Magnuson Moss Warranty Act (a/k/a Federal Lemon Law)

Abstract
As established by the Magnuson-Moss Warranty Act of 1975, all written warranties require a title of either “full” or “limited” and be specific as to coverage. In some states, the limited warranty is required to have an “as is” disclaimer so as to be very clear to the buyer. Otherwise, the implied warranty of merchantability is applied. In the case study at hand, the sales contract between Raymond Smith and the new car dealer, assuming it was titled “limited”, did set specific limitations to the coverage. However, in many states, the Act does prohibit the seller from modifying or disclaiming implied warranties so that the consumer retains basic protection of the implied warranty of merchantability.

Consumer Protection and Warranties Although there is a still a belief in the doctrine of caveat emptor, often thought of as the most important protection for a consumer, the government has recognized that consumers need greater protection and has passed several laws/acts to do just that. “Article 2 of the Uniform Commercial Code, adopted in whole or in part by all 50 states, establishes certain warranties that apply to the sale of goods.” (Cheeseman, 2013, p. 343).
Implied Warranty of Merchantability
The implied warranty of merchantability is essentially a merchant’s promise that the goods sold will do what they are promised to do and that there is nothing significantly wrong with them. Merchant, defined by the UCC, is a person who has experience and knowledge with the goods that he/she is selling. This law says that merchants make this promise every time they sell a product, e.g. a refrigerator merchant selling a refrigerator implies that the refrigerator will keep food cold to appropriate standards. The sales contract between Raymond Smith and the car dealer disclaimed liability for personal injuries caused as a result of defects in the car. Assuming the language included expressions such as “as is” or “with all faults”, the contract would negate the implied warranty of merchantability in those states where it is allowable. There are some states that do not allow the sale of consumer products “as is” where the sellers have implied warranty obligations that cannot be avoided.
Magnuson-Moss Warranty Act
The Magnuson-Moss Warranty Act was passed by Congress in 1975. The law governs consumer product warranties and requires manufacturers and sellers of consumer goods to provide consumers with detailed information about warranty coverage. It is often referred to as the Federal Lemon Law and each state has its own laws regarding defective consumer products. The law also prohibits merchants from disclaiming implied warranties during any period that its written warranty is in effect. As anyone who has purchased a new car knows, all new cars come with some sort of warranty, typically limited. A prudent consumer often comparison shops with this in mind. In the case study at hand, it is highly unlikely that the manufacturer’s warranty had expired after just one month. The implied warranty of merchantability would therefore still be intact and the defendant’s case would not hold water.
The Doctrine of Unconscionability “To prove unconscionability, there must be proof that the parties had substantially unequal bargaining power, that the dominant party misused its power in contracting, and that it would be manifestly unfair or oppressive to enforce the contract”. (Cheeseman, 2013, p. 338). The Doctrine of Unconscionability is also included as part of Article 2 of the UCC. If Raymond Smith was determined to buy that specific car, there were no other dealerships that sold that car within reasonable proximity, and the dealer knew these circumstances, that would make the dealer the dominant party and he/she could easily have misused his/her power by including the disclaimers.
Results of Breach of Warranty Suit The Magnuson-Moss Warranty Act was passed with precisely this type of situation in mind. The law clearly states that a merchant cannot disclaim implied warranties on a product that they offer a warranty on. Therefore, in just a straight case of breach of warranty, because the new car express warranty was still intact, the implied warranty of merchantability would remain in effect and the court would find for the plaintiff. Further, even with the disclaimer, the dealer may still be liable under the principles of product liability because selling “as is” does not eliminate that liability.

References
Cheeseman, Henry. (2013). Business Law, Eighth Edition. Boston: Pearson Learning Solutions