Magnuson Moss Warranty Act Term Paper

Excerpt from Term Paper :

Magnuson-Moss Warranty Act: A Purposeful Venue warranty is a written statement or promise prepared typically prepared by the manufacturer of a product ensuring it's quality. It is a commitment made by the manufacturer or seller that they represent and will stand by the product in the event of loss, breakage or other malcontent. Warranties serve many purposes. They ensure that competition for products is maintained in the marketplace. They provide customers with a means to replace broken, malfunctioning or worn products purchased from manufacturers and sellers. They also provide great customer satisfaction by allowing peace of mind. Customers are more apt to feel that they purchased a worthwhile product, and have an outlet to return the merchandise should something go awry.

In 1975 Congress passed the Magnuson-Moss Warranty Act, in an effort to better regulate and monitor "written" warranties provides by manufacturers and sellers. This Act governs all federal consumer product warranties. Congress had many intentions in passing the act, including ensuring the legality and validity of written warranties provided to consumers. Congress also passed the act in an effort to promote and encourage healthy competition between manufacturers and sellers of like products. Additionally, Congress had the intention of providing consumers with legal recourse without necessarily going to court, should something go wrong with their merchandise (drperformance, 2002). What exactly are the pros of such an act, other than the obvious? What of the cons? Inevitably, good and bad comes from such regulations of merchant product warranties. Many positives result, as will be described further, including increased customer satisfaction, peace of mind and truth in written statement. Does the Act go too far however, in controlling the rights of manufacturers? Does it unintentionally allow manufacturers and sellers an easy way out should something break on their product? One might even argue that it promotes shoddy performance of products that are supplied with limited warranties, providing coverage for one year or less. To understand these points, one must first understand the provisions of the Warranty Act.

In a nutshell the Magnuson-Moss act outlines the many specifications that must be included in written warranties for a product. The act has many provisions. It requires manufacturers and sellers of products to provide consumers with detailed information about the warranty of the product (Grimes, 2003). The purpose of the act was to ensure that consumers are provided with detailed, accurate and adequate information regarding the warranties of any products they may purchase. The act also enables customers to compare the warranties of different merchants prior to buying a product. Another purpose of the act is to encourage competition between merchants. Because consumers have access to detailed information regarding warranties, they are more apt to purchase products with more elaborate coverage. Lastly the act creates a "framework for companies to set up procedures resolving disputes on products without litigation" (Grimes, 2002).

The Magnuson-Moss Warranty Act does not require all businesses to provide a written warning, as some may infer from the above description. Businesses are afforded the option of writing a warranty or not for products supplied to consumers. It does regulate the content of warranties however, should a company choose to provide one for their products. It also makes no mention of "oral" warranties, and therefore does not regulate an oral contract or promise of condition related to a product. Also not covered by the act are products used for commercial use or re-sale (Grimes, 2002). This act regulates only products purchased by consumers for personal not business use. It is important to note however, that the act does imply that a merchant who sells or produces a product guarantees a consumer that the product will perform as it was originally intended.

The act outlines several requirements manufacturers must follow when covering a product. These are outlined below. The FTC also has adapted three rules that cover the requirements outlined in the Warranty Act (Grimes, 2002). These rules are as follows: (1) Rule on Disclosure of Written Consumer Product Warranty Terms and Conditions (the Disclosure Rule), (2) Rule on Pre-Sale Availability of Written Warranty Terms (the Pre-Sale Availability Rule), and (3) Rule on Informal Dispute Settlement Procedures (the Dispute Resolution Rule). Source: Grimes, 2002

The Disclosure rule discusses what must be contained in the warranty, such as terms and conditions. The Pre-Sale availability rule, literally interpreted dictates the terms by which manufacturers and sellers must make their warranty available to the public prior to purchase of the product (drperformance, 2002). The Dispute Resolution Rule, also self-explanatory, outlines the terms under which dispute resolution over product condition or failure should be established (drperformance, 2002). It eliminates the need for lengthy litigation and proceedings that might otherwise occur from purchase of faulty material.

The Act also provides for the condition that all warranties be designated as either "full" or "limited" (Grimes, 2002) provided they are written for products over $10.00 in value. The Disclosure and Pre-Sale rule apply to written warranties covering products in excess of $15 in value (Grimes, 2002).

The Magnuson-Moss Act also includes some prohibitions. It prohibits manufacturers and sellers from disclaiming or modifying a written warranty, meaning the consumer is guaranteed basic protection provided for in the warranty (drperformance, 2002). This prohibition covers implied and written warranties. There is one exception however, stating that if a "limited" written warranty is provided on a product, the law allows a provision designating the time which the product is allowed to remain under warranty. For example, if a limited warranty states that a product is under warranty for one year, then on day 361 after purchase the product in theory may break down. Full warranties do not allow this provision.

The Warranty Act also ensures that warranties are true in nature, and do not offer coverage for inapplicable material. For example, a warranty can only cover parts of a product that actually exist on the product.

All of the above mentioned provisions of the act may be seen as pros. They on first glance, ensure that a customer is fully aware of the quality of the product they are receiving. Congress certainly succeeded in promoting healthy competition by passing the act. Merchants and sellers can offer consumers better warranties in an effort to entice customers to purchase their brand of X versus another merchants. Consumers are also more likely to seek out extended warranties under the plan, ensuring that their product will last a longer time. Another potential positive of the Magnuson Act; it allows consumers to view warranties before they purchase a product. This undoubtedly has assisted many customers in deciding which product to buy in a world of like products.

However, what of the negatives? More and more manufacturers and sellers are likely providing written warranties as enticement for customers to purchase their product. However, there isn't necessarily proper regulation in the act that prevents seedy merchants who build "shoddy" products with limited warranties. The act does allow provisions for merchants/sellers to write in a clause limiting the warranty of their product to a year or less. Perhaps a consumer was to purchase a stereo with a six-month warranty. What if after six months and two weeks, the radio completely fails? The merchant has made their money, and though the consumer may have some recourse to re-claim money lost, most won't bother attempting knowing that their warranty has expired. Additionally, most consumers won't take the time to mail in registration and warranty papers to the manufacturer upon purchasing a product. Though in reality, a product should be covered regardless, there are undoubtedly hundreds of misinformed consumers who believe that their failure in submitting paperwork has resulted in loss of coverage.

The Magnuson-Warranty Act also contains provisions covering legal disputes related to product purchase. Congress also had the goal in passing the act to assist consumers and merchants in settling their disputes expeditiously. The act provides for "informal dispute settlement mechanisms" (Patton, 2002). The act makes it easier in one sense, for purchasers of product to sue companies for "breach of warranty" by making such a breach a violation of federal law (Patton, 2002). Consumers may recover their costs incurred including lawyer's fees if a company does not live up to the terms outlined in the warranty (Grimes, 2002). Is this a con however? Does this allow for rampant suing of companies based on the terms and conditions of the warranty? Of course not. It simply allows consumers to fight for their rights should a manufacturer or seller not live up to the terms and conditions outlined in a warranty, a reasonable request.

The act may allow for consumers to bring lawsuit against breach of contract, but it also provides merchants with the ability to detail provisions for "alternatives" to consumer lawsuits. An informal dispute resolution mechanism is a method that works to resolve warranty problems in stalemate without going to court. For example, a merchant may allow a provision in the warranty that outlines resolution of disputes by a third party,…

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