Note 3 for CSM 401 with Professor Pentecost at UA
Note 3 for CSM 401 with Professor Pentecost at UA
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Date Created: 02/06/15
Notes Chapter 3 Consumer Rights Responsibilities and Remedies To help keep the marketplace honest consumers should be knowledgeable and assertive 1 Legal Rights of Consumers A Consumers legal rights arise from three sources lmplied Warranties arise from common law What does common law mean Those are the laws that came from court decisions They are different from statutory law laws that are made by legislative bodies Sometimes common law interprets or applies statutory law and sometimes it covers an area that has not been addressed by the legislature Express Warrantiesarise from contracts among and between parties These warranties are governed largely by the Uniform Commercial Code and the MagnusonMoss Warranty Act Express warranties can be created by written or oral af rmations or promises or by samples and models offered by the seller as representations of the goods that will be sold Much of the case law in the area of express warranties deals with the differences between sales talk puf ng and actual express warranties Example a seller who says This car gets 235 miles a gallon has made an express warranty lfthe seller says This car s gas mileage is great and you ll have to put a note on your calendar to remind you to get gas he has probably only engaged in sales talk Statutory Rights are established through legislative action B Implied Warranty Rights We are probably most familiar with warranties that are written or orally offered by the sellerto the buyer assuring the buyerthat goods will perform in a certain manner and offering redress if the goods fail to perform In addition to express warranties every state has laws which create an implied warranty every time a good is sold by a merchant to a consumer Note that these warranties apply only in sales by merchants and would not apply for example in the case of something you purchased at a garage sale Also ifyou buy a lawnmower from the man who owns the corner grocery implied warranties will not extend to that transaction unless you can show that the grocer is regularly in the business of selling lawnmowers We ve established that when a merchant sells a good in addition to any express warranties that he might offer there are certain implied warranties that exist Two types of implied warranties l IMPLIED WARRANTY OF MERCHANTABILITY warranty that the goods will reasonably be t for the ordinary purpose for which the goods are expected to be used Example mountain climbing boots carry an implied warranty of merchantability that they will be reasonably t for mountain climbing Ballet shoes carry an implied warranty that they will be reasonably t for ballet Ballet shoes are not warranted to be reasonably t for mountain climbing 2 IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE This is a bit more limited It requires that a number of elements be satis ed before the warranty will be effective These elements are a Seller must have reason to know the buyer s particular purpose b Seller must have reason to know that the buyer is relying on the seller s skill or judgment to furnish appropriate goods 0 The buyer must in fact rely upon the seller s skill orjudgment Seller can disclaim implied warranties with an AS IS clause The Uniform Commercial Code says Unless circumstances indicate otherwise all implied warranties are excluded by expressions like as is or with all faults or other language which in common understanding calls the buyer s attention to the exclusion of warranties and makes plain that there is no implied warranty These warranty laws form the basis for a lawsuit but probably more importantly your AWARENESS ofthem gives you and other consumers a BASIS OF NEGOTIATIONS with a seller You may or may not be interested or willing to actually go to court on one ofthese issues and if you do you may or may not win depending on all ofthe individual facts of your particular case But KNOWING that the law says that goods you buy from a merchant must work when they re sold strengthens your position with a seller when you are trying to get him to correct a problem These laws are important for you to know ifyou become the merchant as well 11 The Consumers Bill of Rights The rights were begun by President Kennedy These are not legal rights you might say there are 3 kinds of rights that consumers have those established by the framers ofthe Constitution those established by law legislation and Politicians statements oftheir policies That s what this Bill of Rights is They give us a framework to operate in and are an example of Presidential policy They give us a generally accepted sense of what should be Laws have been adopted to enforce these rights but these are not themselves legal rights 39Choice Attributed to the idea that consumers are entitled to a competitive marketplace Examples of related laws are antitrust laws that eliminate the ability of business to get together to x prices 39lnformation Examples of pertinent laws are food labeling and truthinIending 39Safety Not a right that all products will be 100 without undue risk Some products are inherently dangerous This right carries the assumption that the consumer will use the product in a manner in which it was reasonably intended to be used 39Refer to the text