Disputes in the Manufacturing Supply Chain

23 October 2014 Dashboard Insights Blog

Disputes in the automotive supply chain often involve questions concerning warranties, warranty disclaimers, limitations on remedies and limitations on damages. Understanding the basics of warranty law is critical to managing and litigating these disputes. The starting point in most commercial cases involves analyzing the warranty given to the buyer by the seller when supplying automotive components. These include both express warranties and implied warranties under the Uniform Commercial Code (UCC). Express warranties arise from affirmations of fact by the seller and may be created by oral statements, advertisements, specifications, drawings, samples or models. Implied warranties under the UCC include the implied warranty of merchantability and the implied warranty of fitness for a particular purpose.

The parties should consider any warranty disclaimers, modifications or other limitations that are part of the parties’ contract in order to determine potential exposure in the event of a breach of warranty dispute. By contract, the parties may agree to disclaim certain implied warranties and fix or limit remedies or damages. Any contractual provision that limits remedies must leave minimum adequate remedies for the aggrieved party and must not be unconscionable.    

In addition to understanding the contractual language and any disclaimers or limitations, there are two separate timing hurdles that a party must clear in order to bring a claim for breach of warranty: (1) warranty eligibility, meaning the claim falls within the applicable warranty period; and (2) timeliness under the UCC’s four-year statute of limitations period. The expiration of either the warranty period or the four-year statute of limitations period is an absolute bar to a breach of warranty claim. 

For more information on this topic, read the authors’ full article originally appearing in the Michigan Bar Journal.

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