Author: Attorney Desk Reference Manual
Last updated: May 2003
Statutes and Other Law
Uniform Commercial Code (UCC)
Remedies for Breach of Warranty
Warranty of Title
Implied Warranty of Merchantability
Implied Warranty of Fitness for a Particular Purpose
Exclusion or Modification of Warranties
Cumulation and Conflict of Warranties
Third Party Beneficiaries
Economic Loss v. Non-Economic Loss
Defenses to Breach of Warranty
New Vehicle Buyer Protection Act (Lemon Law)
Lemon Law Conditions for Any Remedy
Lemon Law Seller's Affirmative Defenses
Used Cars: Power Train Components
Magnuson-Moss Warranty Act
Overview and Scope
Basic Disclosure Provisions
Requirement for Full Warranties
Prohibition of Tie-Ins and Other Requirements
Common Law Implied Warranties
Application by Analogy to the UCC
FTC Used Car Rule
Coverage of the Rule
The "Buyer's Guide"
Other Requirements Relating to the Buyer's Guide
Other Requirements of the Rule
With respect to the sale of goods, the Code provides for express warranties as well as for several implied warranties. It also makes provision for exclusion or modification of such warranties, the effect of the operation of multiple warranties, and the scope of persons protected by the warranties.
Express warranties by the seller are created, provided they are a part of the basis of the bargain, by:
It is not necessary that seller use formal words such as "warrant" or "guarantee." Nor is it necessary that seller intend to make a warranty. However, expression of the seller’s opinion or commendation of the goods does not constitute a warranty, nor does mere "puffing."
"Part of the Basis of the Bargain" is broadly interpreted. The term "bargain" encompasses the entire transaction and surrounding circumstances and specific evidence of reliance on a statement is unnecessary. The customer must usually only show that he read or heard and believed the statement, but other circumstances or contractual disclaimers can make it unreasonable for the buyer to believe that statements or promises were part of the basis of the bargain.
The statement need not be made by the actual retail seller, but can be the manufacturer’s statement or promise, or that of a third party that gets introduced into the bargaining process.
In early 1975, Congress enacted the Magnuson-Moss Warranty – Federal Trade Commission Improvement Act, found at 15 U.S.C. §§2301-12. The Act applies to consumer product warranties – i.e., a consumer product being one "normally used for personal family or household purposes," and it has been implemented by FTC regulations found at 16 C.F.R. §701 et. seq.
Under the Act, effective July 5, 1975, every warranty in writing must fully and conspicuously disclose in simple and readily understood language the terms and conditions of such warranty, including whether the warranty is a full or limited warranty in accordance with the standards set forth in the Act. (SEE SECTION ON MAGNUSON-MOSS BELOW). To the extent of any conflict between the provisions of the Act and the Commercial Code, the Act controls under the Supremacy Clause of the U.S. constitution.
- pass without objection in the trade; and
- be fit for the ordinary purposes for which such goods are used; and
- run of even kind, quality and quantity within each unit and among all units involved; and
- are adequately contained, packaged and labeled; and
- conform to the promises or affirmations of fact made on the container or label.
- Other implied warranties may arise from course of dealing or usage of trade.
- These implied warranties can be excluded or modified pursuant to 810 ILCS 5/2-316.
- Note that in consumer fraud cases, you may also have a breach of the implied warranty of merchantability. For example, a vehicle sold with an odometer roll- back would not "pass without objection in the trade" and would thus be unmerchantable.
If the seller, at time of sale, has reason to know the particular purpose for which the goods are required, and that the buyer is relying on the seller’s skill or judgment to select or furnish suitable goods, there is an implied warranty that the goods shall be fit for such purpose.
Whether or not goods are sold for a "particular purpose" depends on whether the buyer is to put the goods to a specific use peculiar to his business or circumstances. It is to be distinguished from ordinary or general use.
This implied warranty can be excluded or modified under 810 ILCS 5/2-316.
a) If words or conduct tending to negate or limit an express warranty cannot be reasonably construed consistently with the words or conduct relevant to the creation of an express warranty, negation or limitation is inoperative.
b) All implied warranties are excluded by expressions like "as is," "with all faults," or other language which calls the buyer’s attention to the exclusion of warranties, unless circumstances indicate otherwise. Note, however, that an "as is" warranty disclaimer does not shield the seller from non-UCC fraud claims.
c) There are no implied warranties with regard to defects which an examination before entering the contract ought to have revealed, if the buyer has examined the goods as fully as desired or has refused to examine them.
d) An implied warranty can also be excluded or modified by course of dealing, course of performance, or usage of trade.
