Warranty

In business law, a warranty is a promise that something sold is in good condition. A warranty may be express or implied. A breach of warranty occurs when the promise is broken, i.e., a product is defective or not as should be expected by a reasonable buyer. A warranty deed is a promise that the buyer's title to a parcel of land will be defended.

Extended warranty

In retail business, a warranty (or "extended warranty") commonly refers to a guarantee of the reliability of a product under conditions of ordinary use. It is called "extended" warranty because it covers defects that could arise some time after the date of sale. Should the product malfunction within a stipulated amount of time after the purchase, the manufacturer or distributor is typically required to provide the customer with a replacement, repair, or refund. Such warranties usually do not cover acts of God, owner abuse, malicious destruction, commercial use, or anything, for that matter, outside of a mechanical failure incurred with normal personal usage. Most warranties exclude parts that normally wear out, and supplies that must be periodically replaced as they are normally used up (e.g., tires and lubrication on a vehicle). An extended warranty may be included in the purchase price, or optionally extended for an additional fee, and may be for some ambiguous ordinary "lifetime" of the product (not the customer).

Related Topics:
Extended warranty - Reliability - Acts of God

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A manufacturer or distributor may be required to carry reserve funds on its financial balance sheet to cover potential services or refunds that may arise for any products still covered "under warranty".

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There are also third-party warranty providers who sell optional "extended warranty" contracts on certain products, which amount to having an insurance contract for the product. These third parties range from well known store chains, such as Best Buy and Circuit City, to independent, often underwritten companies such as Warranty Direct. As with other types of insurance, the companies are gambling that the products will be reliable, that the warranty will be forgotten or voided, or that any claims made can be handled inexpensively.

Related Topics:
Insurance contract - Best Buy - Circuit City

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Many people do not realize that extended warranties are not always provided through the manufacturer, but in some circumstances it may work to the consumer's benefit. For instance, when an auto warranty is provided through a dealership from the manufacturer, repairs on the vehicle are reimbursed at a lower negotiated rate. Some mechanics might fraudulently attempt to defer the needed repair until the warranty has expired so that the ordinary (higher) shop rate will apply. The third party warranty, while often more expensive, can be worth the price difference because it will cover the higher shop rate as well, and may even permit the customer to select a different mechanic outside the dealership.

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