I need to know what type of legal issues arise when an existing
product is modified and then resold?

Example:
Buying a name brand product (like a DELL PC) and then making custom
modifications to the unit (like cutting holes in the side or adding an
internal light fixture) and re-selling the unit as a "customized DELL
PC".

I understand that it would void the manufacturer's warranty on the
product, but if the customer was made aware of that, would it still be
illegal? The modifications would not be illegal themselves (ie: adding
something to circumvent copy protection). Can someone answer this for
me and provide me with links so that I can prove the answer? I would
really like for someone with a legal background to answer if possible.

pwizard, 

Please note that an answer from any Google Answers researcher is only
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That said, let's go on to your question. 

Whenever someone buys a product, the concept of an "implied warranty"
is already in effect. This concept gives the buyer a reasonable
expectation that the product is not defective and will work as
advertised.

An extra layer of protection is provided by an "express warranty",
typically written and backed by the product manufacturer. They decide
what to include in their warranty, depending upon how they wish to
present their brand to the public. Although manufacturers are not
necessarily obligated to provide additional warranty protection,
express warranties have become so common that it's difficult to sell
complicated products (particularly PCs) without one.

Various types of consumer warranties are discussed here:

Lawyers.Com
"What is a Warranty"
http://www.lawyers.com/lawyers-com/content/aboutlaw/consumer_6.html

A warranty encourages buyers to use a product within the limits of its
specified design. Manufacturers cannot usually be held liable for
defective claims if the product has been abused in an unreasonable
way. For example, a buyer can't drop a new camera, breaking the lens,
and expect to get it repaired under warranty.

Any modification that you might make to a product as a reseller or end
user usually voids the manufacturer's warranty. Here's an example from
Dell's Limited One Year Warranty:

http://www.dell.com/us/en/gen/misc/policy_010_policy.htm#one_year

"...this limited warranty does not cover damage due to external
causes, including accident, abuse, misuse, problems with electrical
power, servicing not authorized by Dell, usage not in accordance with
product instructions, failure to perform required preventive
maintenance, and problems caused by use of parts and components not
supplied by Dell."

Cutting new holes, adding new electrical components, or installing
third-party accessories are not going to be endorsed by the original
manufacturer. Such modifications mean that the product has gone beyond
the manufacturer's control, and outside of their factory
specifications. There's no way they can guarantee that it will work
according to their design.

You could offer your own warranty on a modified product, but you are
then subject to the federal Magnuson-Moss Warranty Act, which requires
that you:

http://www.lawyers.com/lawyers-com/content/aboutlaw/consumer_6.html

"...provide complete information about the warranty so that the
consumer can understand it and compare its terms to that of warranties
offered by competitors in the marketplace. A consumer can bring a
lawsuit against a business that violates the act and can recover the
costs of the lawsuit and attorney's fees if the consumer prevails."

You might want to do a Google search for existing custom PC shops and
see how they have worded their warranties.

Improperly done modifications could expose your customers to an
increased risk of property damage, physical injury, or even death.
What if someone decides to pop open a cover and start poking around?
Since modifying an existing product might make you a link in "the
chain of manufacture", you could be held liable for damages if
something fails:

Products Liability Law: An Overview
http://www.law.cornell.edu/topics/products_liability.html

"Products liability refers to the liability of any or all parties
along the chain of manufacture of any product for damage caused by
that product. This includes the manufacturer of component parts (at
the top of the chain), an assembling manufacturer, the wholesaler, and
the retail store owner (at the bottom of the chain)."

If you intend to carry this out as a retail business, I again
recommend that you first obtain proper legal advice from a competent
business lawyer in your area.

Thanks,
huntsman


References - 

Lawyers.Com
Consumer Law
http://www.lawyers.com/lawyers-com/content/aboutlaw/about_consum.html

A Businessperson's Guide to Federal Warranty Law
http://www.mlmlaw.com/library/guides/ftc/warranties/toc.htm

"Understanding the Magnuson-Moss Warranty Act"
http://www.mlmlaw.com/library/guides/ftc/warranties/undermag.htm

Products Liability Law: An Overview
http://www.law.cornell.edu/topics/products_liability.html

Small Business Law - Free Legal Information
http://business-law.freeadvice.com/


Search Terms - 

- business law
- consumer law 
- dell warranty
- Magnuson-Moss Warranty Act
- product liability
- warranty law

I have a background in resposibility for regulatory safety and EMC
approvals of electrical products. Considerable knowledge of electrical
safety standards and design expertise is required to make
modifications to electrical products that comply with regulations. In
many countries it is necessary for manufacturers to place recognised
standards compliance marking on products. Any company or individual
that modifies such products is at risk of severe penalties in law,
especially if the product no longer complies with mandatory standards
and causes a problem such as an electrical shock or catches fire.
Regarding EMC (electromagnetic compatability), modifications may cause
a product to produce excessive levels of interference that may disrupt
vital communications or cause nearby equipment to malfunction or
interfere with TV reception.
To check out the above please contact the regulators responsible for
electrical safety and EMC compliance in your state or country. In
general it is an offence to sell a product that does not comply with
mandatory standards.

I can think of at least four other legal issues that might arise:
-- Whether there are any trademark issues involved in using the brand
name of the product you are modifying.
-- Whether modifications affect any software licenses that come with
the product.
-- Whether the changes result in a product that violates safety or
other regulations.  You also might be required, for example, to remove
UL labels and other safety certifications.
-- If you're buying the original product wholesale, whether the
changes violate any resellers' agreements.

Also, at the risk of being too nitpicky, I'd like to point out an
error in the discussion of warranties.  Manufacturers' warranties
typically do not provide additional protection above the implied
warranty.  Typically they limit the liability manufacturers face;
that's why they're called limited warranties.