Can an automotive dealership void
Understanding the Magnuson-Moss Warranty Act of
Nearly everyone has heard about someone who has
taken a vehicle that has been modified with aftermarket parts to a
dealer for warranty service, only to have the dealer refuse to cover the
defective items. The dealer usually states that because of the
aftermarket parts the warranty is void, without even attempting to
determine whether the aftermarket part caused the problem.
This is illegal.
Vehicle manufacturers are not allowed to void the
vehicle warranty just because aftermarket parts are on the vehicle. To
better understand this problem it is best to know the differences
between the two types of new car warranties and the two types of
When a vehicle is purchased new and the owner is
protected against the faults that may occur by an expressed warranty -
an offer by the manufacturer to assume the responsibility for problems
with predetermined parts during a stated period of time. Beyond the
expressed warranty, the vehicle manufacturer is often held responsible
for further implied warranties. These state that a manufactured product
should meet certain standards. However, in both cases, the mere presence
of aftermarket parts doesn't void the warranty.
There are also two emission warranties (defect and
performance) required under the clean air act. The defect warranty
requires the manufacturer to produce a vehicle which, at the time of
sale, is free of defects that would cause it to not meet the required
emission levels for it's useful life as defined in the law. The
performance warranty implies a vehicle must maintain certain levels of
emission performance over it's useful life. If the vehicle fails to meet
the performance warranty requirements, the manufacturer must make
repairs at no cost to the owner, even if an aftermarket part is directly
responsible for a warranty claim, the vehicle manufacturer cannot void
the performance warranty. This protection is the result of a parts self
- certification program developed by the Environmental Protection Agency
(EPA) and the Specialty Equipment Market Association (SEMA).
In cases where such a failed aftermarket part is
responsible for a warranty claim, the vehicle manufacturer must arrange
a settlement with the consumer, but by law the new - vehicle warranty is
Overall, the laws governing warranties are very
clear. The only time a new vehicle warranty can be voided is if an
aftermarket part has been installed and it can be proven that it is
responsible for an emission warranty claim. However, a vehicle
manufacturer or dealership cannot void a warranty simply because an an
aftermarket equipment has been installed on a vehicle.
If a dealership denies a warranty claim and you
think the claim falls under the rules explained above concerning the
clean air act (such as an emission part failure), obtain a written
explanation of the dealers refusal. Then follow the steps outlined in
the owners manual. However, if this fails, then phone your complaint in
to the EPA at (202) 233-9040 or (202) 326-9100.
If a dealer denies a warranty claim involving an
implied or expressed new car warranty and you would like help, you can
contact the Federal Trade Commission (FTC). The FTC works for the
consumer to prevent fraudulent, deceptive and unfair business practices
in the marketplace and to provide information to help consumers spot,
stop and avoid them. To file a complaint, you can call toll-free,
1-877-FTC-HELP (1-877-382-4357), or use the
complaint form. The FTC enters Internet, telemarketing, and other
fraud-related complaints into Consumer Sentinel, a secure, online
database available to hundreds of civil and criminal law enforcement
WHAT IS THE MAGNUSON-MOSS WARRANTY ACT?
On January 4, 1975, President Ford signed into law
the Magnuson-Moss Warranty Act, Title 1, ..101-112, 15 U.S.C. ..2301 et
seq. This act, effective July 4, 1975, is designed to "improve the
adequacy of information available to consumers, prevent deception, and
improve competition in the marketing of consumer products. . . ." The
Magnuson-Moss Warranty Act applies only to consumer products, which are
defined as "any tangible personal property which is distributed in
commerce and which is normally used for personal, family, or household
purposes (including any such property intended to be attached to or
installed in any real property without regard to whether it is so
attached or installed)." Under Section 103 of the Act, if a warrantor
sells a consumer product costing more than $15 under written warranty,
the writing must state the warranty in readily understandable language
as determined by standards set forth by the Federal Trade Commission.
There is, however, no requirement that a warranty be given nor that any
product be warranted for any length of time. Thus the Act only requires
that when there is a written warranty, the warrantor clearly disclose
the nature of his warranty obligation prior to the sale of the product.
