• David Manes

Providing warranties: the how and when

The best way to handle customer problems is to avoid them in the first place. The information provided here may not guarantee that customers will sing your praises, but it will help you save money and limit your potential liability.

Providing customer warranties

Providing customer warranties is one way to increase satisfaction with your product and to deal with problems before they arise. Having a clear cut warranty policy with all of your products will help you avoid large liabilities and keep the customer happy.

What is a warranty?

Warranties are statements or promises made about a particular product. Warranties can take a variety of forms, and you do not even need to label them as “warranties” to find yourself in a legal obligation. You do not necessarily have to include warranties in your contract – statements that you make in product literature or advertisements may constitute legally enforceable warranties. If you breach one of those warranties, you may find yourself legally liable to the buyer.

Types of warranties

Warranties can be express or implied, written or oral. Express warranties are direct statements from the seller to the buyer, such as “This computer is new” or “This DVD has eight hours of video” No one expressly states implied warranties, but the customer can reasonably infer them (that the product does what it should do, for example).

The law of warranties

A variety of laws are designed to protect people buying consumer products. These laws impact your potential liability for defective products and your ability to limit your liability. Here is some practical advice for complying with these laws:

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Be careful what you say about your product in advertisements and product literature. Do not make exaggerated claims that you cannot easily back up.

Limited warranties

If you are going to offer a warranty for a product, label it a limited warranty. Full warranties generally give the customer broad protection if a problem arises with the product. In your contract you need to specifically list what your limited warranty involves. Go over things like the term of the warranty, what the warranty covers, and situations where the warranty no longer applies.

Limit customer remedies

Use your limited warranty to restrict customer remedies for breach of warranty. You should have the option to either refund the purchase price or to repair or replace the product.

Disclaim other warranties

Disclaim all other warranties, either express or implied, as part of your limited warranty. You should typically put these disclaimers in bold capitalized letters.

Liability Limitations

State that you are not liable for special, incidental, consequential, or various other damages, and that, should someone hold you liable, your maximum liability is equal to the price the customer paid for the product.[1]


 

[1] Richard D. Harroch, Small Business Kit for Dummies, (Wiley 2nd Edition)(2004).

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