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Michigan Court of Appeals: Repair-or-Replace Provisions Are Not Warranties

September 30, 2016

 On September 22, 2016, in The Grosse Pointe Law Firm, PC v. Jaguar Land Rover North America, LLC, Case No. 326312, the Michigan Court of Appeals was called upon to determine when a cause of action for a breach of a repair-or-replace provision accrues under the Uniform Commercial Code. In this particular case, the plaintiff had purchased an automobile that needed several repairs over the course of its ownership. Plaintiff purchased the car in December 2005, traded it in 2011, and sued the manufacturer and auto dealer for breach of warranty under the UCC and the federal Magnuson-Moss Warranty Act in 2012.

 

The trial court dismissed the plaintiff’s lawsuit, concluding that the claims were barred by the UCC’s four-year statute of limitations applicable to warranty claims, which generally provides that a breach of warranty claim accrues at the time of delivery, regardless of the plaintiff’s knowledge.

 

Here, the vehicle’s sales contract contained the following language under “Vehicle Warranties”:

 

Land Rover North America, Inc., warrants that during the warranty period, if a Land Rover vehicle is properly operated and maintained, repairs required to correct defects in factory-supplied materials or factory workmanship will be performed without charge upon presentment for service; any component covered by this warranty found to be defective in materials or workmanship will be repaired, or replaced, without charge.

 

Although the repair-or-replace language was included in the warranty provisions, the Court of Appeals concluded that it was not a warranty at all because the provision did not relate to the performance of the vehicle, but was instead a contractual promise breached when the defendants failed to honor it. The Court of Appeals reasoned that holding otherwise would lead to an anachronistic and undesirable result. That is, a cause of action for failing to repair or replace defective parts could accrue before the breach ever occurred, giving sellers incentive not to honor the provisions and simply wait out the four-year statutory period.

 

As a result of the Court of Appeals’ ruling, merchants should be mindful that, in Michigan, repair-or-replace provisions can effectively extend a warranty period because if a breach occurs in the last year of the warranty, the consumer will have four years to seek money damages or specific performance.

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