Consumer Product Guarantees

Christian Twigg-Flesner

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781351949309
• Edition: 1
• Topic: Law
• Subtopic: Consumer Law
• Index: Law

This book presents a detailed analysis of the function of consumer product guarantees and the related legal issues. It applies research findings from the fields of consumer complaining behaviour, marketing science and economics to the legal context. Its central argument is that guarantees could be one way of assisting consumers in resolving product quality disputes. Consumers tend to seek to resolve such disputes informally by complaining, rather than by seeking to go through the courts or structured forms of alternative dispute resolution. Such complaints can be supported by encouraging reliance on consumer product guarantees, particularly where consumers also enjoy strong legal rights. With this in mind, the book develops a legal framework for consumer guarantees, which is based on two key principles: fairness and transparency. There then follows an analysis of English and EC provisions on guarantees, as well as of relevant US law. Particular consideration is given to the relationship between consumer guarantees and statutory rights.

Chapter 1
Guarantees, Product Quality, and Consumer Protection

1.0 Introduction

This book is about consumer product guarantees. The most common consumer product guarantee is the manufacturer's guarantee. This is a voluntary undertaking given by a manufacturer¹ (hereinafter "the guarantor") without charge to provide a remedy, should the product covered by the guarantee become defective as a result of poor workmanship or the use of faulty materials in the manufacturing process during a specified period of time after purchase. Similar guarantees are often also given by retailers. However, for the sake of simplicity, this book will generally only refer to manufacturers' guarantees.

Crucially, consumers² are not required to pay for such a guarantee in addition to the overall purchase price of the product covered by the guarantee, because it is an "integral part of the bundle of satisfactions" (Udell and Anderson, 1968, p.1) obtained by the consumer when he buys the product. Guarantees are given on most consumer goods,³ especially cars⁴ and consumer durables such as hi-fi systems or washing machines. For some consumers, a guarantee may be an important part of the overall package, i.e., of considerable significance in the purchasing decision-making process. Such consumers may regard the guarantee as an assurance of product quality and value and as protection against the risk of product failure. For others, a guarantee may also be regarded as redress mechanism, should the product break down, or be of a lower quality than promised (Kelley and Conant, 1991). The purpose of this book is to investigate the legal issues of, and to develop a legal framework for, manufacturers' guarantees. The theme running through this book is that that manufacturers' guarantees could be one route by which to obtain redress informally, and that a legal framework for such guarantees should be designed to facilitate this.

1.0.1 A lack of discussion of manufacturers’ guarantees

Although guarantees are very common, the legal issues to which they give rise have not been investigated systematically by legal scholars in the United Kingdom, A glance at the standard consumer law textbooks reveals that guarantees are given a rather brief treatment.⁵ In essence, most books refer to various theories of the consumer guarantee and the only detailed examination of these, in particular (Priest, 1981).⁶ Editions published after 1999 generally also provide a brief summary of the changes to be introduced by Directive 99/44/EC on Certain Aspects of The Sale of Consumer Goods and Associated Guarantees (hereinafter "the Guarantees Directive"), which was adopted by the European Community (E.C.) in May 1999.⁷

There is hardly any commentary or analysis of the English or European Community law on manufacturers' guarantees in the law journals, either. Although there is a reasonable body of literature in U.S. journals, particularly in the wake of the adoption of the Magnuson-Moss Warranty Act in 1975,⁸ this is now rather dated. There were a number of English articles in the early 1990s when a Private Member's Bill was introduced to enact reform proposals modelled on the U.S. legislation and put forward by the National Consumer Council (NCC, 1989b), notably three papers by Willett (1991; 1992; 1993). Howells examined some of the proposals and considered the tension between a desire to regulate guarantees on the one hand, and the potential that competition on guarantees might offer on the other hand (Howells and Bryant, 1993; Howells, 1994). Palle-Bo Madsen produced a general introduction to the topic in the wake of the E.C. Green Paper (Madsen, 1995) and highlighted some of the aspects that are particularly relevant from a European point of view. The Competition Law aspects of manufacturers' guarantees have received slightly more attention (Astola, 1984; Fine, 1989; Goyder, 1996), but this has mainly been in response to decisions in this field by the European Court of Justice.⁹

In short, there has not yet been a systematic analysis of the legal aspects of manufacturers' guarantees. One might suggest, perhaps somewhat cynically, that this must be so because there is nothing much to say about manufacturers' guarantees. This book will demonstrate that there are, in fact, numerous issues that are raised by manufacturers' guarantees and that there is a considerable amount to say about them.

1.0.2 Scope of analysis

The central task for this book is to identify the function of guarantees and the shape of the legal framework that should be adopted. It is assumed that it is desirable to put into place a legal framework for guarantees. To some, this may be begging the question, and it might be suggested that it is not necessary at all to intervene. For present purposes, it is assumed that it is desirable to create a legal framework for guarantees, but it remains necessary to examine what this framework should cover. That there is such a desire is evident from the string of reform proposals put forward over the last decade or so, and the legislation that eventually emerged in the form of the Guarantees Directive.

An important consideration is the point at which consumers are most likely to be interested in the existence and substance of a guarantee. If this is the case before they commit to a purchase, then the central purpose of a guarantee may be to aid the consumer in reaching a purchasing decision. If it is after purchase, then the guarantee may be there to provide redress when a product does not work. The findings of the examination of guarantees in subsequent chapters will lead to the conclusion that guarantees are better regarded as a means of obtaining redress and that the legal framework on guarantees should enhance this function.