The consumer may then compare warranty protection, thus shopping for the
"best buy." To further protect the consumer from deception, the Act
requires that any written warranty must be labeled as either a "full" or
a "limited" warranty. Only warranties that meet the standards of the Act
may be labeled as "full." One of the most important provisions of the
Act prohibits a warrantor from disclaiming or modifying any implied
warranty whenever any written warranty is given or service contract
entered into. Implied warranties may, however, be limited in duration if
the limitation is reasonable, conscionable, and set forth in clear and
unmistakable language prominently displayed on the face of the warranty.
A consumer damaged by breach of warranty, or noncompliance with the act,
may sue in either state or federal district court. Access to federal
court, however, is severely limited by the Act's provision that no claim
may be brought in federal court if: (a) The amount in controversy of any
individual claim is less than $25,000; (b) the amount in controversy is
less than the sum or value of $50,000 computed on the basis of all
claims in the suit; or (c) a class action is brought, and the number of
named plaintiffs is less than 100. In light of these requirements it is
likely that most suits will be brought in state court. If the consumer
prevails, he is awarded costs and attorneys' fees. Nothing in the Act
invalidates any right or remedy available under state law, and most
suits should proceed on claims based on both the Code and the Act.
Understanding the Magnuson-Moss Warranty Act
The Magnuson-Moss Warranty Act is the federal law
that governs consumer product warranties. Passed by Congress in 1975,
the Act requires manufacturers and sellers of consumer products to
provide consumers with detailed information about warranty coverage. In
addition, it affects both the rights of consumers and the obligations of
warrantors under written warranties.
To understand the Act, it is useful to be aware of
Congress' intentions in passing it. First, Congress wanted to ensure
that consumers could get complete information about warranty terms and
conditions. By providing consumers with a way of learning what warranty
coverage is offered on a product before they buy, the Act gives
consumers a way to know what to expect if something goes wrong, and thus
helps to increase customer satisfaction.
Second, Congress wanted to ensure that consumers
could compare warranty coverage before buying. By comparing, consumers
can choose a product with the best combination of price, features, and
warranty coverage to meet their individual needs.
Third, Congress intended to promote competition on
the basis of warranty coverage. By assuring that consumers can get
warranty information, the Act encourages sales promotion on the basis of
warranty coverage and competition among companies to meet consumer
preferences through various levels of warranty coverage.
Finally, Congress wanted to strengthen existing
incentives for companies to perform their warranty obligations in a
timely and thorough manner and to resolve any disputes with a minimum of
delay and expense to consumers. Thus, the Act makes it easier for
consumers to pursue a remedy for breach of warranty in the courts, but
it also creates a framework for companies to set up procedures for
resolving disputes inexpensively and informally, without litigation.
What the Magnuson-Moss Act Does Not Require
In order to understand how the Act affects you as
a businessperson, it is important first to understand what the Act does
First, the Act does not require any business to
provide a written warranty. The Act allows businesses to determine
whether to warrant their products in writing. However, once a business
decides to offer a written warranty on a consumer product, it must
comply with the Act.
Second, the Act does not apply to oral warranties.
Only written warranties are covered.
Third, the Act does not apply to warranties on
services. Only warranties on goods are covered. However, if your
warranty covers both the parts provided for a repair and the workmanship
in making that repair, the Act does apply to you.
Finally, the Act does not apply to warranties on
products sold for resale or for commercial purposes. The Act covers only
warranties on consumer products. This means that only warranties on
tangible property normally used for personal, family, or household
purposes are covered. (This includes property attached to or installed
on real property.) Note that applicability of the Act to a particular
product does not, however, depend upon how an individual buyer will use
The following section of this manual summarizes
what the Magnuson-Moss Warranty Act requires warrantors to do, what it
prohibits them from doing, and how it affects warranty disputes.
What the Magnuson-Moss Act Requires
In passing the Magnuson-Moss Warranty Act,
Congress specified a number of requirements that warrantors must meet.
