of State Inspection Laws. . . . . . . . . . . . . . . . . . . . . . . . . . 68615.4.8 State-by-State Summary of Special Used Car Warranty and Condition

Standards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68715.5 Enforcing Warranties in Used Car Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . 692

15.5.1 Standards for Merchantability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69215.5.2 Revocation of Acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 693

15.5.2.1 When Is a Used Car Defect Substantial Enough to AllowRevocation? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 693

15.5.2.2 Other Grounds for Cancellation If Revocation Is Unavailable . . . 69415.6 Beyond Warranty: UDAP, Fraud, Tort, and Good Faith Claims . . . . . . . . . . . . 695

15.6.1 UDAP Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69515.6.2 Fraud, Negligence, and Strict Liability . . . . . . . . . . . . . . . . . . . . . . . . 69615.6.3 Good Faith Duty to Disclose Known Defects . . . . . . . . . . . . . . . . . . . 696

15.7 Disclosure and Misrepresentation of Used Car’s True History: OdometerTampering, Lemon Laundering, Salvage Vehicles, State New Car DamageDisclosure Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 697

15.7.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 697

xxxiii

15.7.2 Inaccurate Odometer Readings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 697

C

C


x

15.7.3 Lemon Laundering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69815.7.3.1 Lemon Laundering As a Breach of Warranty . . . . . . . . . . . . . . 69815.7.3.2 Other Causes of Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69815.7.3.3 Determining If a Vehicle Is a Laundered Lemon . . . . . . . . . . . . 698

15.7.4 Salvage Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69915.7.5 New Car Damage Disclosure Requirements May Apply to Demonstrator

Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70015.8 FTC Used Car Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 700

15.8.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70015.8.2 Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 700

15.8.2.1 Types of Vehicles Covered . . . . . . . . . . . . . . . . . . . . . . . . . . 70015.8.2.2 Leased Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70115.8.2.3 Covered Buyers and Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . 70115.8.2.4 Territorial Applicability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70215.8.2.5 State Exemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 702

15.8.3 The Buyers Guide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70215.8.3.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70215.8.3.2 Disclosure of Warranty Coverage . . . . . . . . . . . . . . . . . . . . . . 703

15.8.4 Disclosures Must Be Amended As Sales Terms Change . . . . . . . . . . . . 70415.8.5 Buyers Guide Disclosures Must Be Repeated in Other Documents . . . . . 70415.8.6 Spanish Disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70515.8.7 Rule Prohibits Specific Deceptive Practices . . . . . . . . . . . . . . . . . . . . . 70615.8.8 Remedies for Rule Violations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 706

15.9 Litigation Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70715.9.1 Using Statutory and Common Law Claims to Enhance the Buyer’s

Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70715.9.1.1 Magnuson-Moss Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . 70715.9.1.2 Special Causes of Action Under State Motor Vehicle Laws. . . . . 70715.9.1.3 Lemon Laundering and Odometer Claims . . . . . . . . . . . . . . . . 70815.9.1.4 UDAP and Fraud Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . 708

15.9.2 Pleadings for Used Car Warranty Claims . . . . . . . . . . . . . . . . . . . . . . 70815.9.3 Collecting Against a Used Car Dealer’s Bond . . . . . . . . . . . . . . . . . . . 708

hapter 16 Wheelchairs and Other Assistive Devices

16.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71116.2 Scope of Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71216.3 Are AT Device Warranty Laws Preempted by Federal Law? . . . . . . . . . . . . . 71216.4 What Is an AT Device Lemon? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71316.5 Warranties Under AT Device Lemon Laws . . . . . . . . . . . . . . . . . . . . . . . . . 71416.6 Who Can Bring Claims Under AT Device Warranty Laws? . . . . . . . . . . . . . . 71416.7 Remedies for Consumers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 715

16.7.1 Remedies Provided by AT Device Warranty Laws . . . . . . . . . . . . . . . . 71516.7.2 Affirmative Defenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71516.7.3 Prohibitions and Limitations on Laundering of AT Device Lemons. . . . . 71616.7.4 Other Causes of Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 716

hapter 17 Mobile Home Sales

17.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71717.1.1 Nature of the Mobile Home Market . . . . . . . . . . . . . . . . . . . . . . . . . . 71717.1.2 Categories of Mobile Homes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71817.1.3 Ten Common Mobile Home Defects . . . . . . . . . . . . . . . . . . . . . . . . . 718

