Marketing Beware: Recent Case Highlights Risks of Express Warranties in Advertisements and Promotional Material
By Steven P. Lipowski
December 16, 2009
Businesses must be wary of the risks associated with promises made in advertisements or other promotional materials, as in some cases these promises extend beyond mere puffery and create express warranties of performance.
Generally speaking, advertisers are permitted to engage in “puffery” in the promotion of their products. Puffery is generally defined as promotional statements or claims that express subjective rather than objective views, such that no reasonable person would take the statement literally. For example, “We’re the best!” or “You’ll love our service!” are examples of puffery. However, a statement such as “Our prices are 20% lower than competitor X” is a statement of fact that can be proven or disproven and as such goes beyond puffery. Statements in promotional works that go beyond mere puffery need to be evaluated carefully by the advertiser as they may have unintended consequences. The recently decided case of Kraft v. Dr. Leonard’s Healthcare Corporation underscores this point. In this decision from early 2009, a federal court in Michigan held that advertising claims that go beyond mere puffery can in fact create express warranties under the Uniform Commercial Code. The Uniform Commercial Code (or UCC) is a set of business laws now passed in generally the same form in all 50 states. Express warranties described under the UCC carry with them rights and remedies afforded to purchasers of products which are sold under these express warranties, along with a significant body of case law that supports these statutory rules in each state.
In the Kraft case, a catalog advertisement for “no-slip ice carpet” was found to constitute an express warranty made to the purchaser of the product. The advertisement stated that the carpet product “prevents falls for good!” and included a drawing of the product in use on a snow-covered staircase. A purchaser of the product sued the advertiser after slipping and falling on the ice-covered carpet outside his home. The purchaser stated that he relied on the advertisement before he relied on the product. The court agreed with the purchaser that the advertisement constituted an express warranty under the UCC and as a result the purchaser had several additional remedies against the advertiser.
Of course, there is a natural tension between the marketing objective and the legal risk in this case. Marketing objectives dictate that advertisers want to make their product attractive to prospective purchasers, and one way to do so is to laud its performance with bold statements. However, as the Kraft decision effectively points out, making statements that are objective and beyond mere puffery can constitute express warranties to customers and result in unforeseen exposure to your company. Finding an effective way to manage this tension is critical, and the time to do so is of course before the advertisement or promotional effort is launched. Discussion of proposed marketing efforts with knowledgeable counsel at the outset of a campaign is a good way to spot these issues up front and avoid the potential pitfalls.
If you have questions regarding the above, please contact Steve Lipowski, the author of this article, or any of the attorneys in the Business Transactions Practice Group of Ruder Ware.
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