In the absence of b), c), or d) above, the warranty of merchantability can only be excluded or modified if the language mentions merchantability, and in case of a writing, must be conspicuous.
In the absence of b), c), or d) above, the warranty of fitness can only be excluded or modified if it is in writing and conspicuous. The language need not mention fitness and is sufficient by stating, for example, "There are no warranties which extend beyond the description on the face hereof."
Remedies for breach of warranty can be limited in a manner consistent with 810 ILCS 5/2-718 and 810 ILCS 5/2-719 of the Act. Under 810 ILCS 5/2-718, damages for breach by either party may be liquidated in the agreement but only at an amount which is reasonable in light of the anticipated or actual harm caused by the breach, the difficulties of proof of loss, and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy. A term fixing unreasonably large liquidated damages is void. Under 810 ILCS 5/2-719, the contract may provide for remedies in addition to or in substitution for those provided in the UCC and may limit the buyer’s remedies, unless the limitation is unconscionable.
The General Rule is that warranties, whether express or implied, shall be construed as consistent with each other and as cumulative.
If that construction is unreasonable, the intention of the parties determines which warranty is dominant.
An express warranty displaces an inconsistent warranty of merchantability (e.g. "I will replace defective parts").
An implied warranty of fitness displaces an inconsistent express warranty.
Any of the above warranties, express or implied, extends to all family and household members of the buyer as well as to guests in the home if it is reasonable to expect that the family or household member or guest might use, consume or be affected by the goods and who suffers harm by breach of the warranty.
The Illinois Supreme Court has held that the UCC warranty provisions, rather than theories of negligence or strict liability on tort, govern actions for purely "economic loss." "Economic loss" is distinguished from physical harm or property damage, and includes damages for inadequate value, costs of repair and replacement, or lost profits.
"Economic losses" are recoverable only under a breach of warranty theory whereas other types of losses including personal injuries are recoverable in tort. The distinction is important because recovery under the warranty provisions, as opposed to under a tort theory, are subject to limitation by contract and the third-party limitations of 810 ILCS 5/2-318.
Defenses include: buyer’s negligence, assumption of risk, misuse of the product, non-compliance with conditions to warranty coverage, expiration of express warranty period, and statute of limitations (4 years after the cause of action accrues).
Persons who purchase a new vehicle for primarily personal, household or family purposes have a remedy under this act where the new vehicle fails to conform to all express warranties applicable to such vehicle if that failure substantially impairs the use, market value or safety of that vehicle.
The Act provides a cause of action against the "seller," defined as the manufacturer, the manufacturer’s agent or distributor, or that manufacturer’s authorized dealer. A "new vehicle" means a passenger car, a second division vehicle having a weight under 8,000 pounds, and a recreational vehicle, all as defined in the Illinois Vehicle Code. The Act also now applies to converted, modified or altered vehicles, where the conversion or modification was to parts causing the vehicle not to perform according to its warranty.
Such persons must elect whether to proceed and settle under this Act or to bring a cause of action under the Illinois Commercial Code. Persons who elect the former are barred from the latter.
The buyer must allow the seller a reasonable number of attempts to bring the new vehicle into conformance with the applicable express warranties.
A presumption arises that a reasonable number of attempts have been undertaken where, within a period of one year or 12,000 miles after delivery, whichever occurs first:
This presumption only applies if the manufacturer has received prior direct written notification from or on behalf of the consumer, and has had an opportunity to correct the defect.
Any replacement vehicle provided to the consumer pursuant to this Act is also accorded the same protection of the Act.
Where the nonconformity is the result of abuse, neglect or unauthorized modifications or alterations.
Where the action is brought beyond the statutory limitations period. Any action under this Act must be commenced within 18 months following the date of original delivery of the car to the consumer.
Unless the used car is sold "as is," Section 2L of the Consumer Fraud Act requires the dealer to contribute to the cost of the repairs on power train components for thirty days from the date of delivery, unless repairs become necessary because of abuse, negligence or collision.
Power Train Components are the engine block, head, all internal engine parts, oil pan and gaskets, water pump, intake manifold, transmission, and all internal transmission parts, as well as the drive train (shaft, joints, axles and axle parts, and wheel bearings).
