Dealership Sales Contracts Are the First Line of Defense Against Fraud Claims

September 28, 2015Articles Are We There Yet? - Transportation Law Blog

A car dealership’s purchase order or sales contract is the go-to tool in defending claims by purchasers that a dealership fraudulently induced them into a purchase gone wrong. Key language regarding warranties, condition of the vehicle, and the scope of the contract get special attention from courts when used to defend against purchaser fraud claims.

In particular courts will consider:

  • Complete Paperwork – The sales contract for every deal needs to contain all of the essential terms of the purchase such as make, model, year, miles, and price. All of the initials and signatures for the buyer and the dealer should be present and accounted for. Deploy a structured QC process to ensure that sloppy paperwork does not slip through the cracks.
  • Disclaimer Language – On used vehicles the ‘as-is’ language should be prominently displayed in the contract, not buried in the fine print. Language disclaiming any warranty on the vehicle reinforces the ‘as-is’ language regarding the risk of loss. Many dealerships bold this language in all caps and require buyer initials alongside the clause to eliminate any confusion about condition and warranties. The measure of success is whether your disclaimers put a layman on notice that they bear the risk in the purchase.
  • Integration Clause – A dealership’s standard sales contract needs a clause superseding any prior representations about the vehicle. Limiting representations about the vehicle to those contained in the contract protects against purchaser claims that staff made oral promises they didn’t deliver on. Like your disclaimers, courts want to see that the integration clause is not buried in the fine print, escaping the attention of a layperson buyer.
  • Efforts to Resolve –While there is little basis in law, courts will often look favorably on a dealer that offers a reasonable solution to the customer to resolve the issue with the vehicle prior to litigation.

The lesson here is that conspicuous, clear, and unambiguous integration, as-is, and disclaimer of warranty provisions in your purchase documentation afford strong legal protection against fraud claims by rankled purchasers.

Follow-Up Reading….

A dealership’s sales contract is usually an afterthought until you are already in litigation. One such dealer was able to avoid costly litigation based on the lessons outlined above.