Congress also directed the FTC to adopt rules to cover other
requirements. The FTC adopted three Rules under the Act, the Rule on
Disclosure of Written Consumer Product Warranty Terms and Conditions
(the Disclosure Rule), the Rule on Pre-Sale Availability of Written
Warranty Terms (the Pre-Sale Availability Rule), and the Rule on
Informal Dispute Settlement Procedures (the Dispute Resolution Rule). In
addition, the FTC has issued an interpretive rule that clarifies certain
terms and explains some of the provisions of the Act. This section
summarizes all the requirements under the Act and the Rules.
The Act and the Rules establish three basic
requirements that may apply to you, either as a warrantor or a seller.
As a warrantor, you must designate, or title, your
written warranty as either "full" or "limited."
As a warrantor, you must state certain specified information about the
coverage of your warranty in a single, clear, and easy-to-read document.
As a warrantor or a seller, you must ensure that warranties are
available where your warranted consumer products are sold so that
consumers can read them before buying.
The titling requirement, established by the Act,
applies to all written warranties on consumer products costing more than
$10. However, the disclosure and pre-sale availability requirements,
established by FTC Rules, apply to all written warranties on consumer
products costing more than $15. Each of these three general requirements
is explained in greater detail in the following chapters.
What the Magnuson-Moss Act Does Not Allow
There are three prohibitions under the
Magnuson-Moss Act. They involve implied warranties, so-called "tie-in
sales" provisions, and deceptive or misleading warranty terms.
Disclaimer or Modification of Implied
The Act prohibits anyone who offers a written
warranty from disclaiming or modifying implied warranties. This means
that no matter how broad or narrow your written warranty is, your
customers always will receive the basic protection of the implied
warranty of merchantability.
There is one permissible modification of implied
warranties, however. If you offer a "limited" written warranty, the law
allows you to include a provision that restricts the duration of implied
warranties to the duration of your limited warranty. For example, if you
offer a two-year limited warranty, you can limit implied warranties to
two years. However, if you offer a "full" written warranty, you cannot
limit the duration of implied warranties.
If you sell a consumer product with a written
warranty from the product manufacturer, but you do not warrant the
product in writing, you can disclaim your implied warranties. (These are
the implied warranties under which the seller, not the manufacturer,
would otherwise be responsible.) But, regardless of whether you warrant
the products you sell, as a seller, you must give your customers copies
of any written warranties from product manufacturers.
"Tie-In Sales" Provisions
Generally, tie-in sales provisions are not
allowed. Such a provision would require a purchaser of the warranted
product to buy an item or service from a particular company to use with
the warranted product in order to be eligible to receive a remedy under
the warranty. The following are examples of prohibited tie-in sales
In order to keep your new Plenum Brand Vacuum
Cleaner warranty in effect, you must use genuine Plenum Brand Filter
Bags. Failure to have scheduled maintenance performed, at your expense,
by the Great American Maintenance Company, Inc., voids this warranty.
While you cannot use a tie-in sales provision,
your warranty need not cover use of replacement parts, repairs, or
maintenance that is inappropriate for your product. The following is an
example of a permissible provision that excludes coverage of such
While necessary maintenance or repairs on your
AudioMundo Stereo System can be performed by any company, we recommend
that you use only authorized AudioMundo dealers. Improper or incorrectly
performed maintenance or repair voids this warranty.
Although tie-in sales provisions generally are not
allowed, you can include such a provision in your warranty if you can
demonstrate to the satisfaction of the FTC that your product will not
work properly without a specified item or service. If you believe that
this is the case, you should contact the warranty staff of the FTC's
Bureau of Consumer Protection for information on how to apply for a
waiver of the tie-in sales prohibition.
Deceptive Warranty Terms
Obviously, warranties must not contain deceptive
or misleading terms. You cannot offer a warranty that appears to provide
coverage but, in fact, provides none. For example, a warranty covering
only "moving parts" on an electronic product that has no moving parts
would be deceptive and unlawful. Similarly, a warranty that promised
service that the warrantor had no intention of providing or could not
provide would be deceptive and unlawful.