for the full listing III Consumers Responsibility What responsibility is common to all these rights Refer to the text Common to many ofthese is to speak up One way to do this is to complain when you have a problem but it is important to complain to the right person It is also important to complain EFFECTIVELY in order for your complaint to do the most good That s what we ll look at now Writing a letter of complaint First ofall your letter should be aimed at the right person Sometimes that will be your local business and sometimes it will be the manufacturer ofa product Try to work out your problem on the local level with the seller If you can t get help there go to the manufacturer Either way you should address your letter to the right person and you may have to do a little research to find out just who that is Sometimes the business will tell you who can resolve a conflict And sometimes you must just use your best judgment Don t be afraid to go all the way to the topll Why complain You certainly won t get satisfaction if no one knows there s a problem Secondly if you have a problem it is likely that many others do as well and depending on the nature of the complaint it may be something that the company needs to address for safety reasons Finally if people don t enforce their consumer rights ifwe just accept shoddy products and poor service and never complain we can anticipate there will eventually be a decline in the quality of goods and services available to the consumer Complaining won t be worth my time Who do complain to Both are typical reasons people don t complain Sound familiar Statistics show that for every complaint received another 26 customers have problems 6590 of those who do not complain don t come back and never tell the business why Sounds antibusiness but complaining is GOOD for business Complaining is an important tool for businesses to determine how effective they are It costs about 5 to 10 times as much money to go out and find a new customer as it does to just do a good job of handling a complaint and retaining the ones they already have Listening to complaints gives businesses a good way to learn about product problems that they can avoid in the future and that cost them money Complaining might involve switching brands or stores complaining directly to sellermanufacturer and telling others about your experience IV Speci c Remedies to Resolve Consumer Problems Let s address the sequence to follow when deciding who to go to with your complaint Note that no laws require merchants to offer refunds exchanges or credits on merchandise they sell A You should go to the MERCHANT first to give him an opportunity to right the wrong Your business is probably much more valuable to him than to the manufacturer Give him a chance to earn your continued patronage First go the salesperson If he or she can t help you then ask to see his supervisor If the supervisor can t or won t help ask to speak to the owner Keep going until you get the action you need Don t be afraid to go all the way to the top if necessary You don t have to know who to ask for just say I d like to speak to your supervisor and keep saying it until you run out of people to talk to Don t be intimidated by the fact that you re talking to the person at the top because you re the customer B If you can t get help from the merchant then you should go to the MANUFACTURER A lot of times you will be talking to them initially by phone and you may get a telephone representative who won t be able to help you Again just ask to speak to his or her supervisor don t need a name Continue to ask to speak to that person s supervisor until you get help You may end up with the CEO of the company literally At that point you may be to the letter writing stage C No luck so far Move outside of the business to SELF REGULATORY ORGANIZATIONS One of those is the Better Business Bureau BBB They keep a record of member companies and how they deal with complaints The BBB actually gets much of its information from the companies themselves so I m not sure how objective it is but they take complaints too A consumer would mail a letterto the BBB who in turns contacts the company and gives them a chance to respond The company gives them their side ofthe story and if they ve compromised with the consumer they report that to the BBB The BBB keeps a record of all this In these situations the BBB acts as a sort of mediator by negotiating between the two parties and helping them come to a compromise However the BBB is a very loose sort of an example of a mediator there are more formal mediation situations with a private mediator A mediator doesn t make a decision but helps the parties come to an agreement An arbitrator hears both sides ofa problem and come to a decision In most situations the arbitrator s decision is binding on the parties The BBB can serve as an arbitrator Normally when the BBB is the arbitrator between the consumer and a manufacturer the decision is binding on the manufacturer but not on the consumer Note that most consumer complaints are against dealers Some industries have Consumer Action Panels that handle complaints within the given industry If you don t get any help within the industry then you should go to public or private Consumer Action Agencies These organizations are pretty effective because the company wants to avoid bad publicity Unfortunately they can t handle