Warranty forfeit OK??

[garthu]

Hi Guys, do you think this is fair.

From 2 angles is it legally acceptable (disclaim you all now for any input as i know you aint lawyers!)

And from a ethical stand point??

We have a clause in warranty that basically states that if you choose not to pay us on time and we have to get to final demand stage, you forfeit your warranty completely, even once payment is received after final demands (warranty which can be up to 2 years).

Personally i think this is OK, but then i am viewing it from my side only right now.

[IanF]

Garth
I wouldn't like it, if this happened. Unless you are very upfront with it. So in your sales pitch you say something like The product delivered is the very best and will be installed by workmen with 20 years experience. All we want in return is payment when it is due, if not received in time your warranty is forfeited. Then go on how in the event of failure if the warranty is cancelled your call out must be paid in advance.
There will always be exceptions as we are all softies for a good story!

[Mark Atkinson]

I see no problem whatsoever. Debtors shouldn't avoid paying their accounts to the point where a final demand is received in any event.

Credit is not something to be abused. If you don't have that clause you simply have a debtor who doesn't pay you until something goes wrong. As soon as there is a fault then he pays his account and comes running for the warranty.

I think your clause is a good one and completely ethical. What's not ethical is debtors not paying their accounts!

[garthu]

Hi Ian,

For sure i would be the same... however we do play fair as well i think... Before the final demand is issued, i do say, refer to our terms as you will forfeit warranty with the final demand. So i dont point it out up front, but do point it out before it occurs... otherwise i would also

[AndyD]

I'm not convinced it's ethical, there's something about it that doesn't sit right although I can't immediately explain why.

*Edit*

Just some thoughts.......
It's almost that two 'wrongs' don't make a 'right' and the withdrawal of warranty almost seems like an act of revenge as you have recourse under the law already for non-payers..

You're also using the warranty as a carrot and stick, like a settlement discount when a warranty should actually be the customers peace of mind that he has made a quality purchase with back-up.

Also if you're just supplying an item which was manufactured in its entirety by another company then the warranty is underwritten by the manufacturer and not yourself therefore you could be guilty of damaging the manufacturers brand and good name.
/Edit

I'm also not convinced it's legal and if it is at the moment I doubt very much it will be when the NCA is implemented.

[daveob]

Isn't there usually something in the terms and conditions about the goods remain the property of the seller until paid in full ?

So can't you just change the clause to read that the warranty may only be claimed by the owner of the goods ?

[flaker]

not fair

What you're effectively saying that by ommission ,buyer stands to lose his warranty. you CHOOSE to say at a particular point when buyer is faced with this dilemma. i will never purchase from this rather shrewd (not sure how to describe) seller irrespective that it may be within the law.if you want to cancel warranty ,return late payments (just thinking of warranty purchase) also begins to sound like those gym contracts. & Garthu i know this is bothering you.do the right thing for a good sleep

[adrianh]

There is a way to do it that is perfectly ethical. Look at the motor industry. Yuo buy a car, the car must be serviced every 15,000 km or you lose the warranty. We all agree to this and spend vast sums to service the car at their workshops even thought we know that we are being overcharged.

I think its all in the wording. Lets say you install an electric fence. Build in an inspection clause. This inspection is carried out after three months has passed. The inspection can only be carried out if payment has been received in full. Then you say that failing to have the inspection done would lead to the loss of the warranty.

It looks to me that your problem is to get money out of the customer. If it is over the counter goods, don't let them go before payment has been received in full. If it is an electric fence there is a very simple way of dealing with it. Install a cellular device like the GSM Commander in your control box. If the guy doesn't pay you simply phone up the device and disable the fence. You can also build in an alarm that squeals all the time. If he phones you simply tell him that a technician would need to go out to reconfigue the controller but you can't do so until payment is received in full. Once you've got the payment go out and repace the controller with a controller that doesn't have a GSM Commander. Again, use the 3 month inspection clause to recover the GSM controller from guys who do pay.

To put it in MBA speak: "There are numerous methods to delaminate a feline"

[Martinco]

I'm also not convinced it's legal and if it is at the moment I doubt very much it will be when the NCA is implemented.

