Ismael v. Goodman Toyota
106 N.C. App. 421, 417 S.E.2d 290 (1992)
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Rule of Law:
Under the Magnuson-Moss Warranty Act, a supplier who enters into a service contract with a consumer regarding a consumer product at the time of sale may not disclaim or modify any implied warranties, rendering any 'as is' clause in the sales contract ineffective.
Facts:
- Plaintiff purchased a used Ford Tempo from the defendant dealership for his personal use.
- The vehicle was sold under a contract that included an 'as is' clause, purporting to disclaim all warranties.
- Contemporaneously with the vehicle purchase, the plaintiff paid an additional $695 to the defendant for a written service contract that covered repairs for 24 months or 24,000 miles.
- Beginning the day after the purchase, the plaintiff experienced significant and persistent mechanical problems with the vehicle.
- Plaintiff returned the vehicle to the defendant for repairs on at least six occasions during the first six months of ownership.
- Despite multiple repair attempts, the defendant was unable to satisfactorily repair the vehicle, which the plaintiff was only able to drive for a total of 700 miles before it became permanently unroadworthy.
Procedural Posture:
- Plaintiff sued the defendant dealership in a state trial court for negligence and breach of warranty.
- The trial court found in favor of the defendant dealership.
- The trial court issued conclusions of law stating that the 'as is' nature of the sale meant the dealer bore no responsibility for the vehicle's repair or roadworthiness.
- Plaintiff, as the appellant, appealed the trial court's judgment to the intermediate court of appeals.
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Issue:
Does the Magnuson-Moss Warranty Act prohibit a used car dealer from disclaiming the implied warranty of merchantability with an 'as is' clause when the dealer simultaneously sells the consumer a service contract for the vehicle?
Opinions:
Majority - Wells, J.
Yes. The Magnuson-Moss Warranty Act (MMWA) prohibits a supplier from disclaiming implied warranties on a consumer product if the supplier enters into a service contract with the consumer. The court reasoned that the transaction fell squarely within the purview of the MMWA, as the plaintiff was a 'consumer,' the used car was a 'consumer product,' and the defendant dealership was a 'supplier.' While North Carolina's Uniform Commercial Code (UCC) generally permits 'as is' sales to disclaim implied warranties, the MMWA at 15 U.S.C.A. § 2308(a) expressly forbids such disclaimers when a service contract is also sold. The agreement for which the plaintiff paid $695 met the statutory definition of a 'service contract.' Therefore, the federal Act preempted state law, rendering the 'as is' disclaimer ineffective and preserving the implied warranty of merchantability that arises in the sale of goods under state law. The court found the plaintiff had presented conclusive evidence of a breach of this warranty.
Analysis:
This decision solidifies a critical consumer protection under the Magnuson-Moss Warranty Act, clarifying that the sale of a service contract transforms the nature of an 'as is' transaction. It establishes that dealers cannot simultaneously profit from selling a service contract while disclaiming all underlying responsibility for a product's basic fitness. This precedent significantly strengthens the position of consumers, particularly in the used vehicle market, by ensuring that federal law voids 'as is' clauses when a dealer also sells a promise of future service. The ruling serves as a potent reminder that federal consumer protection statutes can override contrary provisions in state commercial codes.
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