all complaints so usually take the more sensational ones The Attorney General s of ce has an Of ce of Consumer Affairs that mediates between the consumer and business much like the BBB does The difference is that the BBB is a businessrun agency and the Attorney General s office is outside the industry The AG s office writes or contacts the business A call or letter from the AG s of ce will usually get a business s attention and lets the business know you re serious The AG also prosecutes businesses that are actually breaking the law There are local and national consumer action groups like the Consumer Federation of America and the National Consumer s League If all ofthese efforts get you nowhere and you have a problem that is nancially significant you may want to go to the court system as a last resort V Legal Channels A Criminal Actions lfa criminal act occurred during the unfairdeceptive practice it is incumbent on the federal state county or city to seek civil andor criminal penalties The attorney general and district attorneys have responsibility for enforcing the laws 39Attorney General chief law enforcement of cer ofthe state 39District Attorneys bring criminal actions for each county You report it and they decide what to do with it B Civil Actions Civil actions are usually not the most costeffective route to take Attorney s fees could easily exceed the amount ofyour claim 80 200 hour and up 1 Remedies Damages means money a Actual or Compensatory damages out of pocket loss What is the actual loss suffered How much money was lost as a result ofthe wrong Damages can include consequential and incidental expenses Incidental expenses might include charges incurred in stopping delivery or charges incurred in connection with returning goods Consequential expenses are losses that are a result ofthe wrong but are not direct or immediate Example Washing machine explodes and the water ruins our wood oor Most warranties have disclaimers that prevent consequential damages but that s what they are Another example your warranted vehicle antifreeze may not perform as advertised leading to a frozen engine needing 2000 in consequential repairs There also could be incidental towing costs to get the vehicle to the repair shop b Punitive damages act as punishment for the defendant s wrongful act These are intended to punish the defendant and to set an exampledeter future wrongdoers See McDonald39s Case 2 Other Remedies a Rescission is simply the right to cancel a contract and is granted by the court b Restitution act of restoring anything to its rightful owner Speci cally restitution is the award of an amount that would put the plaintiff in as good a position as he would have been if no contract had been made and restores to the plaintiffthe value of what he parted with in performing the contrac There are less expensive ways to bring legal action than a traditional lawsuit Class Action Lawsuit one or more plaintiffs file a claim that they represent a common class many people who suffer the same wrong There must be so many in the class that it is impractical to bring them all before the court These are available under both federal and state law Suppose that XYZ phone company decided to tack an extra 1 on every customers phone bill each month Would it be worth your time to pursue a refund Would you be willing to go to court to recover the money A consumer group may take action to recover on behalf of mistreated consumers Small Claims Court is a court that specializes in claims involving small amounts of money There are relaxed procedures and rules of evidence It is easy to represent yourself You don t need an attorney but both the plaintiffand defendant can have one at least in AL You go to the Small Claims division and file your action There will be a fee of course and your claim must be under a certain dollar amount The court will issue a summons and complaint to have served on the defendant Thesummons orders the defendant to appear before the court and answer within 30 days The legal summons may motivate the defendant In fact 25 of all small claims cases are settled out of court before the hearing date The complaint tells the defendant what action is against him He has to le an appearance and answer the complaint lfyou have witnesses that you want to call the court will issue subpoenas after the court date has been set A subpoena requires witnesses to appear before the court When the hearing is held you should make your argument clear before the judge no jury and offer whatever you have as evidence to support your argument or position The defendant will respond and present his defense to the judge Thereafter the court renders decision Once the court decides and makes award it doesn t necessarily mean that you have your money Small claims court decisions are appealable You may want to bear in mind before going through small claims action that it may get expensive ifyou decide to appeal and hire an attorney However the threat of action itself may motivate the defendant Sometimes it is hard to actually collect from a defendant lfthat is the case you ll go back to court and get a writ of execution This allows you to garnish his wages or get a lien against property other than real estate and bank accounts Be aware of the statute of limitations on your claim You have a limited time to bring action
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