46.2-1993.70 - Warranty obligations.
§ 46.2-1993.70. Warranty obligations.
A. Each motorcycle manufacturer, factory branch, distributor, or distributorbranch shall (i) specify in writing to each of its motorcycle dealerslicensed in the Commonwealth the dealer's obligations for preparation,delivery, and warranty service on its products and (ii) compensate the dealerfor warranty parts, service and diagnostic work required of the dealer by themanufacturer or distributor as follows:
1. Compensation of a dealer for warranty parts, service and diagnostic workshall not be less than the amounts charged by the dealer for themanufacturer's or distributor's original parts, service and diagnostic workto retail customers for nonwarranty service, parts and diagnostic workinstalled or performed in the dealer's service department unless the amountsare not reasonable;
2. For purposes of determining warranty parts and service compensation,menu-priced parts or services, group discounts, special event discounts, andspecial event promotions shall not be considered in determining amountscharged by the dealer to retail customers;
3. Increases in dealer warranty parts and service compensation and diagnosticwork compensation, pursuant to this section, shall be requested by the dealerin writing, shall be based on 100 consecutive repair orders or all repairorders over a ninety-day period, whichever occurs first and, in the case ofparts, shall be stated as a percentage of markup which shall be uniformlyapplied to all the manufacturer's or distributor's parts;
4. In the case of warranty parts compensation, the provisions of thissubsection shall be effective only for model year 1992 and succeeding modelyears;
5. If a manufacturer or distributor furnishes a part to a dealer at no costfor use by the dealer in performing work for which the manufacturer ordistributor is required to compensate the dealer under this section, themanufacturer or distributor shall compensate the dealer for the part in thesame manner as warranty parts compensation, less the wholesale costs, forsuch part as listed in the manufacturer's current price schedules. Amanufacturer or distributor may pay the dealer a reasonable handling feeinstead of the compensation otherwise required by this subsection for specialhigh-performance complete engine assemblies in limited production motorcycleswhich constitute less than five percent of model production furnished to thedealer at no cost, if the manufacturer or distributor excludes such specialhigh-performance complete engine assemblies in determining whether theamounts requested by the dealer for warranty compensation are consistent withthe amounts that the dealer charges its other retail service customers forparts used by the dealer to perform similar work; or
6. In the case of service work, manufacturer original parts or partsotherwise specified by the manufacturer or distributor, and parts provided bya dealer either pursuant to an adjustment program as defined in § 59.1-207.34or as otherwise requested by the manufacturer or distributor, the dealershall be compensated in the same manner as for warranty service or parts.
Warranty audits of dealer records may be conducted by the manufacturer,factory branch, distributor, or distributor branch on a reasonable basis, anddealer claims for warranty compensation shall not be denied except for goodcause, such as performance of nonwarranty repairs, lack of materialdocumentation, fraud, or misrepresentation. Claims for dealer compensationshall be paid within thirty days of dealer submission or within thirty daysof the end of an incentive program or rejected in writing for stated reasons.The manufacturer, factory branch, distributor, or distributor branch shallreserve the right to reasonable periodic audits to determine the validity ofall such paid claims for dealer compensation. Any chargebacks for warrantyparts or service compensation and service incentives shall only be for thetwelve-month period immediately following the date of the claim and, in thecase of chargebacks for sales compensation only, for the eighteen-monthperiod immediately following the date of claim. However, such limitationsshall not be effective in the case of intentionally false or fraudulentclaims.
B. It shall be unlawful for any motorcycle manufacturer, factory branch,distributor, or distributor branch to:
1. Fail to perform any of its warranty obligations, including tires, withrespect to a motorcycle;
2. Fail to assume all responsibility for any liability resulting fromstructural or production defects;
3. Fail to include in written notices of factory recalls to motorcycle ownersand dealers the expected date by which necessary parts and equipment will beavailable to dealers for the correction of defects;
4. Fail to compensate any of the motorcycle dealers licensed in theCommonwealth for repairs effected by the dealer of merchandise damaged inmanufacture or transit to the dealer where the carrier is designated by themanufacturer, factory branch, distributor, or distributor branch;
5. Fail to compensate its motorcycle dealers licensed in the Commonwealth forwarranty parts, work, and service pursuant to subsection A of this section,or for legal costs and expenses incurred by such dealers in connection withwarranty obligations for which the manufacturer, factory branch, distributor,or distributor branch is legally responsible or which the manufacturer,factory branch, distributor, or distributor branch imposes upon the dealer;
6. Misrepresent in any way to purchasers of motorcycles that warranties withrespect to the manufacture, performance, or design of the motorcycle are madeby the dealer, either as warrantor or co-warrantor;
7. Require the dealer to make warranties to customers in any manner relatedto the manufacture, performance, or design of the motorcycle; or
8. Shift or attempt to shift to the motorcycle dealer, directly orindirectly, any liabilities of the manufacturer, factory branch, distributoror distributor branch under the Virginia Motor Vehicle Warranty EnforcementAct (§ 59.1-207.9 et seq.), unless such liability results from the act oromission by the dealer.