17.1.3.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 718

xxiv

17.1.3.2 Leaking Roofs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 719

Contents

17.1.3.3 Improperly Installed Windows and Doors. . . . . . . . . . . . . . . . . 71917.1.3.4 Sagging Roofs and Ceilings . . . . . . . . . . . . . . . . . . . . . . . . . . 71917.1.3.5 Heating and Cooling Duct Work. . . . . . . . . . . . . . . . . . . . . . . 72017.1.3.6 Defective or Damaged Flooring . . . . . . . . . . . . . . . . . . . . . . . 72017.1.3.7 Electrical System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72117.1.3.8 Defective Plumbing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72117.1.3.9 Hardboard Siding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72117.1.3.10 Improperly Installed Appliances . . . . . . . . . . . . . . . . . . . . . . 72217.1.3.11 Formaldehyde Emissions . . . . . . . . . . . . . . . . . . . . . . . . . . . 722

17.2 Applicability of Uniform Commercial Code and Magnuson-Moss WarrantyAct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 723

17.2.1 Uniform Commercial Code. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72317.2.2 Magnuson-Moss Warranty Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72417.2.3 What Law Applies If the UCC and Magnuson-Moss Warranty Act Do

Not Apply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72517.3 National Manufactured Housing Construction and Safety Standards Act. . . . . . 725

17.3.1 Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72517.3.2 Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72717.3.3 Construction Standards and the Consumer Manual . . . . . . . . . . . . . . . . 72717.3.4 Federal Quality Assurance and Inspection Requirements . . . . . . . . . . . . 728

17.3.4.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72817.3.4.2 Construction Designs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72817.3.4.3 Plant Quality Assurance Program . . . . . . . . . . . . . . . . . . . . . . 72917.3.4.4 Production Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72917.3.4.5 Permanent File for Each Home Manufactured. . . . . . . . . . . . . . 72917.3.4.6 Records of In-Plant Inspections of Homes . . . . . . . . . . . . . . . . 72917.3.4.7 Interstate Monitoring Team Reports . . . . . . . . . . . . . . . . . . . . 730

17.3.5 Effect of Federal Standards upon State Law . . . . . . . . . . . . . . . . . . . . 73017.3.6 Administrative Enforcement of HUD Standards . . . . . . . . . . . . . . . . . . 733

17.3.6.1 Correction of Defects in Homes . . . . . . . . . . . . . . . . . . . . . . . 73317.3.6.2 New Federally-Mandated Dispute Resolution System. . . . . . . . . 734

17.3.7 Consumer Enforcement of Federal Standards. . . . . . . . . . . . . . . . . . . . 73417.4 Express and Statutory Warranties for Mobile Homes. . . . . . . . . . . . . . . . . . . 735

17.4.1 Express Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73517.4.2 State Mobile Home Warranty Laws . . . . . . . . . . . . . . . . . . . . . . . . . . 73617.4.3 Other State Standards for Mobile Homes . . . . . . . . . . . . . . . . . . . . . . 73917.4.4 Mobile Homes Purchased with Federally Insured Loans . . . . . . . . . . . . 739

17.5 Implied Warranties for Mobile Homes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74017.5.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74017.5.2 Implied Warranty of Merchantability . . . . . . . . . . . . . . . . . . . . . . . . . 740

17.5.2.1 Creation of the Implied Warranty of Merchantability in MobileHome Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 740

17.5.2.2 Role of HUD Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74017.5.2.3 Standards for Merchantability of Mobile Homes . . . . . . . . . . . . 740

17.5.3 Implied Warranty of Fitness for a Particular Purpose . . . . . . . . . . . . . . 74117.5.4 Disclaimer of Implied Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . 742

