Under California’s Song-Beverly Consumer Warranty Act (“Song-Beverly”), unless disclaimed, every retail sale and lease of consumer goods in California includes an implied warranty by the manufacturer and the retailer that the goods are merchantable. Cal. Civ. C. §§ 1791.3, 1792. The duration of an implied warranty of merchantability in no event shall be “less than 60 days nor more than one year following the sale [or lease] of new consumer goods to a retail buyer.” Cal. Civ. C. § 1791.1(c). Previously, no court had addressed the duration provision where a buyer alleged a latent defect that manifested itself more than one year after purchase. Recently, however, the court in Mexia v. Rinker Boat Co., Inc. (2009) 174 Cal.App.4th 1297, was confronted with this issue and concluded that the duration provision does not bar an action for breach of the implied warranty of merchantability when the action is based upon a latent defect, regardless of whether the defect is not discovered by the consumer or reported to the retailer or manufacturer within the one year maximum durational period.

In Mexia, the plaintiff purchased a boat manufactured and sold by the defendants. More than two years after the purchase, the boat’s engine began corroding. The plaintiff sued the manufacturer and retailer for breach of the implied warranty of merchantability under Song-Beverly, alleging that, at the time he purchased the boat, the boat was unmerchantable due to a latent defect. The manufacturer and retailer demurred, arguing that the duration provision of Song-Beverly constituted a one year statute of limitations for breach of implied warranty claims and that the plaintiff’s claim had already expired. The trial court accepted this argument and sustained the demurrer. The plaintiff appealed.

On appeal, the manufacturer and retailer conceded that the duration provision was not a statute of limitations and that the applicable statute of limitations was four years. However, the manufacturer and retailer argued that the duration provision should be interpreted as barring an action for breach of the implied warranty of merchantability when the purchaser fails to discover and report the defect to the seller within one year. In a unanimous decision, the Mexia court rejected this argument, reasoning that the statute “merely creates a limited, prospective duration for the implied warranty of merchantability…[and] it does not create a deadline for discovering latent defects or for giving notice to the seller.” Id. at 1301. The court acknowledged a “policy repeatedly expressed by the California courts of the need to construe the Song-Beverly Act so as to implement the legislative intent to expand consumer protection and remedies.” Id. at 1311. The court held that the implied warranty is breached at the time of sale where the defect is latent and the purchaser is not obligated to either discover or report the breach within the one year durational provision. Id. at 1310-1311. The court also recognized that discovery and trial might prove the allegation of latent defect incorrect, but the pleadings had to be accepted as true at the demurrer stage. Id. at 1308.

The defendants in Mexia recently filed a petition for review by the California Supreme Court and a decision as to whether it will be reviewed is expected by October. Should the decision stand, it may expose manufacturers and retailers to breach of the implied warranty merchantability claims many years after the sale of a product. This highlights the need for adequate and effective warranty disclaimers that comply with Song-Beverly.