Your Rights When You Buy a Warranty

When you purchase a written warranty (or service agreement) from a seller, there are a number of rights that come with it. I have identified what I view as the three main rights:

1. The Warranty Rights

A written warranty is a contract. Obviously you have the right to whatever the warranty provider contracted to give you. You would have to read the face of the warranty to understand those rights. You should also be given an opportunity to review the warranty before purchasing it.

2. Implied Warranties Apply

When you purchase goods, the goods come with two implied warranties. These warranties are “implied” because they may not be written in the contract but are imposed by law. The first states that the goods will be fit for the general purpose of the goods. The second applies if the seller knew you were purchasing the product for a specific purpose and relying on the seller to help you select a suitable product. Where that is the case, there is an implied warranty that the product will be fit for that particular purpose.

Sellers are permitted to “disclaim” these implied warranties—meaning that they will not apply. This is what a seller is doing when they sell something “as-is.” HOWEVER, when a buyer purchases a warranty or service agreement from the seller, federal law (the Magnuson-Moss Warranty Act) states that the seller CANNOT disclaim or limit the implied warranties. This is very important to know because many times sellers will still try to enforce unlawful disclaimers.

3. Right to deduct losses

When a seller breaches a contract, including any written or implied warranties, “[t]he buyer on notifying the seller of his intention to do so may deduct all or any part of the damages resulting from any breach of the contract from any part of the price still due under the same contract.” Idaho Code 28-2-717. In other words, if you owe $20,000 on a vehicle and find the seller has breached an implied warranty that cost $5,000 to repair, you can notify the lender that you are deducting the $5,000 damage from the $20,000 owed. Thus, you would only owe $15,000 on the loan.

Get Help

I will tell you right now that this article is an over-simplification of these laws. Many sellers will refuse to recognize consumer rights or will even try to put things in contracts to skirt around the applicable laws. Anytime you are seeking to enforce these rights, it would be a good idea to seek legal counsel.