17.6 Revocation of Acceptance of Mobile Homes . . . . . . . . . . . . . . . . . . . . . . . . 74317.6.1 Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74317.6.2 Mobile Home Defects That Justify Revocation of Acceptance . . . . . . . . 74317.6.3 Effect of Repair or Replace Clause . . . . . . . . . . . . . . . . . . . . . . . . . . 74417.6.4 Time for Revocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74517.6.5 Use of the Home After Revocation . . . . . . . . . . . . . . . . . . . . . . . . . . 74517.6.6 Sale of the Home by the Buyer After Revocation. . . . . . . . . . . . . . . . . 74617.6.7 Revocation As Against Manufacturer and Dealer . . . . . . . . . . . . . . . . . 746

xxxv

17.7 Defects Caused by Transportation and Setup . . . . . . . . . . . . . . . . . . . . . . . . 747

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x

17.7.1 How Transportation and Setup Can Damage Mobile Homes . . . . . . . . . 74717.7.2 State and Federal Standards for Installation. . . . . . . . . . . . . . . . . . . . . 74817.7.3 Disputes About Responsibility for Defects Caused by Transportation

and Setup . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75017.7.4 Liability of Manufacturer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75117.7.5 Liability of Dealer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75217.7.6 Liability of Independent Transportation and Setup Company . . . . . . . . . 753

17.8 Litigating Mobile Home Breach of Warranty Cases. . . . . . . . . . . . . . . . . . . . 75417.8.1 Administrative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75417.8.2 Pleading Causes of Action in Mobile Home Cases . . . . . . . . . . . . . . . . 754

17.8.2.1 UCC and Magnuson-Moss Claims . . . . . . . . . . . . . . . . . . . . . 75417.8.2.2 UDAP Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75517.8.2.3 Tort Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75517.8.2.4 Claims Under Federal and State Credit Statutes . . . . . . . . . . . . 756

17.8.2.4.1 Claims under state credit statutes . . . . . . . . . . . . . . . 75617.8.2.4.2 The Truth in Lending Act . . . . . . . . . . . . . . . . . . . . 75617.8.2.4.3 The Real Estate Settlement Procedures Act. . . . . . . . . 757

17.8.2.5 Claims Against Creditor That Financed the Sale . . . . . . . . . . . . 75717.8.2.6 Sample Complaints. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 758

17.8.3 Discovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75817.8.4 Proof of Defective Condition at Delivery . . . . . . . . . . . . . . . . . . . . . . 75817.8.5 Proof of Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 759

17.8.5.1 Diminution in Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75917.8.5.2 Incidental Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76017.8.5.3 Consequential Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76017.8.5.4 Remedy Limitation Clauses . . . . . . . . . . . . . . . . . . . . . . . . . . 761

17.8.6 Deduction of Damages As Self-Help Remedy for Buyer . . . . . . . . . . . . 76117.8.7 Attorney Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76117.8.8 Recovery Against Bond or from Special Fund . . . . . . . . . . . . . . . . . . . 761

hapter 18 New Home Sales

18.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76318.2 Limited Applicability of the Uniform Commercial Code and Magnuson-Moss

Warranty Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76318.2.1 Uniform Commercial Code. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76318.2.2 Prefabricated Homes and the UCC. . . . . . . . . . . . . . . . . . . . . . . . . . . 76418.2.3 Magnuson-Moss Warranty Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 764

18.3 Common Law Implied Warranties of Quality in the Sale of a New Home . . . . 76518.3.1 Policy Basis to Abandon Caveat Emptor . . . . . . . . . . . . . . . . . . . . . . 76518.3.2 Modern Common Law Implied Warranties of Habitability and of

Workmanlike Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76618.3.3 Which Buyers Can Assert the Warranty? . . . . . . . . . . . . . . . . . . . . . . 768

18.3.3.1 Does the Warranty Apply Only to Buyers for Their Own Use? . . 76818.3.3.2 Do Subsequent Buyers Have Rights Under the Warranty? . . . . . 768

18.3.4 Which Sellers Give the Warranty? . . . . . . . . . . . . . . . . . . . . . . . . . . . 76918.3.4.1 Do Only Professional Builders Provide the Warranty? . . . . . . . . 76918.3.4.2 Other Parties Liable Under the Warranty . . . . . . . . . . . . . . . . . 77018.3.4.3 Is a Warranty Provided If the Buyer Already Owns the Land? . . 771

18.3.5 What Property Does the Warranty Cover?. . . . . . . . . . . . . . . . . . . . . . 77218.3.5.1 Implied Warranties Apply to New Homes Only . . . . . . . . . . . . 77218.3.5.2 Multi-Family Homes, Condominiums, Land, and Plans . . . . . . . 77218.3.5.3 Non-Living Areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 773

18.3.6 When Is an Implied Warranty Breached? . . . . . . . . . . . . . . . . . . . . . . 773

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18.3.6.1 Liberal Interpretations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 773

