Federal Lemon Law for New Cars: Magnuson-Moss Warranty

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This new car lemon law supplements and improves Georgia warranty law and has been quoted and relied upon by the Georgia Supreme Court in cases such as Freeman v. Hubco Leasing, a case involving a lemon Delorean automobile.

The Magnuson-Moss Warranty law is a federal law giving consumers substantial rights in dealing with manufacturers of lemon cars. One often unrealized result of the Magnuson-Moss Warranty law was that manufacturers began to advertise and compete on the basis of their warranty. The law provides for certain minimum requirements of warranties and provides for disclosure of warranties prior to purchase.

For lemon car purposes, the law significantly affects the rights of Georgia car buyers. For any product which has a written warranty, if the product or any part thereof contains a defect after a reasonable number of attempts by the warrantor to repair the defect, the warrantor must permit the consumer to elect either a refund for or replacement of the product. We call this the three strikes and you’re out principle and we have argued this successfully in a number of Georgia lemon car trials. We have argued successfully to Georgia juries that the lemon manufacturers should be given three attempts to repair the defect. If they can’t, the new car purchaser should not be required to continue to allow attempts to repair indefinitely.

What New Car Lemon Laws Mean For Consumers

A consumer may file a legal action in any court of general jurisdiction in Georgia to enforce his rights under the Magnuson-Moss Warranty law. If the consumer finally prevails, he or she will be entitled to recover attorney’s fees based on actual time spent. The Magnuson-Moss Warranty law allows the prevailing consumer to collect attorney’s fees in cases of breach of warranty under state law too. The Georgia appellate courts have upheld significant attorney fee awards, even in cases with smaller damages based upon this law. The provision allowing attorney’s fees provides substantial economic pressure on the manufacturer to settle consumer disputes prior to court to keep its expenses down. For example, in a case decided by the Georgia Court of Appeals, one retired Atlanta gentleman bought a motor home in which he planned to travel during his golden years. He had problems with the motor home and eventually sued for breach of warranty. The jury awarded him $1,500.00. The Court awarded his attorneys $15,000.00 in attorney’s fees based on their successful presentation of his claim. The Georgia Appellate Court upheld that award finding that it would be impossible for many consumers to bring their claims if attorneys were not properly compensated for their time.

A warrantor often includes the dealer selling or attempting to repair the vehicle. Most new car warranties provide that the dealer will perform repairs on the vehicle at no charge to the consumer if the vehicle is returned to the dealer for service. For example, Mr. Freeman bought a Delorean from Hub Motor Company. He immediately had problems with the car overheating, with the door ajar, light coming on among others. He took the car to Hub for repairs. Hub attempted to repair but eventually refused additional attempts when Delorean Motors went bankrupt and failed to pay Hub for the repair attempts under the warranty. The Georgia Court held that Hub was a warrantor because it had delivered the written warranty and had agreed to make repairs under that warranty and that it must therefore replace the vehicle or refund the price.

The Magnuson-Moss Warranty Act prevents any warrantor giving a written warranty from excluding or modifying implied warranties applicable to the consumer goods under the Uniform Commercial Code. Implied warranties include the warranty of merchantability or fitness for ordinary use.