The Dealer’s Contribution for a car less than 2 years old is 50% of parts and labor; a car 2 to 3 years old 25%; a car 3 to 4 years old 10%; and none for a car over 4 years old.
The Remedy if the Dealer Fails to Contribute: Any person who violates this section commits an unlawful practice within the meaning of the Consumer Fraud Act, and is subject to the remedies provided for in the Act.
The Act does not create any new warranties. The Act was designed to promote better understanding for consumers purchasing products with written warranties through specific disclosures; to make it easier for consumers to obtain court enforcement of a warranty by providing for attorneys fees and costs; and to stimulate the production of more reliable products by requiring clear disclosure of what the warranty promises.
The main features of the Act are disclosure in simple and readily understood language, minimum requirements for full warranties, prohibition of tie-ins, and recovery of attorneys fees.
The Act applies only to consumer products manufactured after July 4, 1975. 15 U.S.C. §2302(e). Consumer products are defined as any tangible personal property normally used for personal, family or household purposes. 15 U.S.C. §2301(1). Most of its provisions are restricted to products with written warranties. However, damages and attorneys fees for breach of an implied warranty are available.
The Act requires that for each warranty within the scope of the Act, the terms of the warranty must be disclosed before the sale, clearly and conspicuously, in easily understood language, including the following information.
The Act requires that every warranty be labeled as full or limited. If a written warranty meets the minimum standards in 15 U.S.C. §2304, it is a full warranty. Otherwise, it is a limited one.
A full warranty must, at a minimum, comply with the following:
The Act prohibits a warrantor from tying the performance of warranty obligations to the buyer’s use of a particular product or service. For example, it is now illegal for a car manufacturer to honor its implied or express warranty only if all maintenance and service work is performed by one of its dealers. 15 U.S.C. §2302(c).
Prohibited tie-ins include tying a warranty to the use of only authorized parts or to a certified product, and giving a longer warranty for a product when purchased with a tied-in product.
There are a number of less important prohibitions and restrictions applicable to all written warranties. First, the warrantor cannot grant itself the sole authority to determine a defect or nonconformity. For example, a warrantor cannot warrant a product against any defect in material or workmanship and then state that it alone shall determine what is and what is not a defect. Other prohibitions cover subjects such as warranty registration cards, warranty extensions during repair effects, and advertising and labeling.
Private Right of Action: A consumer can sue, individually or as Representative of a class, for violation of the Act. Possible violations of the Act arise when there is a failure to honor a written warranty, or to honor any implied warranty created by state law, or to comply with any requirement of the Act or regulations. 15 U.S.C. §2301(d). But, the Act does not provide a cause of action for breach of all written warranties, only those appearing within the four corners of the identified "full" or "limited" warranty described by this Act, Skelton v. General Motors Corp., 660 F.2d 311 (7th Cir. 1981).
Parties Who Are Liable: A consumer has a claim against any supplier, warrantor or service contractor who fails to comply with any obligation under the Act, the regulations, a written or implied warranty or a service contract.
Jurisdiction: Most suits under the Act will have to be brought in state court. Section 15 U.S.C. §2310(d) grants federal court jurisdiction only when the amount in controversy is $50,000 or more for an individual claim. In a class action, there is no federal court jurisdiction unless each individual claim is at least $25, the total amount in controversy is at least $50,000 and the class has at least 100 named plaintiffs, not just class members.
Relief: A consumer with a cause of action can sue for "damages and other legal and equitable relief." 15 U.S.C. §2310(d)(1). The word damages is not defined, but presumably it includes any monetary loss, including consequential and incidental damages, as well as personal or emotional injury. The measure of damages is not specified, but where appropriate, the Uniform Commercial Code will control. Punitive damages are not recoverable in Illinois. There are no statutory damages.
Attorneys Fees and Costs: A prevailing consumer may be awarded attorneys fees and costs. This provision is very important. It applies to the buyer who prevails on a claim for violation of the Magnuson-Moss disclosure rules or for breach of a "written warranty." Most significantly, the buyer who prevails on a UCC implied warranty claim can obtain attorneys fees if the product was manufactured after July 4, 1975.
Preconditions To Suit: The consumer must meet two conditions prior to suing. First, if the suit is for failure to comply with a warranty obligation, and the warranty requires use of a val
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