Government Contract Warranties - Report Example

Order 116256 Government Contract Warranties As per the requirements of the procurement regulations, the government contracts essentially need toincorporate various clauses that in one way or other call upon the remuneration of the contractor. However, some provisions are not at all associated with the contract remunerations. Since the clauses are mostly included in consonance with the model provisions, a normal view at the contract terms may not reveal the underlying effect of such terms. The terms with regard to warranties, among others, constitute a significant part of the contract agreement. (Worthington; Goldsman, 363) The prime objective of warranty in a Government Contract are to demarcate the privileges and obligations of the contractor and the Government for defective goods and services and to promote quality functioning of the product. Normally, a warranty is required to provide a contractual right for the rectification of errors with regard to acceptance of the supplies or services by the Government. Besides, the cost of warranty should not outweigh the expected benefits to be derived out of it. It order to make it easier the pricing and enforcement of warranties, the contracting officer is required to specify in the terms and conditions of warranty the scope of privileges and obligations of the contractors; the prescribed remedies in case of violation of the condition of warranty; the duration of the warranty; time limit for notification of the discovery of defects. Besides the consistency of the warranty clauses are also to be verified. (Subpart 46.7- Warranties) It is common that the words 'warranty' and 'guarantee' are used in such contracts interchangeably. The origin of both the terms has been traced to the same concept, which indicates 'to guard'. Both the terms are similar since both indicate a bunch of obligations to be fulfilled by the provider as a component of the purchase contract, or imposed on the provider legally. Warranties have been categorized as express and implied warranties. The express warranties indicate the assurances to provide necessary after sale follow up to the product either in writing or orally. Express warranty indicates a particular statement of fact or a promise. Contrary to this the person assuring warranty-the warrantor-never expresses the implied warranties. In some type of contracts such warranties flow automatically and implied by the law. (Chapter Eight: Guard Duty-Warranties) Primarily the implied warranties are of two kinds such as implied warranty of merchantability and the implied warranty of fitness for a specific purpose. The implied warranty of merchantability indicates that while selling a product, being an esteemed seller, it is legally implied that the item is sufficient and complete for the objective for which it is obtained by way of purchase or lease. However, the implied warranty of merchantability is applicable only when the seller is in the business and dealing with the item under question. The implied warranty of fitness for a particular objective is another kind of implied warranty that indicates that any seller is assumed to assure that the products sold is suitable for the specific purpose for which it is being sold, when the buyer discloses the purpose, and the seller feels that the buyer is dependent upon him in choosing a suitable item to fit his purpose. (Chapter Eight: Guard Duty-Warranties) In case of Government Contracts the warranty terms are mostly written, so as to fall under the category of express warranty. The express warranty generally concerned with the quality of products so as to assure whether they perform the desired function or cater to the particular specifications, if they are suitable for the intended purpose for which they are obtained; the period up to which the manufacture is obliged to repair or replace the components and the relevant terms with regard to this, etc. The warranty may also deal with the ownership of goods-whether the ownership lies with the seller or transferred legally to the purchaser. The period of warranty may differ substantially, on the basis of the type of the transaction and type of warranty and the enforced law. The state laws mostly extend an implied warranty up to four years from the initiation of the transaction. Sometimes, the implied warranties are limited to the duration of written warranty. The express warranties categorically states the period of the implied warranty. (Chapter Eight: Guard Duty-Warranties) The Magnuson-Moss Act provides for the written warranties for consumer goods exceeding the cost of a few dollars. According to this Federal it is always not necessary that the merchants make written warranties. However, a written warranty has to cater to certain standards. Prior to purchase the warranty must be available to read before the purchase. It must be expressed in readable language and must also incorporate the relevant information such as the name and address of the company making the warranty; the list of the parts of the product to be covered; the assurances with regard to replacement, repair or refund or details of payments if to be made in lieu of such services; the duration of the warranty; the proposed action at times of contingency; and a nutshell of the legal rights vested with the purchaser. (Chapter Eight: Guard Duty-Warranties) The warranty coverage may be full warranty or limited warranty. The laws provide to categorically express the warranties in terms of full warranty or limited warranty. The terms of full warranty assures that the product will be repaired or replaced free of cost during the warranty period. The state and federal laws necessitate