Case Law Summaries

Poli v. DaimlerChrysler Corporation

• Opinion Date: March 15, 2002
• Business Law
• E-Mail

UCC; WARRANTIES; STATUTE OF LIMITATION — A claim under an express warranty is not limited by the four year UCC statute of limitation.

A customer purchased a new car and elected to obtain a “seven-year, seventy-thousand-mile powertrain warranty from [the manufacturer].” The car buyer experienced problems with an engine timing belt, one of the parts covered by the warranty. The belt failed a number of times and, one of the failures destroyed the engine’s “short block.” It took the dealer six months to repair the engine. A suit was filed under the Lemon Law and under the Magnuson-Moss Warranty Act. The lower court held that the claim under the Lemon Law was barred because the car buyer had not given the manufacturer notice and an opportunity to correct the alleged defect within the first 18,000 miles of operation. It also dismissed the Magnuson-Moss Act claims as untimely because they were not brought within four years after delivery of the car. In doing so, it rejected the car buyer’s argument that the warranty and Magnuson-Moss claims were “timely because the seven-year, seventy-thousand-mile powertrain warranty was ‘a guarantee of performance’ which [the manufacturer] breached by failing to properly repair the timing belt.” The Appellate Division affirmed the dismissal of the Lemon Law claim but reversed the dismissal of the warranty and Magnuson-Moss Act claims. Although the car buyer initially brought the car for repair when it had been driven less than 18,000 miles and was within two years of delivery, there was no allegation that “the dealer failed to correct this condition within a reasonable time.” Further, there was no allegation that the replacement timing belt was defective or had been improperly installed. Further, case law had shown that the Director of the Division of Consumer Affairs, who was responsible for administration of the Lemon Law, had “rejected a Lemon Law claim under facts similar to this case, pointing out that the law does not provide ‘continuous protection to car buyers’ but instead only applies to defects identified and reported within the statutorily specified period.” This gave rise to the question as to whether “a cause of action or a breach of a seller’s agreement to repair any product defect that occurs during a warranty period accrues upon delivery of the product or only after the seller fails to perform the agreed repairs.” Under the UCC, the limitation period for breach of a sales contract is “four years after the cause of action has accrued.” Further, the UCC provides that “[a] cause of action accrues when a breach occurs, regardless of the aggrieved party’s lack of knowledge of the breach[,]” and that “[a] breach of warranty occurs when tender of delivery is made.” There is, however, an exception to this general rule if “a warranty explicitly extends to future performance of the goods and discovery of the breach must await the time of such performance.” The manufacturer contended that the powertrain warranty was an ordinary sales warranty and that the four year statute began upon delivery of the car. On the other hand, the car owner claimed that the powertrain warranty was a warranty of future performance which was not breached until the manufacturer “failed to properly repair the timing belt, thus causing [] recurrent problems with the operation of the car.” The Court held that although the manufacturer “did not describe the warranty as a ‘guarantee’ of future performance, it was not ‘a mere representation of the [car’s] condition at the time of delivery’ but rather a promise relating to ‘its performance at a future time.’” Therefore, it was an enforceable agreement that the defendant would repair the defective condition. Consequently, the Court concluded “that a claim for breach of this warranty did not accrue at the time of delivery of the car but whether when [the manufacturer] allegedly breached its duty to repair the defect.” “[The] correctness of this conclusion is clearest in a case such as this, where the term of the warranty is longer than the four-year limitations period provided in [the UCC].” The Court accepted the manufacturer’s view that the powertrain warranty was “an ordinary sales warranty,” the consumer would be unable to enforce the three year warranty period that extended beyond the four-year UCC statute of limitations. The Magnuson-Moss Warranty Act does not require that any consumer product be warranted, but if the manufacturer warrants a product, it imposes specific obligations on the warrantor. The Act does not contain any express limitations. Consequently, because “[w]here a federal statute creates a cause of action, but does not establish a limitations period for that action, the courts will apply the state’s statute of limitations governing the state cause of action most closely analogous to the federal action.” Here, the Court believed that the statutory cause of action most analogous to a claim under the Act “is a breach of warranty claim under the UCC… .” Consequently, having already concluded that the four year statute of limitations under the UCC had not accrued, the claim under the Magnuson-Moss Warranty Act was also not barred by the statute of limitations.

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