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18.3.6.2 Warranty of Habitability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77318.3.6.3 Warranty of Good and Workmanlike Construction . . . . . . . . . . . 77418.3.6.4 Common Defects That Breach the Warranty . . . . . . . . . . . . . . . 775

18.3.7 Disclaimers of the Implied Warranties . . . . . . . . . . . . . . . . . . . . . . . . 77718.3.8 Express Warranty, Merger Clause, and Transfer of Deed Do Not Nullify

Implied Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77918.3.9 Duration of the Implied Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . 78018.3.10 Notice of Defects to the Builder . . . . . . . . . . . . . . . . . . . . . . . . . . . 780

18.4 Statutory Warranties for Homes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78018.4.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78018.4.2 Parties Liable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78218.4.3 Property Covered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78218.4.4 Nature of the Statutory Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78218.4.5 Disclaimers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78418.4.6 Time Limits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78418.4.7 Other Preconditions to Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78518.4.8 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78618.4.9 Relation to Common Law Warranty Remedies. . . . . . . . . . . . . . . . . . . 786

18.5 Condominium-Specific Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78718.5.1 The Uniform Common Interest Ownership Act . . . . . . . . . . . . . . . . . . 78718.5.2 State Adoptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 788

18.6 Express Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78918.6.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78918.6.2 Common Forms of Express Warranties . . . . . . . . . . . . . . . . . . . . . . . . 790

18.6.2.1 Houses Purchased with Federally Insured Loans . . . . . . . . . . . . 79018.6.2.2 HOW and Other Home Warranty Programs . . . . . . . . . . . . . . . 791

18.6.3 Limitations on Express Warranty Rights . . . . . . . . . . . . . . . . . . . . . . . 79218.6.3.1 The Merger Doctrine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79218.6.3.2 Merger and Integration Clauses . . . . . . . . . . . . . . . . . . . . . . . 79218.6.3.3 Notice Requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79218.6.3.4 Puffing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 793

18.7 Litigating New Home Breach of Warranty Cases . . . . . . . . . . . . . . . . . . . . . 79318.7.1 Additional Causes of Action to Plead. . . . . . . . . . . . . . . . . . . . . . . . . 793

18.7.1.1 UDAP Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79318.7.1.2 Tort Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79318.7.1.3 Breach of Contract Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . 794

18.7.2 Proof of Defects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79418.7.3 Direct Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 795

18.7.3.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79518.7.3.2 Repair or Replacement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79518.7.3.3 Benefit of the Bargain. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79518.7.3.4 Choosing Between Measures . . . . . . . . . . . . . . . . . . . . . . . . . 79618.7.3.5 Doctrine of Waste . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 796

18.7.4 Consequential Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79618.7.5 Failure to Mitigate As a Defense . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79718.7.6 Punitive Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79718.7.7 Specific Performance and Rescission . . . . . . . . . . . . . . . . . . . . . . . . . 79818.7.8 Attorney Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 798

hapter 19 Automobile Repair, Home Improvements, and Other Services

19.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79919.2 Applicability of UCC Article 2 and Magnuson-Moss Warranty Act to Service

Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 799

xxxvii

19.2.1 Magnuson-Moss Applicability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 799


x

19.2.2 UCC Article 2 Applicability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79919.2.3 UCC Applicability by Analogy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 800

19.3 UCC Applicability to Mixed Goods and Services Transactions . . . . . . . . . . . . 80019.3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80019.3.2 Courts That Treat Contract As a Whole . . . . . . . . . . . . . . . . . . . . . . . 801

19.3.2.1 When the Contract Is Predominantly for Goods . . . . . . . . . . . . 80119.3.2.2 When the Contract Is Predominantly for Services . . . . . . . . . . . 803

19.3.3 Courts That Divide the Transaction into Goods and ServicesComponents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 804

19.3.4 Determining the Predominant Purpose . . . . . . . . . . . . . . . . . . . . . . . . 80419.3.4.1 Parties’ Intent As Determining Predominant Purpose . . . . . . . . . 80419.3.4.2 Finished Product As Determining Predominant Purpose . . . . . . . 807

19.4 Common Law Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80719.4.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80719.4.2 Common Law Express Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . 80719.4.3 Common Law Implied Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . 80819.4.4 Damages for Breach of Common Law Warranties . . . . . . . . . . . . . . . . 810

