Warranties: What purchasing pros need to know about them: Part II
Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant
Editor’s note: This is Part II of a two part story on warranties. Part I sets forth the frame work and definitions while Part II cites examples.
The implied warranty of fitness for a particular purpose requires a bit more explanation. It says that a product is warranted against defects when used for the specific purpose intended. To be clear, the supplier must know the intended purpose. A case in the late 90’s illustrates this warranty.
A table-tennis table manufacturer made tables for the specific purpose of out door recreation such as scout camps, vacation resorts, and cruise ships. To address the aggressive climatic influences of freeze-thaw cycles, marine exposure, and ultra violet radiation, the manufacturer contracted with a well known coatings supplier to design and apply an appropriate coating system to its tables.
The coating supplier knew how the tables would be used and all the climatic influences. The coating supplied failed. The manufacturer sued and won pursuant to the implied warranty of merchantability for a particular purpose.
Another curiosity of warranties is the definition of goods. They are identified as things in the UCC, not a very satisfying definition. In a landmark case involving cardiac surgery at a famous east coast hospital, a procedure involved removing, cooling, and recycling the patient’s the blood, adding pharmaceutical substances, and re-introducing the blood to the body.
The patient died and the decedent’s estate sued. Among other causes of action was the warranty of fitness for a particular purpose. The defendant surgeons and hospital had the case thrown out, claiming that cardiac surgery was clearly a service, not goods. The case was reinstated on appeal as the estate was able to convince the court that when the blood was removed from the body and enriched by added chemicals, the blood became goods for warranty purposes!
Warranties offer no magical supplier management solution. They are merely another arrow in the quiver. Nothing replaces qualifying, evaluating, and managing supplier performance over time. The best results will always come from the lowest Total Cost of Ownership supplier that consistently provides the best mix of quality, service, delivery and price.
Further, to enforce warranty rights, you will need to sue. A major problem is the cost of legal action, which may exceed the recovered remedy and consume years of time and expense. At the end of the protracted litigation, if the supplier is still in business, and if the supplier has the money, you will then get money, not the goods you wanted.
The moral of the story is that purchasing pros must know about warranties but manage supplier relationships so we never have to use them.
Want to know more? Take the Purchasing Law Quiz.