How the Magnuson Moss Act May Affect Warranty
Two other features of the Magnuson-Moss Warranty
Act are also important to warrantors. First, the Act makes it easier for
consumers to take an unresolved warranty problem to court. Second, it
encourages companies to use a less formal, and therefore less costly,
alternative to legal proceedings. Such alternatives, known as dispute
resolution mechanisms, often can be used to settle warranty complaints
before they reach litigation.
The Act makes it easier for purchasers to sue for
breach of warranty by making breach of warranty a violation of federal
law, and by allowing consumers to recover court costs and reasonable
attorneys' fees. This means that if you lose a lawsuit for breach of
either a written or an implied warranty, you may have to pay the
customer's costs for bringing the suit, including lawyer's fees.
Because of the stringent federal jurisdictional
requirements under the Act, most Magnuson-Moss lawsuits are brought in
state court. However, major cases involving many consumers can be
brought in federal court as class action suits under the Act.
Although the consumer lawsuit provisions may have
little effect on your warranty or your business, they are important to
remember if you are involved in warranty disputes.
Alternatives to Consumer Lawsuits
Although the Act makes consumer lawsuits for
breach of warranty easier to bring, its goal is not to promote more
warranty litigation. On the contrary, the Act encourages companies to
use informal dispute resolution mechanisms to settle warranty disputes
with their customers. Basically, an informal dispute resolution
mechanism is a system that works to resolve warranty problems that are
at a stalemate. Such a mechanism may be run by an impartial third party,
such as the Better Business Bureau, or by company employees whose only
job is to administer the informal dispute resolution system. The
impartial third party uses conciliation, mediation, or arbitration to
settle warranty disputes.
The Act allows warranties to include a provision
that requires customers to try to resolve warranty disputes by means of
the informal dispute resolution mechanism before going to court. (This
provision applies only to cases based upon the Magnuson-Moss Act.) If
you include such a requirement in your warranty, your dispute resolution
mechanism must meet the requirements stated in the FTC's Rule on
Informal Dispute Settlement Procedures (the Dispute Resolution Rule).
Briefly, the Rule requires that a mechanism must:
Be adequately funded and staffed to resolve all
Be available free of charge to consumers;
Be able to settle disputes independently, without influence from the
Follow written procedures;
Inform both parties when it receives notice of a dispute;
Gather, investigate, and organize all information necessary to decide
each dispute fairly and quickly;
Provide each party an opportunity to present its side, to submit
supporting materials, and to rebut points made by the other party; (the
mechanism may allow oral presentations, but only if both parties agree);
Inform both parties of the decision and the reasons supporting it within
40 days of receiving notice of a dispute; Issue decisions that are not
binding; either party must be free to take the dispute to court if
dissatisfied with the decision (however, companies may, and often do,
agree to be bound by the decision);
Keep complete records on all disputes; and
Be audited annually for compliance with the Rule.
It is clear from these standards that informal
dispute resolution mechanisms under the Dispute Resolution Rule are not
"informal" in the sense of being unstructured. Rather, they are informal
because they do not involve the technical rules of evidence, procedure,
and precedents that a court of law must use.
Currently, the FTC's staff is evaluating the
Dispute Resolution Rule to determine if informal dispute resolution
mechanisms can be made simpler and easier to use. To obtain more
information about this review, contact the FTC's warranty staff.
As stated previously, you do not have to comply
with the Dispute Resolution Rule if you do not require consumers to use
a mechanism before bringing suit under the Magnuson-Moss Act. You may
want to consider establishing a mechanism that will make settling
warranty disputes easier, even though it may not meet the standards of
the Dispute Resolution Rule.
You can view a slightly more detailed legal
explanation of the Magnuson - Moss Warranty act of 1975 by clicking on
the following link:
Sources of the above information include:
Superchips Inc. Newsletter / Car Craft September
Federal Trade Commission Website.
State Bar of Texas Website (texasbarcle.com)