Warranties and service contracts

The FTC's test is the "basis of the bargain." An agreement conveyed at the time of sale requiring no consideration beyond the purchase price is a written warranty. An agreement that calls for some consideration in addition to the purchase price, or that is entered into after the purchase, is a service contract. An agreement providing only maintenance or inspection services with no performance guarantee is also a service contract, even if given free at the time of sale.

Federal definitions. A written warranty is a written affirmation of fact or promise about material or workmanship, or a written undertaking to refund, repair, replace or take other remedial action. A service contract is "a contract in writing to perform, over a fixed period of time or for a specified duration, services relating to the maintenance or repair (or both) of a consumer product."

Why this matters to you practically. If your air conditioner is three years old and still under manufacturer warranty, coverage on the compressor may already be yours at no extra charge — buying a service contract for the same failure is buying it twice. Check the manufacturer documents before adding coverage.

Where you complain differs too. Manufacturer warranty disputes and service contract disputes often go to different places. Service contracts are typically regulated at state level by an agency that varies by state; if you're not sure which, most state attorney general offices publish a complaint referral process.

How to choose

Find out what's still under manufacturer warranty

Then don't buy a service contract covering the same failure on the same equipment.

Ask whether the agreement was free at point of sale

That's the FTC's basis-of-the-bargain test in plain terms, and it tells you which product you hold.

Keep manufacturer documents with your closing papers

Model, serial, install date, and the warranty PDF. That's what proves coverage years later.

Don't rely on a seller's description

"It's under warranty" is not a document. Get the paper.

Match the complaint to the product type

Warranty and service contract disputes often go to different agencies.