Post 30 -by Gautam Shah
Warranties and Guarantees
The words are often used in lieu of the other, because both are promises that manufacturers or sellers make to customers. Each is a promise, but, offers different legal rights. A guarantee has no actual ‘legal’ transport, whereas a warranty does. Guarantee, are commitments, and Warranty is the assurance made to buyers by the producers. In the case of a product guarantee is a promise that it will work as they claim it will. A warranty is a promise (or guarantee) that they will fix it if it breaks within a certain period of time. A warranty is usually a written guarantee for a product that makes the producer responsible for repairing or replace a defective product or its parts.
A warranty is in its simplest form a simple contract. Some warranties run with the product, so that a consumer who is distanced (by wholesaler, distributors, dealers) from the manufacturer also gets it. A warranty may be express or implied. Express warranty is explicitly provided (written) with indication of the jurisdiction. Implied warranties are unwritten promises that arise from the nature of the transaction, and the inherent understanding by the buyer. Here the goods are expected to be merchantable that is to confirm to ordinary expectations of the buyer. Limited warranties are time limited, whereas performance warranties have set parameters (like kilometres). Warranties often exclude abusive usage, malicious destruction, acts of God or nature, and parts or other inputs that wear out (rubber plastic goods) and replenishment (tires, lubrication, fuel, coolants). Warranties are often limited to the first consumer (buyer) and original location of delivery.
Warranties and Guarantees are mechanisms of assurance. When one procures a consumer item, some degree of assurance in expressed and implied form is automatically available. Entities that are formed of several components are assured by the assembler. Complex structures like buildings, however, come-up through works of several assemblers, and lack comprehensive assurance.
Comprehensive or Compounded Assurance : Concepts turn into Designs + Specifications + Contracts, and ultimately into a deliverable entity. If the deliverable entity is deficient, than everyone concerned for its conception, design and production, is held responsible. But in reality this is very difficult, as there are many persons, agencies, materials, technologies etc. involved in the process, with very indistinct and overlapping roles. Often, the extent of individual responsibilities and mode for verification of their compliance, are not properly defined. In some instances’ delivery occurs as compounding of many entities, where the individual share of responsibilities need not match with the physical scale of contribution. Compounded entities do not automatically offer a comprehensive assurance. Here all individual assurances must be assimilated into a comprehensive assurance which then must be transmitted to the owner or operator of the project.
Creating – Providing own Guarantees : Dynamic Users employ raw materials (materials, parts, components) in forms and conditions beyond the original manufacturers’ provisions. Guarantees provided by the original manufacturer for the few definite end-uses are rarely of any help for dynamic users. Even where materials are employed in the manner prescribed by the original manufacturer, the output process could make it impossible to relate a particular inadequacy to a certain material or procedure. People who assemble complex entities cannot hope to dilute their responsibilities even by involving people like suppliers of materials, etc., System creators must evolve their own guarantees.
Comprehensive Guarantees: In some jobs several vendors come together to a site, and create a System. Designers are not equipped to check or test run the system, or in such instances the system is not completely verifiable. Often there is no Master Agency to assure that the system so assembled will function according to the parameters set by Designers.
Owners (of buildings, structures and systems like ships, aircraft) however, need a comprehensive guarantee to assign the operations and maintenance to agencies concerned with working of the whole entity, such as Insurance companies, Safety (fire, security) Engineers, System Operators, etc.
Processes required for Comprehensive Guarantee to materialize: Specifications for Turn-key Jobs invariably include ways and means for assimilating and interpolating individual guarantees into a composite form for the individual part buyers or users. Specifications are also provided for appointment of third party agencies to manage the guarantees and warranties for the life cycle of the entity. Such additional mechanisms provide an uninterrupted cover for all the resultant liabilities and an operandi for the management of risks thereof.
Lloyds Register of shipping: Lloyds is one such organization that began in 1760 in London, It provides standards for construction and maintenance of merchant ships, and provides necessary technical help. Shipping agents, governments, bankers, insurance cos all depend on the certification provided by Lloyds.
Contingent liabilities are commitments that may give rise to a cost as a result of a future event. They often result from indemnities, guarantees, warranties and certain liability caps in contracts. Contingent liabilities are generally used to allocate risk between parties to an arrangement. The Commonwealth’s policy is that risk should be managed by the party best placed to manage it.
A liability account that reports the estimated amount that a company will have to spend to repair or replace a product during its warranty period. The liability amount is recorded at the time of the sale. (It is also the time when the expense is reported.) The liability will be reduced by the actual expenditures to repair or replace the product. Warranty Payable or Warranty Liability is considered to be a contingent liability that is both probable and capable of being estimated.
25 GUARANTEES and WARRANTIES –part of the lecture series DESIGN IMPLEMENTATION PROCESSES