It will also be considered in how far the existing legal framework on manufacturers' guarantees reflects the framework developed in this book. This will involve a detailed analysis of the relevant provisions of English and European Community law.

1.0.3 A word on methodology

Much of chapters 3 and 4 draws on research from non-legal fields, such as economics, business studies and consumer complaining behaviour. However, the present writer does not claim significant expertise in these fields. This book will focus on the conclusions reached by those who carried out research in these nonlegal disciplines, but there will be no examination of the methodology employed. The interest is in the conclusions reached in those areas and their implications for a legal framework for guarantees. The risk with this approach is that arguments are based on findings which may subsequently be proved incorrect. In order to minimise this risk, account has generally been taken of research which has been cited subsequently without its accuracy or correctness being doubted. However, with some of the recent research in the field of consumer complaining behaviour, this was not possible because this is very much an evolving area of study. The analysis in this book is therefore based on the state of the research in these fields in the autumn of 2002.

Considerable reassurance of the value of this approach is derived from Hugh Collins' recent examination of the law of contract (Collins, 1999). He too adopted an interdisciplinary approach in his exploration of the purposes and effects of the legal regulation of contractual relationships. He conceded that:

It must be admitted, however, that [the available evidence about the effects of legal regulation of markets and contracts] is patchy and susceptible to rival interpretations... (p.359).

The evidence relied on in this book leads to the claim that guarantees can have a particular function and that the legal framework should be designed to support this. Arguably, some of the specific evidence that is available in the context of manufacturers' guarantees may be as patchy and susceptible to rival interpretation as the evidence on the effects of the more general regulation of contracts relied on by Collins (1999). Yet, it is possible to identify evidence which supports the conclusions reached in this book, although it would have been desirable to have available more conclusive and less equivocal evidence. Still, it is submitted that the conclusions put forward in this book can be defended successfully, on the basis of a careful scrutiny of the available evidence.

1.1 Quality defects and consumer protection

In the introduction, it was noted that manufacturers' guarantees are given against defects in workmanship and materials which become apparent within a specific period after the consumer has bought the corresponding product. Guarantees are therefore given against quality defects. Before guarantees are examined further, it is necessary to examine two issues: first, there is the problem of quality defects generally, and second, the extent to which consumers are protected against such defects under relevant legislation. The objective for the remainder of this chapter is to analyse more closely the nature of quality defects and the problems consumers face in this context. Furthermore, the rights of consumers in English Law and under relevant provisions of E.C. Law will be examined. It is important to gain a fundamental understanding of these aspects to appreciate the context within which manufacturers' guarantees are provided. This will form the background for the analysis and discussion in the following chapters.

1.2 The nature of “quality defects”

1.2.1 What is “quality”?

One of the most common difficulties that consumers encounter is that something they have bought fails to work as promised. A new refrigerator may fail to chill food to the appropriate temperature, a new personal computer may refuse to boot up to allow an academic to complete an important paper, or a television set may not show a colour picture. Such problems are all grouped together under the broad heading of "quality defects". They are not uncommon. The Office of Fair Trading estimated that in 1999,¹⁰ there were some 85.8 million consumer complaints and concerns in the United Kingdom per year (OFT, 2000, p.9). It was found that nearly half of those related to defective goods or substandard service.¹¹ More specifically, adding together the number of problems reported by individual categories (major household appliances; TV, videos, hi-fi, radios, personal stereos; computers; other household goods; new cars; second hand cars; camera, video cameras and camcorders), there were some 8.7 million problems with these product groups alone. Almost 52% of consumers who encountered a specific problem in 1999 reported that a product they had bought was in some way defective, i.e., either it did not work at all, or it did not work as specified.

There are therefore numerous instances of consumers having bought defective goods, but when can a product be said to have a quality defect? To answer this, it is necessary to examine the aspects of "quality"

Broadly speaking, there are two categories of "quality. The first relates to basic functionality. A product should perform as intended for a reasonable period of time. In this sense, quality defects could be a result of a lack of durability, or

reliability, or both. These are two distinct concepts, and the difference is explained succinctly by Jarmin (1994):

Reliability ... is the term used to describe the ability of a product to continue to perform its function or simply to work. It relates to the operating 'mechanism', whatever it may be. Typical mechanisms may be mechanical, electrical or increasingly electronic to name but three (p. 60).

Thus, the "reliability" of a product is that the product will perform as it should. It refers to the basic functionality of a product.

Durability [-] Often confused with reliability, this is how long a product or specific components of the product endure when used both normally and abnormally. It is about design and use of materials appropriate to the application and use of the product (ibid.).

"Durability" thus denotes the period during which a particular product can be used before it requires attention. Such attention may include routine maintenance, or the need to repair a component of the product which has deteriorated to the extent that the product as a whole can no longer function. However, the distinction between the two should not be overstated. A product which is not sufficiently durable is likely to have been defective when supplied to the consumer. This defect may be located in the "operating mechanism" and would then also be a reliability problem.¹² It is nevertheless important to appreciate that the two concepts are not identical.¹³

The second category of quality relates to product appearance and performance. Although durability and reliability are fundamental aspects of product quality, there are other matters that are also relevant, particularly in a consumer context. A consumer will not only be interested in the functionality of a product, but also its appearance and finish. A consumer is likely to expect a new product to be free from cosmetic defects, unless these have been pointed out to him before making a purchase.¹⁴ Moreover, the performance of a product will matter. A car may well be suitable for driving from A to B, but if...