I am not sure this will fly with NCA but there are certainly some positive suggestions to ease the problem.

[Dave A]

At the risk of sounding stupid, I don't understand why you'd want a forfeit clause like this in the first place. Is it just about having an added incentive in place for timeous payment, or is there some other issue you're looking to cover?

[wynn]

I am sure that if you word it along the lines of;
On purchasing this product/service warranties are guaranteed, callouts however are only covered if your monthly payments are current, should you fall into arears an up front payment will be required before a 'call out' will be effected. Then sting them if they are in arrears.

So really you are saying 'I fully guarantee this product/service but if you don't pay, I aint coming to fix it'

[adrianh]

I've been thinking about the electronics involved with a mechanism to disable the fence automatically after 3 months. It's actually very simple to do with a microprocessor.

Have 2 led's:
Power.
Call Technician.

Under normal circumstances the power led will be on and the Call Technician led will be off.

Now lets say you install the device and the customer hasn't paid you yet. To indicate this have the power led blink (this will show that the device is in "Self destruct" mode) The system simply accumulates time by counting clock cycles devided by hours or days. Once enough cycles have been accumulated flip a relay. The normal connection will be via COM / NC which means that the relay has to be set for the system to be disabled. Now light the Call Technician led and have the device sound an irritating alarm. To disable the alarm have the microprocessor do the following: monitor on an off switch times. Say: turn the device off, on 3 sec, off 3 sec, on 3 sec sec and on. This will allow you to talk the user through resetting the system. To make the process easier have the system delay for 15 secs on start up before sounding the alarm, this allows the user to reset the alarm while the device is quiet.

You can do all of this with a R50 circuit having a PIC 12F675 (including glue circuitry) and a relay.

[sterne.law@gmail.com]

This clause is a problem now and even more so once the CPA kicks in.

Firstly the warranty of a product is linked to a product and is a part of it in that it is sold as a feature and not a benefit. You cant then sell me a product and then remove a part of it without the neccessary court procedures.
A debtor has a remedy for poor payment - obviously via a process, or may repossess the goods, also pending the correct procedures.
you make no mention of if the payment is made does the warranty come back into effect.
If you are removing a warranty, then you are placing a value to it and by so doing you tacitly imply that the purchase price includes a payment for the warranty, thus if you remove it you will need to refund the client for that portion

Of course another issue is taht if a person has no money to pay the account, they wont have money to see an attorney!!!!!!!!! Although it is amazing how money can be found for certain things and not paying acounts
In terms of the CPA the following will be relevant and will leave you in an even worse position -

Firstly all products are sold with an implied warranty. this warranty extends for 6 months and is in addition to any other warranty. on this basis, if the client has not paid within 6 months there are presumably some more pressing and serious issues at hand, not to mention serious cash flow problems.
The CPA also does not allow for any contract that forces you to forfeit or waiver rights in terms of the act - which the warranty of 6 months is.

The practice of not mentioning to a client, that a warranty, rightly or wrongly, will not be honoured if payment is not made, only when at issue is a problem.
In terms of the CPA such clauses must be brought to the attention of the client. The most common practice is to put these clauses in bold so they stand out and the seller need not defend themself as to if they did or didnot point out the relevant clause.

the one way around it may be as follows -
products are sold and obviously come with the 6 month implied warranty in terms of the CPA. Clients who pay for the goods within 3 months then become entitled to a further 6 month warranty (depending on what your current warranty terms are) as a type of early payment discount. (this may be skirting on the edge but will probably leave you better positioned than the current one)

[AndyD]

It's viable from an electronics point of view but systems like this are not generally difficult to reverse engineer or workaround. The added expense might be throwing good money after bad and it might even reduce your chances of getting paid if the customer finds out about it.

[adrianh]

@AndyD

The guy who buys an electric fence ain't going to go through a reverse engineering exercise.

You ain't gonna reverse engineer a device cast in potting compound - I've done enough reverse engineering myself and know full well how to stop reverse engineering.