C. Notwithstanding the terms of any franchise, it shall be unlawful for anymotorcycle manufacturer, factory branch, distributor, or distributor branchto fail to indemnify and hold harmless its motorcycle dealers against anylosses or damages arising out of complaints, claims, or suits relating to themanufacture, assembly, or design of motorcycles, parts, or accessories, orother functions by the manufacturer, factory branch, distributor, ordistributor branch beyond the control of the dealer, including, withoutlimitation, the selection by the manufacturer, factory branch, distributor,or distributor branch of parts or components for the motorcycle or anydamages to merchandise occurring in transit to the dealer where the carrieris designated by the manufacturer, factory branch, distributor, ordistributor branch. The dealer shall notify the manufacturer of pending suitsin which allegations are made which come within this subsection wheneverreasonably practicable to do so. Every motorcycle dealer franchise issued to,amended, or renewed for motorcycle dealers in Virginia shall be construed toincorporate provisions consistent with the requirements of this subsection.
D. On any new motorcycle, any uncorrected damage or any corrected damageexceeding three percent of the manufacturer's or distributor's suggestedretail price as defined in 15 U.S.C. §§ 1231-1233, as measured by retailrepair costs, must be disclosed to the dealer in writing prior to delivery.Factory mechanical repair and damage to tires are excluded from the threepercent rule when properly replaced by identical manufacturer's ordistributor's original equipment or parts. Whenever a new motorcycle isdamaged in transit, when the carrier or means of transportation is determinedby the manufacturer or distributor, or whenever a motorcycle is otherwisedamaged prior to delivery to the new motorcycle dealer, the new motorcycledealer shall:
1. Notify the manufacturer or distributor of the damage within three businessdays from the date of delivery of the new motorcycle to the new motorcycledealership or within the additional time specified in the franchise; and
2. Request from the manufacturer or distributor authorization to replace thecomponents, parts, and accessories damaged or otherwise correct the damage,unless the damage to the motorcycle exceeds the three percent rule, in whichcase the dealer may reject the motorcycle within three business days.
E. If the manufacturer or distributor refuses or fails to authorizecorrection of such damage within ten days after receipt of notification, orif the dealer rejects the motorcycle because damage exceeds the three percentrule, ownership of the new motorcycle shall revert to the manufacturer ordistributor, and the new motorcycle dealer shall have no obligation,financial or otherwise, with respect to such motorcycle. Should either themanufacturer, distributor, or the dealer elect to correct the damage or anyother damage exceeding the three percent rule, full disclosure shall be madeby the dealer in writing to the buyer and an acknowledgment by the buyer isrequired. If there is less than three percent damage, no disclosure isrequired, provided the damage has been corrected. Predelivery mechanical workshall not require a disclosure. Failure to disclose any corrected damagewithin the knowledge of the selling dealer to a new motorcycle in excess ofthe three percent rule shall constitute grounds for revocation of the buyerorder, provided that, within thirty days of purchase, the motorcycle isreturned to the dealer with an accompanying written notice of the grounds forrevocation. In case of revocation pursuant to this section, the dealer shallaccept the motorcycle and refund any payments made to the dealer inconnection with the transaction, less a reasonable allowance for theconsumer's use of the motorcycle as defined in § 59.1-207.11.
F. If there is a dispute between the manufacturer, factory branch,distributor, or distributor branch and the dealer with respect to any matterreferred to in subsection A, B, or C of this section, either party maypetition the Commissioner in writing, within thirty days after either partyhas given written notice of the dispute to the other, for a hearing. Thedecision of the Commissioner shall be binding on the parties, subject torights of judicial review and appeal as provided in Chapter 40 (§ 2.2-4000 etseq.) of Title 2.2. However, nothing contained in this section shall give theCommissioner any authority as to the content or interpretation of anymanufacturer's or distributor's warranty.
(1996, cc. 1043, 1052.)