This article is written by Anurag Mawai, pursuing a Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from LawSikho.
In this consumerist age when everything we desire is available at our fingertips and needs are being pumped for objects which we don’t need but its need is being made by the markets themselves. This rampant shop till you drop consumerism has brought into a constant need for upkeep and repair of objects and things a customer buys, there is a whole niche of service and repair contracts a customer enters into while buying a product, the most famous ones are a Warranty Agreement and an Extended Service Agreement. These are applied in almost all sectors be it phones, house appliances, white goods, or automobiles, these two are eponymous in every modern consumer transaction. Many buyers even consider them as the same or at least interchangeable for each other. But there are fine differences between these two agreements which every consumer should understand and appreciate if they want to have a safe shopping experience and thereby preventing themselves from the need to run from pillar to post in the event the device they bought does show any defects.
When does a consumer enter into these agreements
A consumer at the end of buying a product pays the final MRP of the product and signs various receipts like the bills, etc. and then the shopkeeper tells them that there is an additional offer on an “extended warranty”, this extended warranty is sold by the shopkeeper at an additional price and for that a separate document is given and signed by the customer. This type of transaction is in fact for a Service Agreement, and not at all a Warranty. A Warranty is given by the manufacturer and is availed by the customer when he buys the product itself and the price for the said Warranty is included in the MRP, this Warranty is also serviced by the Manufacturer and as per the condition laid down in the Bill of the product. Though the colloquial language may refer to them as warranty the impact and implication of both the transactions is vastly different.
What is a warranty
A Warranty is in fact a promise by the maker itself, that the product does have certain characteristics or it will suit certain uses and purposes. Warranties are usually written and given with purchase of commodities like cars, appliances, computers, mobile phones and other equipment. Some warranties are inbuilt into the sales arrangement themselves. Usually, a warranty should provide a description of what the warranty covers and what it does not along with the repairs allowed, provide a guideline for the consumer to use the warranty and the expenses which the customer will bear and the expenses which the manufacturer will bear. For example, the warranty on an Apple IPod guarantees the following:
- It warrants the entire Apple hardware including the product as well as accessories given in the original packaging.
- It warrants against any defects of material and workmanship when used in accordance with the published guidelines for a period of one (1) year from the date of original retail purchase.
- It does not cover non-apple branded hardware products or any software, even if packaged or sold with Apple hardware.
- It does not cover software distributed without the Apple brand. Apple also does not warrant that the operation of the device will be uninterrupted or error-free. It is not responsible for any damage arising from failure to follow instructions relating to the product use.
- Additionally, the warranty does not cover consumable parts like battery, protective coatings unless there is default in manufacturing or workmanship.
- It does not cover cosmetic damage like scratches, dents, broken plastic or parts.
- It does not cover damage caused by use of another product, caused by accident, abuse, misuse, liquid contact, fire, earthquake or other external cause.
- The warranty does not apply to an Apple product which has been modified to alter the functionality or capability without written permission of Apple, or if the serial number has been removed or defaced.
What is a service contract?
A service contract is actually a legal term, in day to day language an extended warranty is a term for addressing this kind of arrangement. This extended warranty does not come with the product and mostly is not provided by the manufacturer, but by the retailer who in most cases outsources the actual repair and replacement work. So essentially it is a service repairing contract done between the repairing agency and the customer where the retailer is just as an agent not directly affiliated with the group. The service contracts vary from retailer to retailer and can differ drastically in costs, time period as well as coverage. An example of a service contract can be the AppleCare Protection Plan (APP) the terms regarding the IPod Coverage can be paraphrased as follows:
”If during the coverage period the customer submits a valid claim that there is a defect in materials or workmanship in an equipment covered under the APP, or the capacity of the IPod battery to hold an electric charge has depleted fifty(50%) or more from its original specifications. Apple will repair the defect at no charge, using new or refurbished parts equivalent to new in performance and reliability or exchange the covered equipment with a replacement product that is new or equivalent to new in performance and reliability and is at least functionally equivalent to the original product. If Apple exchanges the equipment, the original product shall become Apple’s property and the replacement product shall be covered during the remaining period of the Plan.
Apple will provide access to telephone and web based technical assistance. Technical assistance shall include installation, launch, configuration, troubleshooting and recovery (data recovery not included), storing, retrieving, managing files, interpreting system messages, and configuring hardware. Apple will also provide for customer service for the then current software. This support may vary according to the plan.
APP will cover technical support for the covered Equipment, IPod OS and software applications that are pre-installed with the covered Equipment.”
As is apparent from a cursory reading of the APP the range of services provided are wider than the original warranty with the product, and the plan can be renewed with payment unlike the manufacturer’s warranty which comes with a fixed time limit. There are warranties in car dealerships as well they provide protection for certain mechanical and electrical components as compared to manufacturer’s warranty which covers the working of the car mainly and leaves the ancillary high risk areas like fixtures. Extended warranties are not compulsory to buy; they are just an added coverage which a consumer can also avail after the initial manufacturer’s warranty runs out, it also depends on the kind of coverage which the original manufacturer warranty provides.
When should a person buy an extended warranty?
This often-asked question is a comparative analysis in itself. For deciding whether a person should buy an extended warranty they should compare the manufacturer’s warranty and the extended warranty and ask the following questions:
- What are the types of problems covered in the service contract as compared to the manufacturer’s warranty? Sometimes the problems covered in the warranty are not wide enough and that can leave the customer in dearth of support just after the initial purchase. For example, many car manufacturers do not cover the electrical fittings at all, for that the customer either has to get a service contract from the dealership or get them fixed from outside.
- Are the repairs available outside? This comparison has to be made as well because unless there is an economical option for repairs available in the local area of the customer, not buying the service contract can prove to be disastrous.
- The Cost of the service contract, compared to the outside options. The customer has to draw a comparison between the costs and time taken for fixing the faults in the product as per the local repair options and the service contract costs.
- The time period covered in the service contract and the frequency of repairs- The customer can find from reviews and other sources the frequency of breakdowns and repair requirements and the time period covered in the service contracts. This can also provide additional data to compare with local repair options.
- The options of availing the service contract- Some retailers provide the option of availing the service contract in any of their branches this gives an additional incentive in cases where the customer may move in the future.
It can be gauged from the above discussion that not only are warranty and service contracts different, they also have different uses and purposes. One usually provides for coverage of manufacturing and workmanship defects, while the other provides for wide ranging defects and sometimes even for damage to the device. One is already covered in the selling price of the article while the other has to be paid separately. The time period and the range of coverage are ideal metrics to not only differentiate between the two but get an idea of the true use of them and choose if a person needs to buy it. The intricate details and coverage differences leaves many customers in dark about the true nature of these two, that is the reason that the United States has a separate act called Magnuson and Moss Act which provides that the seller has to clearly specify the terms of the warranty provided to the customer. In India all such disputes are covered by the Consumer Protection Act, 2019 the newly amended act provides for speedy disposal in cases of violation of express warranty and other such malpractices. But in the end, the market operates on the principle of Caveat Emptor and for that the customer must learn the fine print of every transaction.
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