Wehrt, Klaus --- "Warranties" [2011] ELECD 131; in De Geest, Gerrit (ed), "Contract Law and Economics" (Edward Elgar Publishing, 2011)

Book Title: Contract Law and Economics

Editor(s): De Geest, Gerrit

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781847206008

Section: Chapter 14

Section Title: Warranties

Author(s): Wehrt, Klaus

Number of pages: 23

Extract:

14 Warranties
Klaus Wehrt


1. Introduction
A good can be defined by the set of its properties. Some of the properties
are observable before purchase. According to Nelson (1970), we call these
attributes search properties. Other characteristics cannot be observed. We
call these characteristics experience properties, when their true quality
is only revealed some time after the purchase (for example, function-
ability, duration). Otherwise they have to be classified according to
Darby and Karny (1973) as credence properties (for example, therapeutic
influence).1
Warranties control the quality of the experience characteristics of a
good. However, if we take a look at what happens in reality, we dis-
cover that warranties are actually only offered for a subgroup of the set
of experience characteristics.2 Commonly, the guarantee expires after a
certain time period after the purchase, and therefore only those experience
properties are covered which may reveal themselves within the warranty
period. Apparently, the warranty is not a panacea against bad products.
What is a warranty? The warranty is a promise by the seller to take
contractually specified measures in case the performance of the purchased
item is bad. Such measures3 are typically money-back warranties,4 price
reductions,5 subsequent-improvement,6 or replacement warranties.7 The
warranty condition has to be met before the buyer gets warranty compen-
sation. Normally the warranty condition states that the purchased unit has
to become defective, that is, the bought item breaks down, parts of it do
not work normally or the ...