Warranties: How to confirm your promises while protecting your backside

By Charles A. “Chip” Gentry
October 20, 2009
FABRICATION : LEGAL, MANAGEMENT

Warranties. What are they? What is their purpose? Can they offer benefits beyond simply describing what a customer can get replaced or fixed? Let’s explore answers to these questions through a story.

I recently received a call from Promises Window Co., a commercial window manufacturer. The company was under attack from Duey, Cheatem, and Howe, a law firm with a reputation of putting manufacturers out of business. Mr. Surprised, the CEO of the window company, exclaimed, “I need your help!” A lawsuit was filed against his company for breaching its warranty, claiming the company did not live up to its promises.

“What did you promise your customer in your warranty?” I asked.

“Other than covering glass, sealant and coating failures for up to 10 years, I don’t really know,” explained Mr. Surprised.

“What protections for your company did you build into your warranty?”

“Protections? We don’t have any protections listed in our warranty,” Mr. Surprised sighed.

“We can fix that … for the next case,” I said.

In my review of warranties for fenestration companies, I often run into the situation where a document might spell out what a customer can get replaced if there is a failure, yet the document fails to live up to its potential by clearly limiting a manufacturer, glazing contractor or curtain wall installer’s exposure. Legal claims and money damages that otherwise could be avoided or limited remain viable for lawsuits. Companies’ bottom lines remain open to attack. A warranty claim is typically much easier than other claims to prove. You made a promise. You broke it. Pay up.

Any description of a product and its performance on a Web site, in a sales brochure, in an advertisement, on the product itself or in statements made by sales representatives is a promise. Any promise that goes above puffery is a warranty. Promises can be oral. You don’t have to use words like warranty or guarantee to rise to the level of a warranty. It is important to have a written document scripting what promises can be made and, more importantly, what promises the company will live up to. What many companies miss out on is the opportunity to cover the ol’ backside by building protections into their warranty.

Some protections companies should consider adding to their warranties:

  • Limit damages to the purchase price of the product
  • Exclude consequential and other damages (beyond replacing the product itself)
  • Limit the statute of limitations (time limit for a customer to sue)
  • Limit or exclude the warranty if the product is subject to unfair field testing
  • Include a survivability clause (keeps other protections in place if one or more sections are declared legally unenforceable)
  • Limit the warranty if the product is not installed properly or installed in an improper application
  • Limit the warranty if the product is installed in a wall system that was designed and/or built improperly (i.e. improper flashing, drainage planes, structural loads, etc.)
  • Exclude implied warranties (only warrant what you specifically promise)
  • Specifically state that the warranty includes all promises trumping all other promises potentially made during the sales process or contained within other documents
  • Exclude the warranty if the product is modified or abused by others
  • Set up a program tracking warranty calls, repairs, etc., in order to track trends in product performance, warning signs of litigation and quality control

There are other protections available, and every company must independently evaluate needs and concerns, and specifically tailor their promises and protections. Have everything you say, both written and spoken, analyzed and modified to avoid making promises you can’t keep.

“Thank you so much!” Mr. Surprised said.

“Anytime,” I said. “Now you can focus more on your bottom line and product development. Taking the right kind of precautions now will help you keep the profits rather than turning them over to lawyers.”
 

The author is a managing partner at Carson & Coil P.C., Jefferson City, Mo., 573/636-2177, chip.g@carsoncoil.com.