1976, December, Pg. i. A Brief Survey of the Magnuson-Moss Warranty Act.

• Author: By Norman R. Helwig

5 Colo.Law. 1

Colorado Lawyer

1976.

1976, December, Pg. i.

A Brief Survey of the Magnuson-Moss Warranty Act

iVol. 5, No. 9, Pg. iA Brief Survey of the Magnuson-Moss Warranty ActBy Norman R. HelwigNorman R. Helwig, Denver, is a partner in the firm of Rothgerber, Appel & Powers.1767The area of warranties has been a vexing consumer problem for the last twenty years. The drafters of the Uniform Commercial Code made every effort to retain the traditional rights and remedies of the parties who enter into sales contracts.(fn1) However, the seller is also permitted under this statutory scheme to exclude or modify implied warranties of merchantability and fitness, as long as the disclaimer language is "conspicuous."(fn2) Such language has become commonplace in sales contracts.

Perhaps the greatest flood of complaints has been generated in the field of automobile warranties. The Federal Trade Commission (F.T.C.) began investigations of automobile dealer warranty performance in 1965, and warranty legislation was introduced in Congress as early as 1967. Although none of these bills were passed, the published report of the F.T.C. in October of 1968 began to turn the tide. A subsequent F.T.C. report in 1970 advocating the need for federal legislation was answered by various bills proposed by Senator Magnuson and Senator Moss between 1970 and 1973. The ultimate refinement was Public Law 93-637 signed by President Ford on January 6, 1975, entitled the "Magnuson-Moss Warranty-Federal Trade Commission Improvement Act."(fn3)

THE ACT --- AN OVERVIEW

The Act is structured in a logical fashion. After dealing with definitions, the Act discusses the types of warranties and provides various duties and requirements with respect to each. The subjects of service contracts and implied warranties are taken up next. A lengthy section on consumer remedies follows, and the Act ends with the normal authorization for the F.T.C. to promulgate rules implementing the provisions of the Act.

The major provisions of the rules and regulations under the Act become effective on December 31, 1976. The F.T.C. published a policy statement on June 18, 1975, to provide interim guidance to warrantors,(fn4) and proposed rules were published on July 16, 1975, with a notice of various public hearings to be held around the country to receive the comments of consumers and industry.(fn5) Barely keeping within the time limits mandated by Congress, the Commission published final rules on December 31, 1975.(fn6) Additional interpretations were published on August 16, 1976.(fn7)

The language of the Act has raised many questions. The Commission has valiantly attempted to deal with some of the more obvious problems, and a complete analysis of the Commission's work1768 to date would unduly lengthen this article. However, the major portions of the Act can now be analyzed in the light of recent interpretations proposed by the Commission.

Two central concepts --- a full warranty and a limited warranty --- were the chief creations of the Act. An analysis should begin with an understanding of these expressions.

Full and Limited WarrantiesIt is important to observe at the outset that a manufacturer or seller is not required to give a written warranty.(fn8) If he does, however, he must comply with the minimal standards established by the Act.

The two types of warranties are defined by the Act. These terms are not mutually exclusive, and one type of warranty may well include the other.

In order to meet the standards of a full warranty, the entity or person warranting the product (the warrantor) must: "(1) remedy any defect, malfunction or nonconformity within a reasonable time and without charge; (2) refrain from imposing a limitation on the duration of any implied warranty; (3) conspicuously print on the face of the warranty any attempt to limit or exclude consequential damages for breach of any written or implied warranty; and (4) permit the consumer to choose either a refund or a replacement of the malfunctioning product or part if the warrantor has failed after a reasonable number of times to adequately repair the malfunction."(fn9) Any warranty which fails to meet these standards is termed a limited warranty by the Act. The warrantor must conspicuously designate any written warranty as either a full warranty or a limited warranty.(fn10)

COVERAGE UNDER THE ACT

ProductsAs in other consumer legislation, the Act concerns itself with items of personal property purchased only for "personal, family or household purposes."(fn11) Such items are defined as "consumer products." This definition includes fixtures and other personal property intended to be attached to or installed in real property (e.g., air conditioners, furnaces and water heaters).

The Commission's proposed interpretations evidence a tendency to articulate rather broad coverage.(fn12) A product used for both a commercial and a personal use will be covered, and the Commission states that it will resolve any ambiguity in favor of coverage.

Building materials sold "over the counter" are within the intended coverage of the Act, and the proposed interpretations include all such materials except structural components which are already integrated into a dwelling at the time of sale (e.g., wallboard, wiring and plumbing). Home repair and improvement products will be covered in the typical home improvement contract where the consumer agrees to pay for the materials to be used by the home improvement contractor. The Commission has announced it will not enforce coverage of products purchased in connection with the initial construction of a residence or a substantial addition to an existing residence. The distinction between home improvements and a "substantial addition" to a home is rather hazy and will undoubtedly create further controversy.

Agricultural products will not be covered, according to the Commission, unless they are used for personal or household gardening. This interpretation may have been prompted, in part, by recent efforts to free the agriculture industry from the confines of other consumer legislation.(fn13)

CostAnother greatly confusing part of the Act deals with coverage of products costing1769 less than a fixed dollar amount. A $5 threshold is applied to all consumer products which are sold with any kind of written warranty.(fn14) The next section of the Act, however, applies a $10 threshold to products sold with a limited warranty.(fn15)

Incredibly, the Commission decided without apparent statutory authority to raise the threshold to $ 15 with respect to the duties imposed on warrantors to disclose the terms of written warranties.(fn16) It was felt that it would be unduly burdensome on warrantors to retain the $5 threshold. The National Consumer Law Center has submitted that no authority exists to raise the $5 figure, and litigation will obviously be generated at some point in the future. In any event, the $5 ($15?) threshold is the most important, since it...