Consumer Rights, Responsibilities & Remedies: Warranties & Legal Channels - Prof. Eve Pent, Study notes of Marketing

Download Consumer Rights, Responsibilities & Remedies: Warranties & Legal Channels - Prof. Eve Pent and more Study notes Marketing in PDF only on Docsity! Notes Chapter 3 – Consumer Rights, Responsibilities and Remedies To help keep the marketplace honest, consumers should be knowledgeable and assertive. I. Legal Rights of Consumers A. Consumers legal rights arise from three sources: Implied Warranties arise from common law. What does common law mean? Those are the laws that came from court decisions. They are different from statutory law (laws that are made by legislative bodies). Sometimes common law interprets or applies statutory law and sometimes it covers an area that has not been addressed by the legislature. Express Warrantiesarise from contracts among and between parties. These warranties are governed largely by the Uniform Commercial Code and the Magnuson-Moss Warranty Act. Express warranties can be created by written or oral affirmations or promises or by samples and models offered by the seller as representations of the goods that will be sold. Much of the case law in the area of express warranties deals with the differences between sales talk (puffing) and actual express warranties. Example: a seller who says, “This car gets 23.5 miles a gallon,” has made an express warranty. If the seller says, “This car’s gas mileage is great and you’ll have to put a note on your calendar to remind you to get gas,” he has probably only engaged in sales talk. Statutory Rights are established through legislative action. B. Implied Warranty Rights We are probably most familiar with warranties that are written or orally offered by the seller to the buyer assuring the buyer that goods will perform in a certain manner and offering redress if the goods fail to perform. In addition to express warranties, every state has laws which create an implied warranty every time a good is sold by a merchant to a consumer. Note that these warranties apply only in sales by merchants and would not apply, for example, in the case of something you purchased at a garage sale. Also, if you buy a lawnmower from the man who owns the corner grocery, implied warranties will not extend to that transaction unless you can show that the grocer is regularly in the business of selling lawnmowers. We’ve established that when a merchant sells a good, in addition to any express warranties that he might offer, there are certain implied warranties that exist. Two types of implied warranties: 1. IMPLIED WARRANTY OF MERCHANTABILITY: warranty that the goods will reasonably be fit for the ordinary purpose for which the goods are expected to be used. Example: mountain climbing boots carry an implied warranty of merchantability that they will be reasonably fit for mountain climbing. Ballet shoes carry an implied warranty that they will be reasonably fit for ballet. Ballet shoes are not warranted to be reasonably fit for mountain climbing. 2. IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE: This is a bit more limited. It requires that a number of elements be satisfied before the warranty will be effective. These elements are: a. Seller must have reason to know the buyer’s particular purpose. b. Seller must have reason to know that the buyer is relying on the seller’s skill or judgment to furnish appropriate goods. c. The buyer must, in fact, rely upon the seller’s skill or judgment. Seller can disclaim implied warranties with an “AS IS” clause. The Uniform Commercial Code says: “Unless circumstances indicate otherwise, all implied warranties are excluded by expressions like “as is” or “with all faults” or other language which in common understanding calls the buyer’s attention to the exclusion of warranties and makes plain that there is no implied warranty.” Let’s address the sequence to follow when deciding who to go to with your complaint. Note that no laws require merchants to offer refunds, exchanges, or credits on merchandise they sell. A. You should go to the MERCHANT first, to give him an opportunity to right the wrong. Your business is probably much more valuable to him than to the manufacturer. Give him a chance to earn your continued patronage. First go the salesperson. If he or she can’t help you then ask to see his supervisor. If the supervisor can’t or won’t help, ask to speak to the owner. Keep going until you get the action you need. Don’t be afraid to go all the way to the top if necessary. You don’t have to know who to ask for - just say, “I’d like to speak to your supervisor,” and keep saying it until you run out of people to talk to. Don’t be intimidated by the fact that you’re talking to the person at the top because you’re the customer! B. If you can’t get help from the merchant, then you should go to the MANUFACTURER. A lot of times you will be talking to them initially by phone, and you may get a telephone representative who won’t be able to help you. Again, just ask to speak to his or her supervisor (don’t need a name). Continue to ask to speak to that person’s supervisor until you get help. You may end up with the CEO of the company, literally. At that point you may be to the letter- writing stage. C. No luck so far? Move outside of the business to SELF REGULATORY ORGANIZATIONS. One of those is the Better Business Bureau (BBB). They keep a record of member companies, and how they deal with complaints. The BBB actually gets much of its information