Warranty Definition, Types, Example, and How It Works

What Is a Warranty?

A warranty is a type of guarantee that a manufacturer or similar party makes regarding the condition of its product. It also refers to the terms and situations in which repairs or exchanges will be made if the product does not function as originally described or intended.

Key Takeaways

• Warranties often have limiting conditions.
• The buyer must fulfill specific duties for the warranty to be honored by the manufacturer.
• The two general types of warranties are expressed and implied.
• The Magnuson-Moss Warranty Act was created to protect consumers from fraud and misrepresentations.

• A guarantee is a promise from a seller that their product will meet certain quality and performance standards.

How a Warranty Works

Warranties usually have exceptions that limit the conditions in which a manufacturer is obligated to rectify a problem. For example, many warranties for common household items only cover the product for up to one year from the date of purchase. Generally, they are covered only if the product has problems due to defective parts or workmanship.

As a result of these limited manufacturer warranties, many vendors offer extended warranties. Extended warranties are essentially insurance policies for products that consumers pay for upfront. Coverage will usually last for several years above and beyond the manufacturer’s warranty and is often more lenient in terms of limited terms and conditions.

Home warranties can provide discounted repair and replacement services for household appliances and systems, and the best home warranties offer a range of plans depending on the coverage you want.

Types of Warranties

There are two general types of warranties, expressed and implied. Each category has different sub-types of warranties, with terms, conditions, and guarantees.

Warranty terms can vary from free repairs on the defective product to complete replacement. The owner may be instructed to bring the product to the nearest authorized repairman, the seller, or ship it to the manufacturer.

Express Warranty

As its name suggests, an express warranty is an expressed guarantee from a seller or manufacturer to a buyer that the purchased product performs according to certain specifications. If defects are present, the seller agrees to repair or replace the defective product. The warranty can be expressed in writing or verbally in advertising, on the product, or through other means.

All expressed guarantees are not warranties. For example, if a retailer claims that its mattresses will give you the “best night’s sleep ever,” they are not issuing a guarantee that it will deliver upon that statement. It is puffery—exaggerated language used to advertise a product and attract customers. It can be reasonably assumed that this claim is based only on the opinion of the person making the statement in an attempt to promote the product.

Implied Warranty

An implied warranty, or implied warranty of merchantability, is a guarantee that the purchased product functions in the manner designed. It need not be expressed to be valid. This guarantee is implied unless it is explicitly excluded—typical of “as is” sales.

Implied warranties also apply when sellers present and sell a product fit to fulfill a specific purpose. The buyer relies on the seller’s expertise to purchase the product. Any statements made by the seller regarding the product can be considered assurances.

Warranty Sub-types

There are many different warranty subtypes, but the most common are extended warranties and special warranty deeds.

• Extended warranties are available on products of substantial value, such as cars, electronics, and appliances. Although sold by the retailer, the manufacturer is responsible for executing the extended warranty on behalf of the customer.
• Special warranty deeds transfer property ownership from one person to another and assure the buyer that the title at the time of sale is free of encumbrances, liens, or claims. This deed transfers ownership to the grantee with an expressed warranty about the title.

Reasons Why a Warranty Claim Could Be Denied

Altered Products

Warranties typically only apply to products that have not been altered or modified after they were purchased. For example, car enthusiasts enjoy changing engines or making other enhancements to a vehicle’s drivetrain to coax a particular type of performance. Many modifications can nullify the vehicle’s warranty coverage of the modified and affected components because they can affect the vehicle’s reliability in ways that the dealer and manufacturer are not responsible for.

Owner Actions

Each company has a unique process for addressing warranties. Even if a product is within the timeframe designated by a warranty, the company may require multiple proof points to show that the product failed in normal use. If the product failed because of the owner’s actions rather than a fault in the design or manufacturing, the warranty is not likely to be honored. For instance, the owner might have placed the product in an extreme environment that was too hot or too cold for its reasonable use.

Warranties are generally only good for a specified period. If that period ends, the entity that issued the warranty is no longer obligated to repair or replace a product previously covered.

Warranty vs. Guarantee

The terms warranty and guarantee are often used interchangeably, but they have subtle differences. Both require sellers to act on certain promises. However, the difference lies with the level of confidence the manufacturer expresses regarding the product’s quality and functionality.