19.5 Negligence in Service Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81119.5.1 Advantages and Disadvantages of the Negligence Claim . . . . . . . . . . . . 81119.5.2 The Negligence Cause of Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81219.5.3 Parties Liable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81519.5.4 Proving Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 815

19.6 UDAP and Fraud Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81619.7 Special Issues Concerning Home Improvement Contracts . . . . . . . . . . . . . . . 817

19.7.1 Canceling the Contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81719.7.1.1 UCC Revocation, Unconscionability, and Cancellation Based

upon Misrepresentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81719.7.1.2 Truth in Lending Rescission . . . . . . . . . . . . . . . . . . . . . . . . . 81719.7.1.3 FTC Cooling-Off Rule for Off-Premises Sales . . . . . . . . . . . . . 81819.7.1.4 State Home Solicitation Statutes . . . . . . . . . . . . . . . . . . . . . . . 81819.7.1.5 Credit Repair Organization Statutes. . . . . . . . . . . . . . . . . . . . . 818

19.7.2 Failure to Complete Work and Completion Certificates . . . . . . . . . . . . . 81819.7.3 Special Relevance of Building Codes and Permits . . . . . . . . . . . . . . . . 81919.7.4 State Home Improvement Statutes and Regulations . . . . . . . . . . . . . . . 81919.7.5 Dealing with the Home Improvement Contractor’s Insolvency . . . . . . . . 822

19.7.5.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82219.7.5.2 Contractor Bonds and Collection Against Individuals. . . . . . . . . 82219.7.5.3 Piercing the Corporate Veil . . . . . . . . . . . . . . . . . . . . . . . . . . 82219.7.5.4 Refusing to Pay the Balance and Asserting Claims Against the

Holder of the Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82219.7.5.5 Other Theories of Lender Liability . . . . . . . . . . . . . . . . . . . . . 823

19.7.6 Home Improvement Contract Litigation Tips . . . . . . . . . . . . . . . . . . . . 82319.7.6.1 Investigating the Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82319.7.6.2 Pleading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82419.7.6.3 Dealing with Mortgages and Liens on the Consumer’s Home . . . 82419.7.6.4 Discovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 825

19.8 Special Issues Concerning Automobile Repair . . . . . . . . . . . . . . . . . . . . . . . 82619.8.1 Repair Shop Refusal to Return Car Until Repair Bill Paid. . . . . . . . . . . 826

19.8.1.1 Consumer’s Remedy When Repair Shop Has No Right toRetain the Car . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 826

19.8.1.2 Stopping a Credit Card Payment for Repairs . . . . . . . . . . . . . . 82619.8.2 Special Protections When Repair Shop Offers Written Warranty

Covering Parts and Labor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82719.8.3 State Automobile Repair Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 827

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19.8.3.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 827

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19.8.3.2 Disclosure and Regulation Laws. . . . . . . . . . . . . . . . . . . . . . . 82719.8.3.2.1 Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82719.8.3.2.2 Required disclosures . . . . . . . . . . . . . . . . . . . . . . . . 82819.8.3.2.3 Other requirements . . . . . . . . . . . . . . . . . . . . . . . . . 82919.8.3.2.4 Administrative enforcement and private remedies . . . . 830

19.8.3.3 Repair Shop or Mechanic Licensing . . . . . . . . . . . . . . . . . . . . 83119.8.3.4 Certification or Licensing of Mechanics. . . . . . . . . . . . . . . . . . 831

19.8.4 State UDAP Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83119.8.5 Manufacturer’s Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 832

19.8.5.1 Liability for Negligent Repairs by Authorized Dealer . . . . . . . . 83219.8.5.2 Liability for Cost of Repairs in Case of Recall or Emissions

Control Equipment Failure. . . . . . . . . . . . . . . . . . . . . . . . . . . 832

hapter 20 Service Contracts, Extended Warranties, and Mechanical BreakdownInsurance

20.1 Getting Started . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83520.1.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83520.1.2 Relationship of Service Contracts to Extended Warranties and

Mechanical Breakdown Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 83520.1.3 Parties to a Service Contract Transaction . . . . . . . . . . . . . . . . . . . . . . 835

20.2 Distinguishing Service Contracts from Warranties. . . . . . . . . . . . . . . . . . . . . 83620.3 Is a Service Contract Regulated As Insurance?. . . . . . . . . . . . . . . . . . . . . . . 83620.4 Service Contract Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 837

