Essentials of Business Law, 9th edition
INSTRUCTOR’S MANUAL
Chapter 18 Warranties
LESSON OVERVIEW
While the previous chapter dealt with the concept of sales, Chapter 18 examines one of the most
indispensable concepts related to sales—warranties. The objective of this chapter is to identify the
various provisions of law that protect consumers and third parties who suffer physical injuries or
financial losses. We understand the term warranty, distinguish between express and implied warranties,
identify the four kinds of express warranties, and identify the three kinds of implied warranties.
Students will additionally learn how the provisions of the Magnuson-Moss Warranty Act have a direct
bearing on the rights of consumers pertaining to warranties. Finally, students’ understanding of the
topics is evaluated through objective-type questions, discussion questions, and case scenarios. Students
are encouraged to conduct their own research through the use of the Internet and other sources.
CHAPTER OUTLINE
A. PROTECTING CONSUMERS AND THIRD PARTIES (p. 288)
B. THE LAW OF WARRANTIES (p. 288)
C. EXPRESS WARRANTIES (pp. 289-290)
1. Express Warranty by Promise (p. 289)
2. Express Warranty by Description, Sample, or Model (p. 289)
3. The Timing of the Express Warranty (p. 290)
4. The Effect of Sellers’ “Puffing” (p. 290)
5. Disclaimers of Express Warranties (p. 290)
D. IMPLIED WARRANTIES (pp. 291-293)
1. Title (p. 291)
2. Quality (pp. 291-292)
3. Disclaimers of Implied Warranties (pp. 292-293)
E. MAGNUSON-MOSS WARRANTY LEGISLATION (pp. 293-294)
1. Provisions of Magnuson-Moss (p. 293)
2. Distinction between Full and Limited Warranty (pp. 293-294)
3. Lemon Laws (p. 294)
F. CHAPTER SUMMARY (p. 294)
G. CHAPTER ASSESSMENT (pp. 295-299)
1. Matching Key Terms (p. 295)
2. True/False Quiz (pp. 295-296)
3. Discussion Questions (pp. 296-297)
4. Thinking Critically About the Law (p. 297)
5. Case Questions (pp. 297-298)
6. Case Analysis (pp. 298-299)
7. Legal Research (p. 299)
KEY TERMS
Key terms are listed at the beginning of the chapter, posted in the student textbook margins, and placed
in bold in the copy. They are listed here for your quick reference.
§ warranty (p. 288)
§ express warranty (p. 288)
§ implied warranty (p. 288)
§ custom of the marketplace (p. 289)
§ disclaimer (p. 290)
§ implied warranty of merchantability (p. 291)
§ merchant (p. 291)
§ implied warranty of fitness for a particular purpose (p. 292)
§ Magnuson-Moss Warranty Act (p. 293)
§ interstate commerce (p. 293)
§ full warranty (p. 293)
§ limited warranty (p. 294)
§ lemon laws (p. 294)
LEARNING OUTCOMES
The chapter Learning Outcomes will help you and the students discover the concepts and information
that should be understood upon completion of the chapter. You may want to access the PowerPoint
(PPT) slides for Chapter 18 when you begin the study of the chapter and discuss each Learning
Outcome. Each Learning Outcome will be covered separately in the Instructor Notes, but they are
shown here in total as an overview of the sections being presented in Chapter 18. The corresponding
text page numbers and PPT slides are listed next to each outcome. These slides should be used to
reinforce the main points of the lecture.
After completing this chapter, the students will be able to:
1. Identify the various provisions of the law that protect consumers and third parties who suffer
physical injuries or financial losses. (p. 288, PPT slide 2)
2. Explain the term warranty and distinguish between express and implied warranties. (p. 288, PPT
slide 3)
3. Identify the four kinds of express warranties. (pp. 289-290, PPT slides 4-9)
4. Identify the three kinds of implied warranties. (pp. 291-293, PPT slides 10-16)
5. Explain the provisions of the Magnuson-Moss Warranty Act. (pp. 293-294, PPT slides 17-20)
5.
LECTURE OUTLINE
A. PROTECTING CONSUMERS AND THIRD PARTIES
A seller or manufacturer has a very significant legal responsibility to buyers and users of goods and
services, as well as to third parties. These obligations are covered by the law of sales, contract law, the
Uniform Commercial Code (UCC), and tort law. Two important aspects of the law protecting buyers
and users concern warranties and product liability.
B. THE LAW OF WARRANTIES
A warranty, as the term is used in the UCC, is a guarantee or promise made by the manufacturer or
seller that the goods offered really are what they are claimed to be, or that the goods are what a
reasonable person has a right to expect.
C. EXPRESS WARRANTIES
Express warranties can be made in many ways, both orally and in writing, including by promise,
description, sample, or model. They also can be made before or after a sale.
1. Express Warranty by Promise
An express warranty is an explicit, definite promise by the seller that the goods will
have certain characteristics. An express warranty that is made by the seller to the buyer
and becomes part of the basis of the agreement creates an explicit warranty that the
goods will be as promised.