A warranty is a guarantee from a seller that if their product fails to meet certain specifications, a remedy is available. A warranty describes the conditions in which the seller is liable and what conditions are excluded. Although the buyer does not pay a separate cost for the warranty, the warranty price is included in the product’s price.

A guarantee is a promise or assurance from the manufacturer or seller that the product will work as described or meet specific quality standards. If it doesn’t, the manufacturer will fix or replace it. Guarantees are of no cost to the buyer and can be offered for both products and services.

How to Resolve Warranty Disputes

Understandably, it is easy to become confused with the coverage a warranty provides because of the language used in them. However, if you believe a warranty covers an issue, here are some steps you can take:

• Ensure you read the warranty and instructions: If you’ve damaged an item using it for something it wasn’t designed for, most warranties won’t cover the damages or issues. Additionally, some warranties may not cover certain issues.
• Contact the seller, then the manufacturer: Sometimes, a seller will provide an additional warranty. You can contact the retailer to see if it covers your issue. If it doesn’t, contact the manufacturer.
• Report the manufacturer to the Federal Trade Commission: If you believe the warranty covers your issue and you’re not getting help, you can file a report with the Federal Trade Commission, which will forward it to law enforcement for investigation.

• File a lawsuit: You can always file a lawsuit against the manufacturer, seeking reimbursement for damages. Depending on the item, this option often costs more than replacing the article, and there is no guarantee that you’ll win the lawsuit. If you believe this is your only option, contact an attorney and discuss the matter.

Before a sale, sellers must provide written warranties to consumers for products that cost more than $15.

Tips Regarding Warranties

There are some things you can do to minimize warranty issues:

• Read the warranty before you buy, and purchase additional coverage from the seller if it is offered. Additionally, you’ll need the receipt when dealing with a warranty issue, so it helps to keep it with the warranty.
• Keep a copy of the warranty to refer back to if an issue arises.
• Only purchase from companies known for adhering to their warranties and their customer service.
• Use items for intended purposes in accordance with the instructions. Also, if there is a maintenance schedule, ensure you conduct and document any periodic maintenance.

Special Considerations

The U.S. Congress passed the Magnuson-Moss Warranty Act of 1975 to set standards and rules for consumer product warranties to protect consumers from fraud and misrepresentations.

The act stipulates that, when warranties are given, their terms and conditions must be fully and clearly disclosed to the buyer before purchase, including whether it is a full or limited warranty. It also prohibits deceptive practices, such as the inclusion of misleading or false terms or requiring the buyer to purchase another product to validate the warranty.

Foreign companies are subject to the Magnuson-Moss Warranty Act if their deceptive practices are likely to cause injury within the United States.

In addition to what the manufacturer guarantees in an express warranty, the Uniform Commercial Code provides additional consumer protection by providing the implied warranty of merchantability. This warranty guarantees remedy if the product fails to perform as designed.

How Does a Warranty Work?

A warranty is a guarantee issued by a seller to a buyer that a product will meet certain specifications. If the product does not meet those specifications, the buyer can ask the manufacturer or seller to correct the problem. Certain exceptions apply, and not every defect is covered. The terms and conditions of the warranty depend on the type of warranty covering the product.

What Does Having a Warranty Mean?

A warranty means that a manufacturer or seller will replace or repair an item under specific conditions and circumstances. Generally, the conditions and covered issues are outlined in the warranty document.

What Are the 3 Types of Warranties?

There are two types of warranties—express and implied. Each has sub-types intended for different circumstances and products.

What Is a Warranty Example?

Imagine you purchase a new television. In the box with the instructions, you find a document that explains what the manufacturer will do if you experience specific issues within a certain time frame.

The Bottom Line

A warranty is a guarantee from a manufacturer or seller that defective products will be repaired or replaced. The warranty sets forth the terms and conditions to which the warranty applies, as well as exclusions. There are two types—express and implied, with many sub-types in each category designed for specific products and services.

In the U.S., the Magnuson-Moss Warranty Act and the Federal Trade Commission’s Uniform Commercial Code—created to protect consumers from unscrupulous sellers—provide rules on consumer product warranties.

If you experience a problem covered by a warranty, contacting the seller or manufacturer is the first step to resolving the issue. You can contact the Federal Trade Commission or file a lawsuit if they can’t or won’t fix a matter covered by the warranty.