## Facts

- Khalid Ismael bought a used Ford Tempo from Goodman Toyota for about $5,054 under a retail order stating “AS IS – NO WARRANTY.”
- At the same time as the sale, Ismael paid $695 for a Vehicle Service Agreement providing repair coverage for 24 months/24,000 miles.
- Before purchase, Ismael and his wife test-drove the car and reported that it ran rough and made engine noise; a salesman stated the car likely needed a tune-up and that Goodman would repair anything found wrong at no charge.
- After delivery, the car exhibited serious problems (including stalling and loss of power).
- Ismael returned the vehicle to Goodman multiple times; Goodman attempted repairs without charging him, but the problems persisted.
- Other dealers later advised Ismael that the engine contained sludge and was effectively not repairable.
- Ismael sued asserting, among other claims, breach of implied warranty and negligence, and alleged violations of the Magnuson-Moss Warranty Act based on the “as is” sale coupled with the service contract and repair assurances.

## Issues

1. Whether the Magnuson-Moss Warranty Act applied to a used-car sale labeled “as is” when the dealer simultaneously sold a service contract and made repair assurances.
2. Whether, under Magnuson-Moss and state implied-warranty law, the dealer could rely on an “as is” disclaimer to avoid implied-warranty and repair-related obligations.
3. Whether obligations could be treated as running only to the service-contract company rather than to the dealership involved in selling the contract and making repair representations.

## Decision

- The North Carolina Court of Appeals reversed the judgment for Goodman Toyota and remanded.
- The court held that the Magnuson-Moss Act applied to the transaction.
- The court rejected the trial court’s conclusion that the “as is” sale eliminated any responsibility by Goodman for the vehicle’s condition and repairs as a matter of law.
- The court held Goodman could not avoid potential liability by characterizing all obligations as belonging solely to the third-party service-contract provider where Goodman sold the service contract in connection with the vehicle sale and made repair assurances.
- The court reviewed the challenged conclusions of law de novo and found them legally erroneous in light of Magnuson-Moss’s treatment of implied warranties and service contracts.

## Legal Principles

- Magnuson-Moss provides a consumer cause of action for damages caused by a supplier’s, warrantor’s, or service contractor’s failure to comply with obligations under the Act, a written warranty, an implied warranty arising under state law, or a service contract.
- Magnuson-Moss operates alongside state warranty law; “implied warranty” under the Act refers to implied warranties created by state law.
- A dealer’s ability to disclaim implied warranties using “as is” language may be restricted under Magnuson-Moss when a service contract (and related repair assurances) is offered in connection with the sale.
- A seller cannot necessarily avoid Magnuson-Moss exposure by shifting all responsibility to a separate service-contract company when the seller itself participates in selling the service contract and making repair commitments tied to the sale.

## Conclusion

The court held that a dealer’s simultaneous “as is” sale and sale of a service contract, combined with repair assurances, can trigger Magnuson-Moss obligations and limit reliance on implied-warranty disclaimers; it reversed the dealer’s judgment and remanded for further proceedings.


Ismael v. Goodman Toyota, 106 N.C. App. 421, 417 S.E.2d 290 (N.C. Ct. App. 1992)