that if the warrantor provides for repairing the item then the problem is to be attended within a specified time limit and even without involving any charge. Besides it should also be reasonably convenient to bring back the item to and from the repair site. When the company fails to fix the problem after reasonable number of attempts then the purchaser have every right to claim for a refund or replacement. It is common to judge that the best made products often have the best warranties, since they are really less prone to require them. (Chapter Eight: Guard Duty-Warranties) In this case the manufacturer can assure a long period warranty without involving any substantial risk. Thus, the warranty is seen as the line of confidence of the manufacture about the product. Therefore, the value of a warranty is added to the price of the product while making purchase decision of a product. Conversely, a limited warranty normally covers less. It generally covers only the parts and not the service charges beyond a certain period. However, for costly and durable products the reputed manufacturers some time extend limited warranties those are for a longer period of time and greater coverage. In addition to these product warranties most of the companies also provide extended warranties or service contracts for differing lengths of time and for differing amounts of money. It is pertinent to check whether the advantages that it confers commensurate to their costs. It is worth considering as to how the extended warranty or service contact increases the regular warranty. It is also necessary to find out as to where the products are to be sent for repairs. (Chapter Eight: Guard Duty-Warranties) At the time of the execution of the service contract it is worth considering whether the products are durable. The durability of a product makes the service contract less valuable. Conversely, some others are trouble-prone. The facsimile machine, laser printer, computers are considered to be trouble prone and therefore, worth possessing an extra coverage or service contract. However, the freezers on the other hand normally are considered durable and go on working with minimum maintenance for years together. Thus such durable application may not need service contracts. Sometimes, the service contract involves a deductible amount or per-repair flat fee that is laid down in the agreement. Such deductible amount or per-repair flat fee often offsets the anticipated savings as a result of the service contract. Sometimes, it is worthwhile to wait till the expiry of the product warranty before executing a service contract in order to assess the reliability of the product. Sometimes it is essential to consider as to who actually is providing the service. It is the manufacture, or store from which the product is procured or a company the name of which is little known ever before. (Chapter Eight: Guard Duty-Warranties) The Government contracts normally include express warranty provisions in respect of the product. The warranty provisions extend for the exclusive remedies in respect of the inherent defects or those not associated with fraud or such gross mistakes that tantamount to fraud by entailing the contractor to repair or replace the defective product. Often the contractors take the plea to get the relief that government is required to inspect the product prior to acceptance. However, the warranty covers the latent faults not found under visual inspection or by the pre-acceptance examination are subject to coverage by the product warranty. The government may also claim the advantages of the implied warranties in consonance with the Uniform Commercial Code -- UCC. Irrespective of the fact that federal law affords to find out the privileges and responsibilities of parties to a government contract, the Uniform Commercial Code provides as guidance to the federal law in the area so far as it is not covered by the contract or by federal regulations. (88 Warranties) The implied warranty of merchantability is provided by the section 2-314 of the UCC. The implied warranty of fitness for a specific purpose is provided by the sections 2-315 of the Uniform Commercial Code. It has been provided that the relief under implied warranties guaranteed by the sections 2-314 and 2-315 of the UCC will not be applicable if the product was inspected prior to acceptance and the defects were failed to have reasonably been found at the time of the inspection. The contractor need not guard or recover an implied warranty where the government has expressly disclaimed such warranties. In case of estimate of quantities, there is implication that the warranty is expressly disclaimed. The existence of a warranty is ascertained out of an affirmation of the fact or a promise that is associated with functioning under the contract. Moreover, it has been laid down that the completion of the performance within a prescribed time limit may not be taken as an assurance as to complete the performance within the stipulated time. (88 Warranties) It is quite clear that almost all the service providers in the warranty industry concentrate solely upon the sale and governance of the extended service plans. However, a few of the valiant companies resort to outsource the product warranty claims processing on behalf of the manufacturers in the consumer electronics industry and carry on the repair and servicing works through numerous service centers available at different locations. The process of providing a service warranty is seen as a network run by companies those associating consumers, service centers, parts distributors and manufacturers. In the broad terms the product warranties are fundamentally different from the