20.4.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83720.4.2 Compare Service Contract Language with Stated Grounds for Denial

of Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83820.4.3 Terms Not Clearly Disclosed or at Variance with Prior Representations . . 838

20.5 Remedies for a Contractor’s Failure to Pay a Covered Claim . . . . . . . . . . . . . 83920.5.1 Informal Approaches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83920.5.2 Shaping the Consumer’s Legal Claim. . . . . . . . . . . . . . . . . . . . . . . . . 83920.5.3 Mandatory Arbitration Requirements . . . . . . . . . . . . . . . . . . . . . . . . . 84020.5.4 Magnuson-Moss Warranty Act Remedies . . . . . . . . . . . . . . . . . . . . . . 840

20.5.4.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84020.5.4.2 Application of Magnuson-Moss Act to Service Contracts

Regulated As Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84120.5.5 UDAP Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84120.5.6 Breach of Duty of Good Faith; Special Application to Service Contracts . . 84120.5.7 Regulation As Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84220.5.8 State Service Contract Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 842

20.6 Shoddy Repair Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84220.7 Third Parties Liable for Service Contract Obligor’s Failure to Pay a Claim. . . . 842

20.7.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84220.7.2 Liability of the Service Contract Administrator . . . . . . . . . . . . . . . . . . 84320.7.3 Seller’s Obligations When Service Contractor Is Insolvent. . . . . . . . . . . 84320.7.4 Reimbursement Insurance, State Insurance Guaranty Funds, and Bonds . . . 84420.7.5 Raising Service Contract Defenses to Claims by a Related Creditor

or Lessor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84420.8 Refunds upon Service Contract Cancellation . . . . . . . . . . . . . . . . . . . . . . . . 84420.9 Service Contract Rights of Subsequent Purchasers of the Covered Product . . . . 845

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21.1 First Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84721.1.1 Scope of This Chapter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84721.1.2 The Structure of Consumer Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . 84721.1.3 Consumer Leasing Warranties in a Nutshell . . . . . . . . . . . . . . . . . . . . 84821.1.4 Does the Lease Qualify As a Consumer Finance Lease? . . . . . . . . . . . . 848

21.2 Sources of Lease Warranty Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84921.2.1 UCC Article 2A on Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 849

21.2.1.1 States Enacting Article 2A. . . . . . . . . . . . . . . . . . . . . . . . . . . 84921.2.1.2 Scope of Article 2A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85021.2.1.3 Applicable Law When Article 2A Does Not Apply . . . . . . . . . . 850

21.2.2 UCC Article 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85021.2.3 Magnuson-Moss Warranty Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85121.2.4 State Lemon Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85121.2.5 Federal Consumer Leasing Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85121.2.6 UCC Article 2A Unconscionability Claims . . . . . . . . . . . . . . . . . . . . . 85121.2.7 UDAP Statutes, Tort Law, and State Leasing Acts . . . . . . . . . . . . . . . . 852

21.3 Lessor’s Warranty Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85221.3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85221.3.2 The Lessor’s Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85321.3.3 Disclaimer of Lessor’s Implied Warranties . . . . . . . . . . . . . . . . . . . . . 85421.3.4 Damages for Lessor’s Breach of Warranty . . . . . . . . . . . . . . . . . . . . . 85421.3.5 Rejection and Revocation of Acceptance . . . . . . . . . . . . . . . . . . . . . . 855

21.3.5.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85521.3.5.2 Lessee’s Right to Reject . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85521.3.5.3 Lessee’s Right to Revoke Acceptance . . . . . . . . . . . . . . . . . . . 85521.3.5.4 Grounds for Revocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85621.3.5.5 Consumer Rights upon Rejection or Revocation . . . . . . . . . . . . 856

21.3.6 Lessee’s Right to Withhold Lease Payments . . . . . . . . . . . . . . . . . . . . 85721.3.7 Lessee Remedies Are Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . 857

21.4 Raising Warranty Defenses Against the Entity Holding the Lease . . . . . . . . . . 85721.4.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85721.4.2 Consumer Can Raise Initial Lessor’s Warranty Obligations Against

Lessor’s Assignee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85721.4.2.1 Raising the Lessor’s Warranty Obligation As a Defense to

Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85721.4.2.2 Can the Right to Raise Assignor Defenses Against the Assignee

Be Waived?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85821.4.2.3 Can the Consumer Raise Affirmative Claims Against the

