Drafting Effective and Legally Compliant Consumer Warranties

Clients involved in consumer sales transactions need to be mindful of all the federal and state law requirements applicable to consumer warranties.  As you know, a warranty may be described as a contractual term concerning some aspect of a sale, such as title to the goods or their quality or quantity. For example, a warranty typically may warrant that a product will be free from defects for a specified period of time.  The most important federal statute covering the law of consumer warranties is the Magnuson-Moss Warranty Federal Trade Commission Improvement Act (15 U.S.C.A. §§ 2301 et seq.), which addresses products liability arising out of the breach of specific warranties that come up in the course of consumer sales.  State law is also an important consideration when drafting consumer warranties and any warranties provided in consumer transactions must be drafted to meet both federal and applicable state requirements.

Understanding the case law and regulatory regime applicable to consumer product warranties, and drafting effective disclosures of consumer warranties, is an activity that should be carried out as part of the larger process of documents sales of goods transactions and establishing procedures for providing service and other support to customers.  In managing and completing the steps associate with preparing an effective consumer product warranty statement, the following checklist may be helpful:

  • Determine the goods that are to be sold under the agreement;
  • Review relevant laws and tax regulations relating to consumer sales arrangements;
  • Prepare the initial draft of the warranty statement;
  • Determine whether other forms or agreements are required to complete the transaction, such as service contracts or credit documents, and draft such agreements;
  • Take all steps required to insure compliance with all federal and state law requirements relating to the form and content of consumer warranties;
  • Circulate drafts of all documents to all parties, collect comments, and prepare the final form of documents for execution or public distribution;

An excellent additional resource to recommend to clients with respect to understanding federal consumer warranty law is the Federal Trade Commission publication titled “A Businessperson’s Guide to Federal Warranty Law”.

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