We have all, at some time or the other, been offered an extended warranty with the purchase of a product be it an electronic item or a car. And we have to admit that we have been tempted by the offer. But how many of us stop to consider what an extended warranty is and how is it different, if it all, from any other product that helps mitigate risk at a cost, like an insurance cover.
When we purchase a new car, we receive a warranty from the manufacturer that the car is made available to us in a perfect condition. What we forget is that an unconditional warranty is embodied in the Sale of Goods Act, 1930.
This warranty should be applicable through a time period generally accepted as the lifetime of the car. If breached, we have the right to have the manufacturer either replace or repair a particular part or the product itself. Besides, let’s not forget that the customer can always approach the consumer court for relief in all such circumstances.
The extended warranty, often sold with electronic goods, generally claims to cover limited items like defects in the product, malfunction, accidental damage or in some cases it could be an “all risk” cover but always for a limited period of time.
The question then is whether ‘extended warranties’ fall within the meaning of ‘warranties’ as provided in the Sale of Goods Ac, or if they are a form of insurance.
The question is intriguing because the two concepts seem deceptively similar but intuitively distinct at the same time.
A warranty, is essentially an assurance to another person of certain conditions which if not fulfilled could result in a claim for damages. An insurance contract on the other hand is simply a contract where for a specified consideration, one party undertakes to compensate the other for a loss relating to a particular subject as a result of the occurrence of a particular event.
A closer look at insurance policy and warranty would reveal that insurance effectively provides cover for practically every eventuality, whereas the