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Prerequisites for Breach of Warranty Claims
Buying a new vehicle can be stressful enough when things go well. It’s one of the largest single purchases Americans make, and between shopping for a car, financing, and insuring it, can take days to weeks. Ideally, when you get your new car home, the story is over. But for roughly 150,000 American car consumers every year, the nightmare is just beginning.
That’s how many Americans inadvertently purchase defective vehicles each year, according to the National Highway Traffic Safety Administration (NHTSA). These defective vehicles, known colloquially as “lemons” or “lemon cars,” contain repeating, unfixable problems ranging from minor annoyances to potentially catastrophic issues. Whether these problems occur because of substandard materials, faulty components, faulty design, or worker error, the manufacturer and not the consumer is at fault and thusly on the hook to pay for the problem. When a consumer buys a new vehicle from a manufacturer, they enter a deal. When the manufacturer doesn’t hold up their end of the deal, lemon law attorneys can help the consumer seek legal relief.
Warranties are the key to consumer protection in commerce, including the automobile market. Manufacturers are required by law to make their warranty coverage available and easily readable by consumers. If a manufacturer fails to abide by the language in their own warranty, they are in “breach” of that warranty. New cars always have warranties detailing how long the manufacturer will provide free repairs for problems specifically covered by said warranty; usually limited to any problems the consumer discovers but not caused by the consumer themselves.
In addition to written warranties are “implied warranties,” also known as “warranties of merchantability.” An implied warranty means a vendor or seller of particular good promises that goodwill work as intended. A microwave should heat food, a television should turn on and show a picture, a car should start, and safety convey passengers and goods from an origin to a destination. If a product cannot accomplish what it was designed for, it breaches its implied warranty. The only way a seller can get around this is if the product is marked “as is,” indicating no warranty is provided. Several states do not legally allow “as is” sales.
When this happens, breach of warranty attorneys can use state and federal “lemon laws” to get consumers the justice they deserve. Each state in America has its own lemon law offering consumers protection levels that can vary from state to state. The Magnuson-Moss Warranty Act, a federal law, often protects American consumers when their state law falls short. Both state and federal laws work in concert to protect Americans when they take their vehicle’s manufacturer to court.
Before consumers can file a breach of warranty claim for their automobile, they must meet certain criteria depending on their state. State laws can vary on how long a consumer must file a claim, how many times they must allow the manufacturer to attempt a repair, and other variables. Texas, for example, requires a vehicle to meet one of three tests before it can be declared a lemon: the serious safety hazard test, the four times test, or the 30-day test.
A vehicle passes the serious safety hazard test if the vehicle owner submits the vehicle for the repair of a serious safety hazard once during the first 12 months of ownership or 12,000 miles, whichever comes first, and then once more during the 12 months or 12,000 miles following the first repair attempts without the problem being fixed.
A vehicle passes the four times test if it’s been taken to a dealership for repairs two times for the same problem or defect within the first year or 12,000 miles, whichever comes first, and twice more during the first 12 months or 12,000 miles following the first repair attempt without the problem being fixed.
A vehicle passes the 30-day test if it has been out of service for repair because of problems covered by the original factory warranty for a total of 30 days or more during the first two years or 24,000 miles of ownership without a comparable loaner vehicle offered, and there were two repair attempts during the first year or 12,000 without any success.
Different states also allow consumers different timespans for reporting defects. Texas consumers, for example, must file their lemon law complaint within 42 months of receiving the vehicle or within the first 24,000 miles driven, whichever comes first.
States also differ in their coverage of consumers who lease vehicles – if they cover lessees at all. Arizona, for example, does not extend lemon law coverage to lessees. The Arizona Supreme Court decided in 2006 the leasing company technically owns the vehicle, meaning the leasing company and not the consumer owns the vehicle and is thusly protected by the state’s lemon law. Texas, on the other hand, protects consumers who lease their vehicles.
The federal Magnuson-Moss Warranty Act of 1975 protects all American consumers regardless of which state they purchase their vehicle in. It covers any product sold with a warranty, including automobiles.
The Act was first introduced in the U.S. Senate by Sen. Warren Magnuson (D-WA) on May 14, 1973. It passed the Senate on Sept. 12, 1973, before moving to the U.S. House of Representatives where it passed on Sept. 19, 1974. After going through committees, it was signed into law by U.S. President Gerald R. Ford on Jan. 4, 1975.
The Act requires companies to make clear statements in their warranties, otherwise, those ambiguities will be held against the company in court.
Magnuson-Moss came about in response to alleged consumer rights violations by businesses in the 20th century. Throughout the 19th and early 20th centuries America’s main consumer law was caveat emptor: let the buyer beware. The consumer was on their own when making purchases. However, as the economy grew more complex and the gulf between consumer and manufacturer widened, Americans demanded a new standard of legal protection.