Lessor’s Assignee? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85821.4.3 Can the Consumer Raise Manufacturer or Dealer-Related Warranty

Defenses Against the Lessor? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85921.4.3.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85921.4.3.2 Consumer Leasing Act Liability for Failure to Disclose

Manufacturer Warranties Correctly . . . . . . . . . . . . . . . . . . . . . 85921.4.3.3 Other Consumer Remedies for Misdisclosure of Manufacturer

or Dealer Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85921.4.3.4 Lessor Liability Based on Incorporation of Manufacturer or Dealer

Warranties into the Lease or Based on Close-Connectedness. . . . . 86021.5 Manufacturer Liability to the Lessee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 860

21.5.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86021.5.2 Liability Under the Written Warranty . . . . . . . . . . . . . . . . . . . . . . . . . 86121.5.3 Lemon Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86121.5.4 Breach of Non-Written Express Warranties . . . . . . . . . . . . . . . . . . . . . 861

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21.5.6 Manufacturer Liability in Finance Leases . . . . . . . . . . . . . . . . . . . . . . 86121.6 Dealer’s Warranty Obligations When Dealer Not the Originating Lessor . . . . . 862

21.6.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86221.6.2 Dealer’s Obligations in a Finance Lease . . . . . . . . . . . . . . . . . . . . . . . 86221.6.3 When Transaction Does Not Qualify As a Finance Lease . . . . . . . . . . . 86221.6.4 Dealer’s Disclaimer of Implied Warranties . . . . . . . . . . . . . . . . . . . . . 862

ppendices

ppendix A Magnuson-Moss Warranty Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 863

ppendix B Magnuson-Moss Warranty Act Rules, Interpretations, and Statements

B.1 Magnuson-Moss Warranty Act Rules and Interpretations. . . . . . . . . . . . . . . . . 869B.1.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 869B.1.2 Federal Trade Commission, 16 C.F.R. Parts 700 to 703 . . . . . . . . . . . . . 869

B.2 FTC Statement Regarding Magnuson-Moss Warranty Act Rules . . . . . . . . . . . 879B.2.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 879B.2.2 Federal Trade Commission Statement, 64 Fed. Reg. 19,700 (Apr. 22,

1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 879

ppendix C National Manufactured Housing Construction and Safety StandardsAct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 889

ppendix D FTC Used Motor Vehicle Trade Regulation Rule . . . . . . . . . . . . . . . . . . 903

ppendix E Uniform Commercial Code Warranty Provisions

E.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 913E.2 2001 Revised Version of Article 1—Selected Provisions and Official Comments. . 913E.3 Pre-2001 Version of Article 1—Selected Provisions and Official Comments. . . . 928E.4 Pre-2003 Version of Article 2—Selected Provisions and Official Comments. . . . 939E.5 1990 Version of Article 2A—Selected Provisions and Official Comments . . . . . 975E.6 Revised Article 9—Section 9-110 and Official Comments . . . . . . . . . . . . . . . 1001

ppendix F State-by-State Analysis of New Car Lemon Laws. . . . . . . . . . . . . . . . . 1003

ppendix G State-by-State Analysis of Service Contract Laws and Regulations . . . 1023

ppendix H State-by-State Analysis of New Home and Condominium WarrantyLaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1031

ppendix I Sample Client Intake Form and Interview Sheets

I.1 Sample Client Intake Form—Car Purchase. . . . . . . . . . . . . . . . . . . . . . . . . . 1043I.2 Sample Client Interview Sheet—Car Purchase . . . . . . . . . . . . . . . . . . . . . . . 1044I.3 Sample Client Interview Sheet—Home Improvements . . . . . . . . . . . . . . . . . . 1056

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Appendix J Sample Notices Triggering Self-Help Remedies

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J.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1071J.2 Sample Notice of Rejection or Revocation of Acceptance . . . . . . . . . . . . . . . 1071J.3 Sample Notice That Consumer Is Deducting Damages from the Outstanding

Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1073

ppendix K Sample Complaints

K.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1075K.1.1 Warranty Complaints in This Appendix and on the CD-Rom . . . . . . . . 1075K.1.2 Sample Pleadings Raising Other Claims. . . . . . . . . . . . . . . . . . . . . . . 1076K.1.3 How to Use the Pleadings Found in This Appendix. . . . . . . . . . . . . . . 1076