2. Express Warranty by Description, Sample, or Model
The UCC [UCC 2-313(1)(b)] states that “any description of goods which is made part of
the basis of the bargain creates an express warranty that the goods shall conform to the
description.”
3. The Timing of the Express Warranty
While most express warranties are made before or during a sales transaction, written or
oral statements issued by the seller after the transaction has been completed also can be
interpreted as express warranties.
4. The Effect of Sellers’ “Puffing”
The UCC states that “it is not necessary to the creation of an express warranty that the
seller use formal words such as ‘warrant’ or ‘guarantee’ or that the seller have a specific
intention to make a warranty, but an affirmation merely of the value of the goods or a
statement purporting to be merely the seller’s opinion or commendation of the goods
does not create a warranty.”
5. Disclaimers of Express Warranties
In an effort to limit the effect of express warranties, some sellers put specific limitations
in the warranty. Such a denial or repudiation in an express warranty is known as a
disclaimer and serves to limit the effectiveness of a warranty.
D. IMPLIED WARRANTIES
In addition to the provisions dealing with express warranties, the UCC also makes specific references
to implied warranties, which are those warranties not made explicitly but that a buyer might
reasonably expect a seller to honor. Implied warranties can relate to either the title or the quality of
goods.
1. Title
The UCC provides that “. . . the title conveyed shall be good, and its transfer rightful;
and the goods shall be delivered free from any security interest or other lien or
encumbrance of which the buyer at the time of contracting has no knowledge.”
2. Quality
The law recognizes two types of implied warranties of quality: (1) warranties of
merchantability, which are given solely by merchants; and (2) warranties of fitness for a
particular purpose, which apply more generally, to merchants as well as to others.
3. Disclaimers of Implied Warranties
The two important implied warranties of merchantability and of fitness for a particular
purpose may be disclaimed in several ways. The UCC provides specific rules that must
be followed by a seller who wants to avoid the responsibility of these implied
warranties.
E. MAGNUSON-MOSS WARRANTY LEGISLATION
Even with the protection provided by the UCC, consumers were not always protected adequately. The
Magnuson-Moss Warranty Act addresses many different kinds of abuses to consumers relating to
warranties.
1. Provisions of Magnuson-Moss
The Magnuson-Moss Warranty Act applies only when written warranties are made
voluntarily on consumer products that cost more than $15. The Act requires that such
warranties must be labeled as either “full” or “limited.”
2. Distinction between Full and Limited Warranty
The Magnuson-Moss Act makes a distinction between a full warranty and a limited
warranty. A full warranty promises that a defective product will be repaired without
charge within a reasonable time after a compliant has been made. A written warranty
that does not meet the minimum requirements of a full warranty must be designated as a
limited warranty.
3. Lemon Laws
Lemon laws are statutes that provide remedies to consumers for products such as
automobiles that repeatedly fail to meet certain standards of quality and performance.
INSTRUCTOR NOTES
A resulting answer or explanation is provided below for each Learning Outcome in Chapter 18. Every
outcome is also mapped to corresponding text page numbers, PPT slides, and relevant chapter
assessment exercises and activities for ease of reference and use.
LO1. Identify the various provisions of the law that protect consumers and third parties who suffer
physical injuries or financial losses.
Consumers and third parties are protected by the law of sales, contract law, the UCC, and tort law.
Together, these various provisions of the law provide remedies to buyers and users of goods and
services, and to third parties, who suffer physical injuries or financial losses.
Text Pages: 288
PowerPoint: Slide 2
LO2. Explain the term warranty and distinguish between express and implied warranties.
A warranty is a guarantee made by a manufacturer or a seller that the goods offered for sale are
what they are claimed to be, or that the goods are what a reasonable person has a right to expect. An
express warranty is explicitly stated, whereas an implied warranty is suggested or inferred from known
facts and circumstances.
Text Pages: 288
PowerPoint: Slide 3
Discussion Questions: 26
Thinking Critically About the Law: 35
Case Questions: 38
LO3. Identify the four kinds of express warranties.
Express warranties can be made both orally and in writing, by promise, description, sample, or model.
Text Pages: 289-290
PowerPoint: Slides 4-9
Discussion Questions: 27, 30
Thinking Critically About the Law: 31-34
Case Questions: 37
Case Analysis: 39-40
LO4. Identify the three kinds of implied warranties.
Implied warranties include that of ownership when title is passed and of merchantability and fitness for
a particular purpose in contracts for the sale of goods.
Text Pages: 291-293
PowerPoint: Slides 10-16
Discussion Questions: 27-28
Case Questions: 36
Case Analysis: 41
LO5. Explain the provisions of the Magnuson-Moss Warranty Act.
The Magnuson-Moss Warranty Act addresses many different kinds of abuses to consumers relating to
warranties.
Text Pages: 293-294
PowerPoint: Slides 17-20
Discussion Questions: 29