The Uniform Commercial Code (UCC) originally tried harmonizing sales and commercial transaction laws across America. States can adopt the code into their statutes either fully or partially, even though the Code itself is not law. Every U.S. state but Louisiana adopted UCC rules, which instead opted to keep their own civil law traditions.
This didn’t go far enough in stemming manufacturer abuses, and as such consumers demanded change from their elected officials. They wanted government oversight for warranty law and legal support when they take manufacturers to court. The Magnuson-Moss Warranty Act provides consumers and their attorneys the tools and support they need.
The Magnuson-Moss Warranty Act makes manufacturers designate any warranties they offer as either “full” or “limited” and specify exactly what they cover in a single, clear, easy-to-read document. They must also make the warranty conspicuously available for consumer review, allowing consumers to shop for warranty coverage before making a purchase.
The Act also prohibits these companies from disclaiming or modifying implied warranties with their written ones. This means consumers are always entitled to the basic protections of “implied warranties of merchantability;” that a good sold must do what that good is supposed to. For example: a new car should operate and convey passengers and cargo from one place to another safely. A car that cannot do this does not conform to the implied warranty of merchantability.
The Act helps consumers sue for breach of warranty not only by making it a violation of federal law but also by lowering the number of economic damages needed for a case to enter federal jurisdiction.
The Act also, however, allows companies to require consumers to first try arbitration, otherwise known as “informal dispute settlement procedures,” before filing a breach of the warranty claim. Arbitration unfortunately rarely works out in the consumer’s favor.
Andrew Ross, lemon law attorney with Allen Stewart P.C., said while arbitration occurs over a single day outside of a courthouse setting, the “best-case scenario” isn’t satisfactory for the consumer. The manufacturer can send engineers coached by company attorneys and will work to end arbitration as soon as possible with as little cost to them as they can.
“It’s been my experience that those arbitrations are a waste of time,” Ross said. “Rarely does the BBB render a decision that satisfies the consumer.”
He said the best consumers can usually hope for in arbitration is a buyback, but even that may not end well for the consumer.
“When they award a buyback, they don’t tell you what the figures are,” he said. “First you must accept the decision, and then they’ll tell you what the figures are. It’s a bad situation for the consumer.”
Ross said 90 percent of lemon law claims don’t go to court, as even the manufacturer would prefer a speedy end to the situation. He said the manufacturer almost always offers a settlement in lieu of going to trial; your attorney will work with you to determine whether the settlement is acceptable.
When a lemon law claim succeeds in court, consumers generally have one of two options: repurchase or replacement. Repurchase, or buyback, is simply getting what you paid back for the vehicle. The manufacturer is buying the defective vehicle back from you. This includes sales taxes, title registration, and other fees. Most state laws also require the manufacturer to reimburse you for incidental costs you encountered because of the vehicle’s defects, including rental car fees, towing costs, phone or mail communications made when contacting the dealership or manufacturer, personal property damage, attorney’s fees if the consumer hires an attorney after learning the manufacturer has also hired an attorney, and even room and board if the vehicle fails while traveling away from home.
Replacement is just as simple: the manufacturer replaces the defective vehicle with one that is as identical to the defective vehicle as possible (without the defects, of course). Lemon laws require the manufacturer provide the same service contract included with the original vehicle, as well as the same factory or dealer options originally included. The manufacturer must reimburse the consumer for incidental and collateral charges associated with the defective vehicle, such as taxes, finance charges, registration, and more.
Whether you opt for replacement or repurchase, both come with a catch. The manufacturer can withhold what is known as a “usage allowance,” defined as a “reasonable allowance for the consumer’s use of the vehicle” before discovering the defect. In plain terms: the longer you drove the vehicle before it went into the shop to fix a defect, the more money the manufacturer can withhold. This is also known as a “mileage offset.” It’s calculated by determining how much you drove the vehicle before first reporting the issue. This is one of the biggest reasons a consumer should report all problems with the vehicle to the dealership as soon as they crop up.
Time is always of the essence in lemon law claims. Statutes of limitations, legal rules creating deadlines for filing legal claims, mean you have a limited timespan to report a problem and, if needed, file a lemon law claim. Past this deadline, your options radically narrow.
The United States has statutes of limitations for most civil and criminal claims, with only the most several criminal claims having no such limits. State laws can vary on statute of limitations lengths for various claims state to state.
Texan consumers, for example, have no more than 42 days from the warranty becomes active to file a state lemon law claim. However, if the consumer drives the vehicle 20,000 in the first year after the vehicle’s delivery, the consumer will need to file the Texas state lemon law complaint before the car traveled another 4,000 miles, even if that occurs before the expiration of the 42 months mentioned above.
When you reach out to Allen Stewart P.C., lemon law experts will examine the details of your situation and determine the best way forward. Our attorneys have decades of experience fighting against automotive manufacturers both in and out of the courtroom. Don’t wait any longer; contact Allen Stewart P.C. today and get back on the road.