from the companies themselves, so I’m not sure how objective it is, but they take complaints too. A consumer would mail a letter to the BBB, who in turns contacts the company and gives them a chance to respond. The company gives them their side of the story and if they’ve compromised with the consumer, they report that to the BBB. The BBB keeps a record of all this. In these situations, the BBB acts as a sort of mediator by negotiating between the two parties and helping them come to a compromise. However, the BBB is a very loose sort of an example of a mediator - there are more formal mediation situations with a private mediator. A mediator doesn’t make a decision, but helps the parties come to an agreement An arbitrator hears both sides of a problem and come to a decision. In most situations the arbitrator’s decision is binding on the parties. The BBB can serve as an arbitrator. Normally when the BBB is the arbitrator between the consumer and a manufacturer the decision is binding on the manufacturer but not on the consumer. Note that most consumer complaints are against dealers. Some industries have Consumer Action Panels that handle complaints within the given industry. If you don’t get any help within the industry then you should go to public or private Consumer Action Agencies. These organizations are pretty effective because the company wants to avoid bad publicity. Unfortunately they can’t handle all complaints so usually take the more sensational ones. The Attorney General’s office has an Office of Consumer Affairs that mediates between the consumer and business, much like the BBB does. The difference is that the BBB is a business-run agency and the Attorney General’s office is outside the industry. The AG’s office writes or contacts the business. A call or letter from the AG’s office will usually get a business’s attention and lets the business know you’re serious. The AG also prosecutes businesses that are actually breaking the law. There are local and national consumer action groups like the Consumer Federation of America and the National Consumer’s League. If all of these efforts get you nowhere and you have a problem that is financially significant, you may want to go to the court system as a last resort. V. Legal Channels A. Criminal Actions If a criminal act occurred during the unfair/deceptive practice, it is incumbent on the federal, state, county, or city to seek civil and/or criminal penalties. The attorney general and district attorneys have responsibility for enforcing the laws. •Attorney General – chief law enforcement officer of the state. •District Attorneys - bring criminal actions for each county. You report it and they decide what to do with it. B. Civil Actions Civil actions are usually not the most cost-effective route to take. Attorney’s fees could easily exceed the amount of your claim ($80 - $200 hour and up). 1. Remedies. Damages (means “money”) a) Actual (or Compensatory) damages – “out of pocket” loss. What is the actual loss suffered? How much money was lost as a result of the wrong? Damages can include consequential and incidental expenses. Incidental expenses might include charges incurred in stopping delivery or charges incurred in connection with returning goods. Consequential expenses are losses that are a result of the wrong, but are not direct or immediate. Example: Washing machine explodes and the water ruins our wood floor. Most warranties have disclaimers that prevent consequential damages, but that’s what they are. Another example: your warranted vehicle antifreeze may not perform as advertised leading to a frozen engine needing $2,000 in consequential repairs. There also could be incidental towing costs to get the vehicle to the repair shop. b) Punitive damages act as punishment for the defendant’s wrongful act. These are intended to punish the defendant and to set an example/deter future wrong-doers. See McDonald's Case. 2. Other Remedies a) Rescission is simply the right to cancel a contract and is granted by the court. b) Restitution - act of restoring anything to its rightful owner. Specifically, restitution is the award of an amount that “would put the plaintiff in as good a position as he would have been if no contract had been made” and “restores to the plaintiff the value of what he parted with in performing the contract.” There are less expensive ways to bring legal action than a traditional lawsuit. Class Action Lawsuit - one or more plaintiffs file a claim that they represent a common class (many people who suffer the same wrong). There must be so many in the class that it is impractical to bring them all before the court. These are available under both federal and state law. Suppose that XYZ phone company decided to tack an extra $1 on every customers phone bill each month. Would it be worth your time to pursue a refund? Would you be willing to go to court to recover the money? A consumer group may take action to recover on behalf of mistreated consumers. Small Claims Court - is a court that specializes in claims involving small amounts of money. There are relaxed procedures and rules of evidence. It is easy to represent yourself. You don’t need an attorney but both the plaintiff and defendant can have one (at least in AL). You go to the Small Claims division and file your action. There will be a fee (of course) and your claim must be under a certain dollar amount. The court will issue a summons and complaint to have served on the defendant. Thesummons orders the defendant to