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Rosendahl v. The Penn Warranty Company

A-339-97T3 (N.J. Super. App. Div 1998) (Unpublished)

CONSUMER FRAUD; WARRANTIES—Absent violation of the administrative regulations under the Consumer Fraud Act and absent “substantial aggravating circumstances,” a breach of a consumer warranty is not a violation of the Act.

A customer purchased a “Used Car Limited Warranty” in connection with the purchase of a used truck. The warranty provided that during its term the company would repair or replace any covered part found to be defective or worn beyond service limits and that “the repair shop shall use components of the same type and quality as those removed.” When the transmission failed within the warranty period, the customer sought a rebuilt transmission as a replacement. However, the warranty company insisted that it would get a transmission from “a junkyard that they dealt with.” The lower court and the Appellate Division agreed that the installation of a used component part could satisfy the terms of the warranty. However, the Appellate Division found that the warranty company had the responsibility to take reasonable measures to assure that such a used part is of the “same type and quality” as the part it replaces. Because the company failed to present any evidence that it had undertaken, or was prepared to undertake, testing of the used transmission to assure that it was in good working condition, the company was found not to have satisfied the terms of its warranty. Nonetheless, although the company breached the warranty, the breach alone did not violate the Consumer Fraud Act. Unless a breach constitutes a violation of the regulations adopted under the Act, a consumer must show “substantial aggravating circumstances ... in addition to the breach,” to establish a violation of the Act. Evidence presented to the lower court did not support a finding that the company’s breach was so manifest that the Court could infer that the company deliberately deprived the customer of the rights conferred by the warranty. Consequently, all the customer was entitled to receive was the difference between the amount paid by the warranty company (the equivalent of a used transmission) and the price that the customer paid for the rebuilt transmission.


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