Warranty

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.

How a Warranty Works

Warranties usually have exceptions that limit the conditions in which a manufacturer will be 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 and usually only if the product in question contains problems resulting from defective parts or workmanship.

As a result of these limited manufacturer warranties, many vendors offer extended warranties. These 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 main categories of warranties, expressed and implied. Within each category exists different types of warranties, with their own terms, conditions, and guarantees.

Express Warranty

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

All expressed guarantees are not warranties. For example, puffery is not considered an express warranty. It is an exaggerated language used to advertise a product and attract customers. If a retailer claims that its mattresses will give you the "best night's sleep ever," they are no issuing a guarantee that it will deliver upon that statement. 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, as is with "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.

Extended Warranty

An extended warranty is a type of warranty that covers the repair and maintenance of a product beyond the manufacturer's warranty. It is more of a service contract than a warranty as it is optional coverage purchased by the buyer covering service-related claims. Like expressed warranties, extended warranties have terms and conditions, and coverage can be denied if the buyer breaches the agreement.

Most commonly, 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 Deed

A special warranty deed is specific to real estate transactions whereby the seller issues a guarantee against title defects occurring during their ownership of the property. This deed transfers ownership to the grantee with an expressed warranty about the title.

Special warranty deeds transfer property ownership from one person to another and assures the buyer that the title, during the seller's ownership, is free of encumbrances, liens, or claims.

Reasons Why a Warranty Could Be Denied

Warranties typically only apply to products that have not been altered or modified after they were purchased. For example, a warranty on an automobile could be invalidated if the owner added nonstandard parts that substantially altered the functionality, performance, reliability, and stability of the vehicle.

Although it is popular for car aficionados to change engines or make other enhancements to the drivetrain to coax a particular type of performance out of the vehicle, such modifications, in most cases, would nullify the warranty. When such aftermarket adjustments are made, it can affect the reliability of the vehicle in ways that the dealer and manufacturer are not responsible for.

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

Terms of warranties can vary from free repairs on the defective product to an entire replacement of the product. The owner of the product may be instructed to bring the product to the nearest authorized repairman, back to the seller, or shipped directly to the manufacturer.

Warranty vs. Guarantee

Warranty and guarantee are often used interchangeably, but they have subtle differences. Both require sellers to act on certain promises regarding their offerings. However, the difference lies with the level of confidence expressed by the manufacturer 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, as well as what conditions are excluded. Although the buyer does not pay a separate cost for the warranty, the price of the warranty is included in the price of the product.

A guarantee is a promise or assurance from the manufacturer or seller that the product will work as described or meet certain quality standards. If not, it will be fixed or replaced. Guarantees are of no cost to the buyer and can be offered on products and services.

Special Considerations

To protect consumers from fraud and misrepresentations, the U.S. Congress passed the Magnuson-Moss Warranty Act of 1975 to set standards and rules for consumer product warranties. It stipulates that, when warranties are given, its terms and conditions must be fully and clearly disclosed to the buyer prior to purchase, including whether it is a full or limited warranty. It also prohibits deceptive practices, such as the inclusion of misleading or false terms and 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.

Before a sale, sellers must provide written warranties to consumers for products that cost more than $15. The consumer can file a complaint with the Federal Trade Commission (FTC) if the seller does not comply.

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. In most states, the seller can sell the product as is, disclaiming this implied warranty.

Warranty FAQs

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 seek to have the manufacturer or seller 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 Are the 4 Types of Warranties?

Four common types of warranties are the express warranty, implied warranty, extended warranty, and special warranty deed. An expressed warranty guarantees that a product will meet certain conditions of quality and performance. An implied warranty is a warranty that guarantees that the product will function as designed. There need not be a statement made by the seller about the warranty for it to be effective.

An extended warranty is a service contract, at an extra cost to the buyer, that provides repairs and maintenance beyond or in addition to the manufacturer's warranty. Lastly, a special warranty deed is a real estate guarantee in which property ownership is transferred to the buyer with certain guarantees about the title. It guarantees that no title defects arose during the seller's possession of the property.

What Does a 1-year Warranty Mean?

A 1-year warranty is a warranty in which the seller or manufacturer guarantees remedies for product defects for one year from the date of sale. During that time, the seller shall repair or replace the product if such defects present.

What Is the Difference Between a Warranty and Guarantee?

A warranty is a guarantee from a seller that a defective product will be repaired or replaced within a specific time. A guarantee is a seller's promise that a product will meet certain quality or performance standards. If not, it will be repaired or replaced.

Can I Get a Refund Under a Warranty?

An express warranty does not generally allow the buyer to receive a refund. It guarantees that defects will be resolved with the repair or product replacement. On the other hand, an implied warranty often allows the customer to receive a refund when a customer returns a product to a retailer.

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. In the U.S., the Magnuson-Moss Warranty Act and the Federal Trade Commission's Uniform Commerical Code — created to protect consumers from unscrupulous sellers — provide rules on consumer product warranties. There are two categories of warranties — express and implied — and various subcategories, including extended warranties or service contracts; and special warranty deeds. Consumers can benefit from understanding their rights under the law. Often protections exist beyond the express warranty.