Opinion ID: 2634622
Heading Depth: 3
Heading Rank: 2

Heading: The Use of the Terms Together in the Statute

Text: The terms service contract and express warranty are used together in several sections of the Song-Beverly Act in such a way as to indicate, DaimlerChrysler argues, that the Legislature conceived of them as distinct entities. Section 1794.41, subdivision (a)(3), for example, provides: The [service] contract is applicable only to items, costs, and time periods not covered by the express warranty. However, a service contract may run concurrently with or overlap an express warranty if (A) the contract covers items or costs not covered by the express warranty or (B) the contract provides relief to the purchaser not available under the express warranty, such as automatic replacement of a product where the express warranty only provides for repair. (Italics added.) Section 1794.4, subdivision (a) provides that Nothing in this chapter shall be construed to prevent the sale of a service contract to the buyer in addition to, or in lieu of, an express warranty if that contract fully and conspicuously discloses in simple and readily understood language the terms, conditions and exclusions of that contract.... (Italics added.) And section 1794, subdivision (a) provides: Any buyer of consumer goods who is damaged by a failure to comply with any obligation under this chapter or under an implied or express warranty or service contract may bring an action for the recovery of damages and other legal and equitable relief. (Italics added.) The above three statutes indicate that the Legislature not only conceived of service contracts as distinct from express warranties, but intended the two categories to be mutually exclusive. Section 1794.41, subdivision (a)(3), does not permit a service contract to cover the same items as an express warranty. Section 1794.4 specifies that service contracts are sold in addition to or in lieu of express warranties. And section 1794 refers to express warranties and service contracts in the alternative. If express warranties and service contracts were intended to overlap, then these sections would have been phrased differently, by modifying the term express warranty to at least leave open the possibility of overlap. For example, section 1794.4, subdivision (a) might have read: Nothing in this chapter shall be construed to prevent the sale of a service contract to the buyer in addition to, or in lieu of, an express warranty that is included in the original price of the consumer good if that contract fully and conspicuously discloses in simple and readily understood language the terms, conditions and exclusions that contract.... Without such a modifier to the term express warranty, it is difficult to escape the inference that the Legislature considered service contracts to be categorically distinct from express warranties. The legislative history of the Song-Beverly Act supports this interpretation. As originally enacted, the Song-Beverly Act's sole reference to service contracts was the provision in section 1794.4 allowing service contracts to be sold in addition to or in lieu of express warranties. (Stats.1970, ch. 1333, § 1, p. 2482.) The Act was amended in 1971 to, among other things, specify in section 1791, subdivision (a), that the term consumer goods with which the Act was concerned signified new goods. (Stats.1971, ch. 1523, § 2, p. 3001.) At the same time, section 1795.5 was added to extend the Song-Beverly Act's application to used consumer goods sold with express warranties. It provided that, notwithstanding the definition of consumer goods as new goods, the obligation of a distributor or retail seller of used consumer goods in a sale in which an express warranty is given shall be the same as that imposed on the manufacturer under this chapter, with certain enumerated exceptions. (Stats.1971, ch. 523, § 17, p. 3008.) In response to concerns about the prospective enactment of section 1795.5 from the Northern California Motorcar Dealers Association, Inc., Senator Song's staff assured the association that the proposed remedies with respect to express warranties on used vehicles would not apply to used vehicles with service contracts. That response is perhaps the clearest window we have into the Legislature's reason for distinguishing between a service contract and an express warranty. It stated: You may be correct that the distinction between a warranty and a service contract is purely one of semantics, but such is often the most important kind. I believe the words `guarantee' and `warranty' possess a meaning that `service contract' does not share. .... We think that an `as is' sale, with or without a service contract, will better inform the public as to what they are actually buying than a sale accompanied by the express warranties presently used in the used car trade. (Richard Thomsen, Admin. Asst. to Sen. Song, Letter to Wallace O'Connell, Apr. 16, 1971, p. 2.) [2] It is true that, functionally speaking, warranties and service contracts appear to have the same purpose  to guarantee the repair or replacement of certain products or parts of products for a specified period of time. But, as the above passage suggests, the Legislature apparently conceived of an express warranty as being part of the purchase of a consumer product, and a representation of the fitness of that product that has particular meaning for consumers. In contrast, it apparently thought of the purchase of a service contract as distinct from the purchase of the product, and not as a representation of fitness but only an agreement to provide repair services, a kind of insurance. Hence, one difference between express warranties and service contracts is that the latter is generally purchased for an additional cost. [3] (§ 1791, subd. ( o ).) In arguing that express warranties and service contracts do indeed overlap, Gavaldon points to language in the definition of express warranty in section 1791.2 stating that [i]t is not necessary to the creation of an express warranty that formal words such as `warranty' or `guarantee' be used, but if such words are used then an express warranty is created. Therefore, a service contract that is denominated an extended warranty, as service contracts are sometimes called, will also be an express warranty under section 1791.2, and therefore subject to the replacement/restitution remedy. This argument does not assist Gavaldon. As discussed above, the Legislature apparently believed that the terms warrant or guarantee had particular significance to consumers. And because the Legislature generally conceived of service contracts and extended warranties as falling into distinct categories, it also provided that a manufacturer that confused those categories by labeling service contracts as warranties should assume the obligations imposed on manufacturers that issued express warranties. DaimlerChrysler did not so label its service contract in the present case. Gavaldon also argues that sections 1794.4 and 1794.41 are antifraud provisions, designed to protect a consumer who pays for an express warranty, as part of the price of the vehicle or other consumer good, from paying extra for a service contract that partly provides the same coverage as the warranty. Assuming she is correct, such purpose is nonetheless wholly consistent with the Legislature's view that service contract and express warranty should be considered distinct entities. In sum, reading the various portions of the Act, together with relevant legislative history, it appears that the Legislature thought of service contracts and express warranties as mutually exclusive categories, except when the manufacturer chooses to use the terms warrant or guarantee in a service contract. When, as here, the manufacturer has not used those terms in its service contract, the breach of its service contract does not make it subject to the replacement/restitution remedy reserved in section 1793.2, subdivision (d) for purchasers of motor vehicles sold with express warranties.