K.1.3.1 Adapting the Substance of the Complaints. . . . . . . . . . . . . . . . 1076K.1.3.2 Adapting the Form of the Complaints . . . . . . . . . . . . . . . . . . . 1076K.1.3.3 Truth in Lending Counts Found in the Home Improvement

Complaint . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1076K.2 Sample Basic Warranty Complaints . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1076

K.2.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1076K.2.2 Sample Complaint for Damages for Breach of Implied Warranty of

Merchantability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1077K.2.3 Sample Complaint for Damages for Breach of Implied Warranty of

Fitness for a Particular Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1077K.2.4 Sample Complaint for Damages for Breach of Express Warranty . . . . . . 1077K.2.5 Alternative Allegations to Establish Revocation of Acceptance . . . . . . . . 1078

K.3 Sample Complaint for Used Car Sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1079K.4 Sample Complaint for Home Improvement Case . . . . . . . . . . . . . . . . . . . . . 1085K.5 Sample Complaint for New Car Lemon Law Case . . . . . . . . . . . . . . . . . . . . 1091K.6 Sample Complaint Against Dealer and Manufacturer of Defective Mobile

Home . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1094K.7 Sample Complaint Against Dealer and Financer for Improper Setup of

Mobile Home. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1098

ppendix L Sample Discovery

L.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1101L.1.1 Sample Discovery in the Appendices and on the Companion CD-Rom . . 1101L.1.2 How to Use the Sample Discovery Found in This Appendix . . . . . . . . . 1101

L.1.2.1 Adapting These Samples . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1101L.1.2.2 Admissions and Depositions . . . . . . . . . . . . . . . . . . . . . . . . . 1102L.1.2.3 Initiate Discovery Early and Seek Information on Other

Consumers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1102L.1.2.4 The Definitional Section and Relationship of Interrogatories to

Document Requests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1102L.2 Sample Interrogatories for New Car Lemon Law Case . . . . . . . . . . . . . . . . . 1103

L.2.1 Combined Discovery Request to Manufacturer . . . . . . . . . . . . . . . . . . 1103L.2.2 Requests for Admissions to Manufacturer. . . . . . . . . . . . . . . . . . . . . . 1105L.2.3 Combined Discovery Request to Dealer . . . . . . . . . . . . . . . . . . . . . . . 1106L.2.4 Discovery Requests to Dealer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1108L.2.5 Expert Witness Interrogatories to Defendant . . . . . . . . . . . . . . . . . . . . 1108

L.3 Sample Interrogatories and Document Request for Lemon Law Case . . . . . . . 1109L.4 Sample Interrogatories for Used Car Sale . . . . . . . . . . . . . . . . . . . . . . . . . . 1110L.5 Sample Document Request to Mobile Home Manufacturer . . . . . . . . . . . . . . 1112

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Appendix M Sample Trial Documents

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M.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1113M.2 Sample Pre-Trial Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1113M.3 Sample Trial Brief in a New Car Case. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1115M.4 Sample Voir Dire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1121M.5 Sample Opening Statement Before Jury . . . . . . . . . . . . . . . . . . . . . . . . . . . 1123M.6 Sample Outline of Direct Examination of Consumer’s Expert . . . . . . . . . . . . 1126M.7 Sample Outline of Direct Examination of Buyer in Case Involving Breach

of Warranty and Fraud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1127M.8 Sample Closing Argument Before a Jury and Excerpt of Rebuttal . . . . . . . . . 1129M.9 Sample Jury Instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1133

M.9.1 Express Warranty, Merchantability, Revocation, and Magnuson-MossWarranty Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1133

M.9.2 Rejection, Revocation, Merchantability, Fitness for a ParticularPurpose, and Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1136

M.9.3 Substantial Impairment, Shaken Faith Doctrine, and Continued Use. . . . 1140M.9.4 Lemon Law Instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1141

M.10 Sample Verdict Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1141M.10.1 Used Car Case. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1141M.10.2 New Car Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1142

M.11 Sample Motion to Treble Damage Award . . . . . . . . . . . . . . . . . . . . . . . . . 1143

ppendix N Car Manufacturers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1145

ppendix O Useful Warranty Law Websites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1149

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1153

Quick Reference to Consumer Credit and Sales Legal Practice Series . . 1209

About the Companion CD-Rom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1227

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Transcript of Warr 3rd ed, Contents