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Opinion: Changes to Merchandising Practices Act represent progress

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Small businesses in Missouri have long grappled with lawsuits, or the threat of lawsuits, under the Missouri Merchandising Practices Act. At its core, the MMPA seeks to prevent deceptive and/or unfair trade practices in consumer transactions by lowering the standard of proof required for consumers to make claims arising from their purchases, leases or sales.

The MMPA attempts to deter businesses from engaging in deceptive or unfair practices by permitting consumers who prevail on claims under the MMPA to recover their attorney fees and receive punitive damages against the offending business. Some courts in Missouri have described the MMPA as covering “every practice imaginable and every unfairness to whatever degree.”

Obviously, the sheer breadth of the MMPA makes it difficult for businesses to operate with certainty.

This uncertainty especially affects businesses that sell or advertise large or complex products that involve many different components, since any defect to any single component of a product may give rise to a claim under the MMPA. Residential contractors are a typical example of businesses that are susceptible to MMPA claims. In fact, homebuilders are often the targets of MMPA claims due to the very nature of residential home construction.

In the past, homebuilders had no ability to contractually limit their liability under the MMPA. Thankfully, recent revisions to the MMPA passed by the Missouri legislature provide homebuilders new tools to avoid frivolous litigation. In order for homebuilders to protect themselves from MMPA lawsuits, they must do the following:

  • Offer an express written warranty in connection with the sale of the residence, and
  • Include a disclaimer in each residential sale contract that substantially includes language excluding the transaction from coverage under the Merchandising Practices Act.

This is just one of many considerations that must be factored in when drafting disclaimer language in residential sale contracts. Since there is no exact language that must be included to trigger these new protections under the MMPA, and because there are often other important drafting and liability considerations, homebuilders should consult with an attorney before drafting disclaimer language.

Similarly, express warranties involve additional binding obligations on homebuilders that lay out a seller’s obligations to repair or replace parts of a residence. Important considerations such as the scope and length of a warranty should be carefully weighed before drafting residential sale contracts. However, homebuilders do not have to offer express warranties themselves, but may do so through third-party warranty companies.

The contracting process matters as well. Residential builders need to ensure that any homebuyer affirmatively accepts and agrees to any written warranties applicable to the sale of a residence in order to ensure the warranty is effective.

If a residential homebuilder fails to do either one of these steps, then they may be susceptible to lawsuits under the MMPA.

These new protections are not limited to single-family residences. Sales of duplexes, triplexes, quadruplexes and condominium or cooperative units where the title passes to individual unit owners as part of the sale are all potentially covered by these revisions to the MMPA.

These changes represent welcome progress for residential builders. They equip savvy builders with tools to avoid MMPA lawsuits and provide certainty about their obligations and potential liability under Missouri law.

As in all construction, it is crucial that homebuilders have confidence in their materials, tools and equipment, so they are certain the job is done right. Just the same, homebuilders need to be certain that their contracts are up to date so they spend their time where it is most valuable: at the jobsite, not at the courthouse.

Ben Shantz is an attorney with Spencer Fane LLP in Springfield. He can be reached at 
bshantz@spencerfane.com

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