SCENARIO:

Harold Sanchez was in the market to buy some new kitchen cabinets. After looking at numerous "big box" stores, he decided that he would rather pay a local craftsman to design and construct his cabinets as a way to support small businesses. Harold began researching local cabinet makers online and found DeNight Cabinets, LLC. Pictures on the website were appealing to Harold. They showed a man diligently working on a cabinet in a woodworking shop, numerous beautifully crafted cabinets, and, in the "About Us" section of the website, the story of the owner's desire to create the highest quality cabinets. As a careful consumer, Harold did even more research on the company itself. He looked through the terms and conditions on the website and noticed the following warranty:

WARRANTY TERMS AND CONDITIONS:

DeNight Cabinets, LLC, warrants that all products will be free of defects in the material or workmanship for as long as they are owned by you, the original purchaser. To make a warranty claim, contact DeNight Cabinets, LLC, at 123 Main Street, Bobswell, MA 00012 USA. DeNight Cabinets, at its option, may elect to repair or replace any product covered by this warranty. Things not covered: the natural aging of cabinets or variations in wood, wear and tear or damage caused by misuse/negligence/alteration, nonresidential use, or improper storage, installation, or handling. This warranty does not cover indirect, special, incidental, or consequential damages, loss of use, or labor expenses in uninstalling or installing any material or parts.

Harold also looked for online reviews of DeNight Cabinets and, seeing mainly positive results, he decided to give them a call.

During the conversation with DeNight Cabinets, Harold was told that he could take all the measurements for the cabinets himself, if he felt comfortable to do so, and enter the measurements in the online order form. Harold had some experience doing handiwork and thought he could complete the task without a problem. Harold took of the measurements and entered them in the online form as instructed which calculated the total cost ($4,000) based on the measurements and feature selections Harold made. Harold entered his credit card and completed the purchase. The email confirmation he received stated, "Thank you for your purchase with DeNight Cabinets! We look forward to providing you with the highest quality cabinets in the region. Because all cabinets are custom made, we will notify you of a shipping date once the cabinets are ready so that you can make arrangements to receive them." Six weeks passed and Harold had not heard from DeNight Cabinets, so he decided to call the company. The representative stated that she had no record of him purchasing any cabinets, therefore, it would take at least another eight weeks to build and ship his cabinets. Harold was shocked. He stated that his credit card had been charged when he made his initial order and that he had bank statements to prove that DeNight had made the withdraw. Additionally, he also had an email confirmation of his order. The representative from DeNight apologized and stated that she would see what she could do and would contact Harold in a few days.

Several days later, a different representative from DeNight contacted Harold and stated that there must have been a miscommunication between the first representative and the warehouse because his cabinets were already in production. Harold was somewhat relieved until later that evening when he noticed his credit card had been charged for another $4,000 by DeNight. Harold made another call to DeNight to dispute the second charge. DeNight agreed that the charge was in error and that it would refund the amount. It also updated Harold on an anticipated shipping datean additional five weeks out. Harold became extremely agitated, stating, "Look, I ordered these more than six weeks ago. If you had told me it would take this long I would never have ordered them. I have been without a kitchen all this time, and now you are telling me it is going to take another five weeks! This is completely unacceptable. Maybe I should just cancel the order." The rep responded, "Sir, these are all custom made. It takes time. And we don't allow for refunds since all cabinets are made to your specifications." Against his better judgment, Harold decided not argue and waited for the cabinets. Once they finally arrived, they truly were beautiful. He stood in the kitchen admiring his new cabinets, while the local news played on a TV in the background. He overheard a reporter say, "Up next, local cabinet maker DeNight Cabinets subject to a new lawsuit. We will tell you why one family says the company's use of a dangerous varnish caused their house fire."

QUESTIONS:

1. Assume that at the time of installation of the cabinets, DeNight still had not refunded the second charge of $4,000. If Harold notifies his credit card company, must it credit Harold's account the $4,000 even without DeNight's initiation of a refund?

a. No, DeNight must issue the refund.

b. No, Harold would need to bring a lawsuit against the credit card company to force the credit.

c. Yes, because Harold notified the company of the error and attempted to resolve the issue.

d. Yes, but only after it first notifies DeNight.

2. Under FTC regulations, DeNight Cabinets was obligated to ship the cabinets to Harold:

a. within no required time frame because it did not agree to a specified time on its order form.

b. within 5 weeks of his inquiry.

c. within a "reasonable" time after he ordered them.

d. within 30 days of Harold's order.

3. What is the FTC's best argument for holding DeNight Cabinets out of compliance with the Magnuson-Moss Warranty Act?

a. The warranty was not attached to the cabinets.

b. The warranty does not cover all types of damage to the cabinets.

c. The warranty only covers the original owner, rather than any owner.

d. The warranty fails to meet the specific requirements of the Act, namely, it is vague on the parts covered, the procedure for the replacements of parts, and at what cost to the consumer.

4. Assume the following statute exists: "Every manufacturer of a consumer product who obtains information which reasonably supports the conclusion that such a product contains a defect which could create a substantial product hazard or creates an unreasonable risk of serious injury or death shall immediately inform the Product Safety Council of such defect or risk." Which of the following would be DeNight Cabinet's best argument for not notifying the council that its product posed a hazard?

a. DeNight relied on the family reporting the potential safety concern to the council.

b. An independent scientist hired by DeNight provided a report that the varnish could not have caught on fire without an additional fuel source, such as grease.

c. The varnish safety data sheet states the product is not flammable when dry, and DeNight followed all the varnish product recommendations for safe application.

d. This is the only report of a fire due to varnish that the company has ever received, and no one was injured in the fire.

5. Not all of DeNight's customers are able to pay up-front. In those circumstances, it refers the customer to a third-party lender that loans the customers money exclusively to purchase DeNight cabinets, payable monthly over the course of one year. Does the Truth in Lending Act apply to these transactions?

a. No, the loan is not made by the right type of lender.

b. No, it is not the right type of loan.

c. Yes, if the loan is secured by the cabinets themselves as collateral.

d. Yes, it meets all of the elements necessary as long as the transaction is under $54,600.