Guarantees, warranties, and liability for defects – what, where, when?
Lifelong warranty? Unlimited guarantee? A 3-year limited warranty? Liability for a defect?
A company doing business with consumers should already at an early stage adapt to the rules of the game. Defective products and compensation will most likely occur sooner or later and once that happens, understanding the position of a manufacturer, importer, and seller in terms of liability towards the consumer will be vital.
These rules are now changing with the EU Digital Content Directives and the Sales of Goods Directive’s implementation in the national legislation. At the time this is written, the drafting of the Finnish legislation is still in preparation, and the Government proposition has not yet been published. The transposition deadline expires on 1 July 2021 and the regulations shall apply from 1 January 2022.
When is a good considered being defective?
The general principle in Finnish consumer legislation is that a good should correspond to what can be deemed to have been agreed. The contents of such “agreement” is affected by, for instance, the nature of the good itself or the product name on the package, instruction for use, and warnings. The good must be fit for its purpose. The good should also be packaged in an appropriate manner if the good so requires and correspond to any samples presented prior to the purchase. Moreover, the Consumer Protection Act requires that the good shall, as to durability and otherwise, correspond to what a consumer ordinarily may expect in the purchase of such goods. The seller is also bound by public statements regarding the qualities of a good (especially its advertising or markings on its package). If a good deviate from these requirements, the product is considered defective.
How does the liability for a defect work?
If a good is defective, the customer usually contacts the seller of the good. The seller is liable for a defect in a good that was present already when the product was handed over to the buyer, regardless of when the defect was discovered. If the consumer notifies the seller about a defect within six months from the receipt of the good, it is assumed that the good was defective already upon receipt (“rebuttable presumption”), and the seller must be able to show that the good was in conformity when it was handed over to the consumer. This six-month rebuttable presumption is not applied if the presumption is incompatible with the nature of the good or the defect. According to the new EU Sales of Goods Directive, the time for the rebuttable presumption will be extended to one year, and the Member States are entitled to retain or assume up to 2-year-long rebuttable presumption duration in their national legislation.
According to the current legislation, when six months have passed from the purchase it is on the buyer’s responsibility to prove that the good was defective at the time of hand-over in order for the consumer to be able to require the seller to repair or replace the good, reduce the price, or under certain conditions, cancel the contract and refund the price paid. In Finland, no maximum has been set as for the time during which the consumer may claim that a good is faulty. In Finland, it is assumed that the good has a certain expected durability depending on the type of good. The expected durability depends on the good itself, but for instance, the durability of a cellphone has been set to 3-4 years and the durability of a TV to 4 years. When considering the expected durability of a product, the good’s price is also taken into account: expensive goods should last longer than cheaper ones. There is no general list of the typical expected durability of different goods so ultimately expected durability of a good or its part will be assessed on a case-by-case basis.
In the EU, the general liability for a defect is two years, but its duration may also be longer in the national legislation of the Member States, like in Finland. To this rule, the Sales of Goods Directive will not bring any changes.
What does the warranty mean then?
An additional guarantee, also called a warranty, is a voluntary commitment. The buyer cannot require a company to provide a warranty. By issuing a warranty, the company commits to be responsible for the usability or other qualities of a good for the time period determined in the warranty. The warrantor is liable for any defects or other issues defined in the warranty that may occur – in other words, the rebuttable presumption is of the same length as the warranty period. To be released from liability, a warrantor must be able to show that the defect in a product is attributable to for example incorrect use or other similar reason on the side of the buyer. However, a warranty is always separate from the liability for a defect, and the consumer’s statutory rights cannot be limited through a warranty. Even after the end of the warranty period, the consumer may invoke the statutory liability for a defect – in Finland, generally always for as long as the expected duration of a good.
A warranty may be provided by the seller, producer, or importer of the goods. The seller is liable for a warranty provided by a previous seller, such as the producer or the importer, in the same way as the seller is liable for its own liability. The seller may only withdraw from the warranty given by the previous level of sales chain by notifying the consumer in a clear and explicit manner before the purchase. If the seller has not done that, the buyer may choose which stage in the chain of sales the seller will lodge the claim under the warranty.
A warranty granted by a manufacturer in one EU Member State must also be valid on the same conditions in other Member States. In a situation when the manufacturer issues a warranty for its goods, the manufacturer may not refuse to give a warranty to goods purchased from other EU Member States and imported in parallel to Finland. However, it should be noted that the consumer does not have a direct right to receive repairs related to a warranty from a Finnish importer. A Finnish seller of a parallel import good is still liable for the warranty given by a manufacturer, if the seller has not withdrawn from the warranty as described above, and the seller is naturally bound by the liability for defects as provided by law.
What should be kept in mind when giving a warranty?
A warranty should provide an additional benefit for the buyer, which entails more extensive rights than the law requires. When marketing the product, it is prohibited to use the expression (additional) guarantee or warranty (“takuu” in Finnish), if the warranty does not give the buyer any additional benefits compared to the ones they are entitled to directly under the law.
The conditions of a warranty must be given in writing (also electronically) in such a form that the warrantor cannot alter them unilaterally, and they must also remain available to the buyer. The warranty certificate must be drafted in clear and comprehensible language.
With regard to the terms of the warranty, it is essential that they state the following: the content of the warranty; the fact that the buyer has legal rights and the warranty does not limit these rights; who is the warrantor, the warranty period and area of validity and other information necessary for the submission of claims based on the warranty, such as regarding the notification of a defect and the presentation of a warranty certificate. The buyer has the right to invoke the warranty, even if it does not meet the above requirements. The new EU directives will also harmonize requirements in the EU concerning warranty terms.
It is also important to pay attention to the limitations of the warranty. If, for example, fast-wearing parts or damage caused by use contrary to the instructions for use are to be excluded from the warranty, it is recommended to record this in the warranty terms. However, the warranty may not exclude the costs of correcting a defect for which the seller is liable on the basis of its statutory liability for defects, such as the cost of transporting or shipping the goods. The warranty repair must be free of charge for the buyer. When defining the duration of the warranty, it is also good to note that Finnish practice has traditionally adopted a restrained attitude towards very long warranty periods, let alone “lifetime warranty”. The carry-out of such a warranty may in practice prove problematic which is why the marketing of such warranties in Finland can be considered as false and misleading marketing.
A warranty is product-specific and remains valid even if the owner of the product changes as long as the intended use of the product does not change significantly.
Simplification of the differences between liability for a defect and warranty: