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Covering Equipment Corrosion Warranties in Sales Contracts

In this blog, Ken Kirschenbaum answers whether equipment corrosion is covered under the warranty of a standard sales contract.



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Question

We sold an intrusion/camera system approximately eight months ago to a customer located within a relatively short distance from the ocean. At one point, the customer had us come to correct a problem he was having with the images. We re-did the coax connectors, which cleaned up the picture. Afterwards, we tested the cameras, and they were working fine. Now, the customer wants us replace the cameras at no charge via the warranty. I provide 90 days labor and a one-year parts warranty. Would corrosion be covered under the warranty of the Standard Sales Contract?

Answer

This is an interesting question, and a bit complicated because you are not using the Standard Form Contract. If you were, there would not be a one-year parts warranty. Here is part of the warranty in the Commercial All in One contract:

“In the event that any part of the security system becomes defective, or in the event that any repairs are required, ALARM COMPANY agrees to make all repairs and replacement of parts without costs to the Subscriber for a period of ninety (90) days from the date of installation. ALARM COMPANY reserves the option to either replace or repair the alarm equipment, and reserves the right to substitute materials of equal quality at time of replacement, or to use reconditioned parts in fulfillment of this warranty. This warranty does not include batteries, reprogramming, damage by lightning, electrical surge, wire or communication pathway interruption of service.”

This warranty is for 90 days and therefore you would not be making any repair under the warranty eight months after the installation. However, if the subscriber signed up for service, which is also covered in the Commercial All in One contract, then your obligation would be this:

“Service, if included as a service to be provided, includes all parts and labor. ... All repairs, replacement ... caused by any means other than normal usage, wear and tear, shall be made at the cost of the Subscriber. Batteries, electrical surges, lightning damage, obsolete components and components exceeding manufacturer’s useful life are not included in service and will be repaired or replaced at Subscriber’s expense.”

So the repair obligations in the warranty and in the service provision are somewhat different. The warranty provision, as far as equipment goes, really shouldn’t be any broader than the manufacturer’s warranty. You will want to pass the cost of the defective equipment back to the manufacturer. It’s bad enough you have to contribute the labor. But when service is included you have to replace the equipment, which is likely out of warranty with the manufacturer, and you have to contribute the labor. Service is, however, pretty much limited to ordinary wear and tear. Is corrosion ordinary wear and tear? 

I’ll offer my opinion, and I am sure others have their own opinions. If equipment corrodes, especially within eight months, I think some environmental issue must be the cause. I am thinking about a device located near a steam shower. Or, an indoor device installed outside. Or an outdoor device installed close to the ocean.

I think if you know about the environmental issue before you install the equipment you have responsibility to advise the subscriber of the risks, and by advise, I really mean cover your butt in the contract [and the Disclaimer Notice]. In fact, you’ll probably be excluding that equipment from warranty and service because you can anticipate problems, in this case corrosion. On the other hand, if you sold the equipment knowing about the environmental issues and used equipment that was suitable for that environment — and charged for it — then I think you should replace it during warranty and under the service contract.


Article Topics
Blogs · Contracts · Equipment Corrosion · Laying Down the Law · Warranties · All Topics

About the Author
Ken Kirschenbaum
Security Sales & Integration’s “Legal Briefing” columnist Ken Kirschenbaum has been a recognized counsel to the alarm industry for 35 years and is principal of Kirschenbaum & Kirschenbaum, P.C. His team of attorneys, which includes daughter Jennifer, specialize in transactional, defense litigation, regulatory compliance and collection matters.
Contact Ken Kirschenbaum: ken@kirschenbaumesq.com
View More by Ken Kirschenbaum
Contracts, Equipment Corrosion, Laying Down the Law, Warranties


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