Code Section

Business and Professions Code - BPC


  ( Division 8 added by Stats. 1941, Ch. 44. )

CHAPTER 28. Fair Practices of Equipment Manufacturers, Distributors, Wholesalers, and Dealers Act [22900 - 22927]
  ( Heading of Chapter 28 amended by Stats. 2005, Ch. 712, Sec. 1. )


(a) If a dealer submits a warranty claim to a supplier while the dealer contract is in effect or within 60 days after the termination of the dealer contract, and if the claim is for work performed before the termination or expiration of the dealer contract, the supplier shall approve or reject that warranty claim by written notice to the dealer within 45 days after the supplier’s receipt of the warranty claim. If the supplier approves the warranty claim, the supplier shall pay the dealer or credit the dealer’s account the entire amount owed with respect to the claim within 30 days of approval. If the supplier rejects the warranty claim, the supplier shall give the dealer written or electronic notice of the grounds for rejection. These reasons must be consistent with the supplier’s reason for rejecting the warranty claims of other dealers, both in terms and manner of enforcement. If the supplier does not provide the dealer with grounds for rejection, the claim shall be deemed to be approved.

(b) Any claim that is not approved by the supplier based upon the dealer’s failure to properly follow the procedural or technical requirements for submission of the warranty claim may be resubmitted in proper form by the dealer within 30 days of receipt of the supplier’s rejection notification.

(c) Warranty work performed by the dealer shall be compensated in accordance with the reasonable and customary amount of time required to complete the work, expressed in hours and fractions multiplied by the dealer’s established customer hourly retail labor rate, which shall have previously been made known to the supplier. Parts used in warranty repair work shall be reimbursed at the current net parts cost plus 15 percent and the cost of freight. For purposes of this subdivision, “established customer hourly retail labor rate” means the lowest posted customer in-shop retail labor rate for the six months preceding the claim.

(d) For the purpose of this act, any repair work or installation of replacement parts with respect to the dealer’s equipment in inventory or equipment of the dealer’s customers at the request of the supplier, including work performed pursuant to a product improvement program, shall be deemed to create a warranty claim for which the dealer shall be paid pursuant to this section.

(e) A supplier may audit warranty claims submitted by its dealers for a period of up to one year. If the audit reveals an amount was misrepresented by the supplier, the supplier may charge its dealers the amount shown by the audit to be misrepresented. If a warranty claim is misrepresented, then subsequent warranty claims submitted within the two-year period ending with the date of the audit may be audited. However, a supplier shall not audit a warranty claim more than once.

(f) The requirements of subdivisions (a), (b), and (c) apply to all warranty claims submitted by a dealer to a supplier where the dealer has complied with the supplier’s reasonable written policies and procedures for warranty reimbursement. A supplier’s warranty reimbursement policies and procedures shall be deemed unreasonable to the extent they conflict with any of the provisions of this section.

(g) A dealer may choose to accept alternate reimbursement terms and conditions instead of the requirements of subdivisions (a), (b), and (c) if there is a written dealer contract between the supplier and the dealer that requires the supplier to compensate the dealer for warranty labor costs either as: (1) a discount in the pricing of the equipment to the dealer; or (2) a lump-sum payment to the dealer that is made to the dealer within 90 days of the sale of the supplier’s new equipment. If the requirements of this subdivision are met and alternate terms and conditions are in place, subdivisions (a), (b), and (c) do not apply and the alternate terms and conditions are enforceable. Nothing contained in this subdivision shall be deemed to affect the supplier’s obligation to reimburse the dealer for parts in accordance with subdivision (c).

(h) If a supplier fails or refuses to pay for warranty work covered under this section within 30 days of the supplier’s approval of the dealer’s claim, the supplier shall be liable for 110 percent of the total claim, plus interest at the statutory rate from the payment due date until the date of payment, and actual costs for any court or arbitration proceeding, including costs for attorney’s fees and arbitrators.

(Added by Stats. 2005, Ch. 712, Sec. 9. Effective October 7, 2005.)