extended warranty or service contracts and these two cannot be assimilated. Literally, the product warranty conferred by a manufacturer stands as an assurance, while an extended warranty is in line with an insurance product. (Warranty Services) The product warranties are provided by the manufacturer at the time of purchase of the product. The service warranties are regarded as a product in itself. The basic difference of product warranty and extended warranty lies in the fact that the product warranty is provided free of cost and packaged with the purchase of the product. The extended warranties are regarded as a product in itself and sold for an additional amount of money. The acceptance of the product warranty is compulsory while the acceptance of the extended warranty or service contract is optional. However, presently the extended warranty or service contracts have becoming more complex. (Warranty Services) Presently, the service providers do not wait to cover the product under warranty till the expiry of the product warranty. From the date of purchase itself the basic product warranty can possibly be extended with coverage of the additional utilization and additional parts of the product not fundamentally assured by the primary product warranty. To illustrate the basic warranty of a flat screen TV may be limited to the domestic use of the product. This warranty can be extended on payment of additional charges to the commercial use from the date of purchase of the product itself. The product warranty and service warranties can be compared similar to the relationship between salt and fresh water. Both are connected and intermingled without any confusion of their independent existence. Irrespective of the fact that there may be a prolonged debate about the starting point of the ocean and finishing point of the river still it is consensus to belief that there exists a border line somewhere. (Warranty Services) A product warranty is usually granted by the manufacturer and normally initiated at the time of the purchase of the product. Normally, it is lasts for a specified period of time. During such period of contract the manufacturer assures their product to function properly under normal consumption or they undertake to repair or replace at no cost in case of any malfunctioning. This is the case when the auto-manufacturer under takes to assure the normal functioning of the vehicle for 5 years or 50,000 miles of running, whichever is earlier along with the sale price of the vehicle. Contrary to this a service warranty is extended by a service organization may be the product manufacturer it self or an independent service organization. The service provider under the service contract extends the service warranty for a charge commensuration to the degree of service provided. The service warranty contract clearly indicates the parts of the product covered, the time to be taken to fix the problem by the technician and the number of coverage hours and days per week, the service is extended. (Service & Warranty) It is customary to assume that the product warranties substitute the maintenance programs for the specified period assured by the manufacturer. Normally, after the purchase of a product it is customary to depend upon the product warranties to assist the user guard against the malfunctioning of the product. Such warranties are mostly very particular with regard to the coverage, the privileges of the company and the privileges of the consumer. The Government contracts also attain such privileges on entering into the warranty contract after purchase of the product. The product warranties fundamentally involve some basic points. It is customary that most manufacturers assure a warranty on their products at the time of purchase. It is pertinent to note that no state or federal law compels any manufacturer to provide the warranty. (Chapter 6: Maintenance & Warranties) The warranty is provided by the manufacturers to enhance the confidence of the consumer about the quality of the product. The warranties stems as an essential ingredient of the marketing strategy. The warranties generally make good of the defects of manufacture by means of repair or replacement of the product. However, the warranties cannot be regarded as the maintenance programs. Most of the manufacturers offers an extension to the normal warranty and provide service and repair packages charging a fees. The service warranty or extended warranty refers to the out of warranty service. Such type of warranty coverage is almost similar to the basic product warranty and the manufacturer here only extends the warranty package after the expiry of basic warranty period taking a fees. The service warranty brings a reduction in the maintenance cost related to the product depreciation and failure. (Chapter 6: Maintenance & Warranties) References Chapter Eight: Guard Duty-Warranties. Retrieved from http://www.abanet.org/publiced/practical/books/consumer/chapter_8.pdf Accessed 17 March, 2006 Chapter 6: Maintenance & Warranties. Retrieved from http://ops.fhwa.dot.gov/publications/telecomm_handbook/chapter6.htm Accessed 17 March, 2006 Service & Warranty. Retrieved from http://www.dataram.com/ServiceAndWarranty.asp Accessed 17 March, 2006 Subpart 46.7- Warranties. Retrieved from http://www.acqnet.gov/far/01-27/html/Subpart_46_7.html Accessed 17 March, 2006 88 Warranties. Retrieved from http://www.usdoj.gov/usao/eousa/foia_reading_room/usam/title4/civ00088.htm Accessed 17 March, 2006 Warranty Services. 11 August, 2003. Retrieved from http://www.warrantyweek.com/archive/ww20030811.html Accessed 17 March, 2006 Worthington, Margaret M; Goldsman, Louis P. Contracting with the Federal Government. 1998. Read More