Legal Article - Business Law

Car Sales and Consumer Protection from Unfair Trading Regulations 2008

It is tempting to put aside Trading Standards issues because they don't appear to hit the bottom line when it comes to monthly sales figures. 

There is sometimes a culture of "we'll deal with it when it happens". Or perhaps the view is "we've got a very good relationship with Trading Standards they pop in every so often and we have a chat".

Unfortunately with Lawgistics background we have seen it all too often.

It is true your business is selling cars. You must be profitable and you must keep the bank manager happy in terms of a viable business plan. However, if you are going to build a sound customer base then all of the issues we have discussed will instil confidence and loyalty with the customers. 

Yes you can con a customer through your doors and some will buy. But if they are not happy with the car, the price, the finance deal, the integrity of the sales staff then their dissatisfaction will echo in their conversation with friends.

It may also spill over to the Trading Standards Department or the Office of Fair Trading.

If their purchase has been a good experience then that good news will be spread widely. Potential purchasers are looking for signals to point them in a particular dealers direction and this could be the cue they need.
You cannot afford to feel smug about your relationship with Trading Standards Departments.

Yes it is good to have that relationship but be aware that the patience of Trading Standards is not endless if small problems keep repeating themselves. For the larger problems such as misdescriptions etc then they may feel they have no alternative to prosecute, particularly if a customer has complained.

This may also affect your Consumer Credit Licence with the Office of Fair Trading and your MOT testing certificate with VOSA.

Another aspect is that routine issues such as advertising etc may be handled informally but periodically Trading Standards may carry out a special project on a certain area that is giving problems nationally.

Quite recently we have seen prosecutions for failing to service a car properly when a doctored car is put in for a particular service schedule, and also spot checks on the roadworthiness of cars for sale on forecourts.

If a prosecution does result then the repercussions are very heavy indeed. There is a fine, which currently amounts to £5000 FOR EACH OFFENCE. There are the legal costs of a solicitor, barrister to represent you.

There is the potential loss of the Consumer Credit Licence and MOT testing authorisation, which effectively could put you out of business. There is the very large cost of the repercussions within your potential customer base and the effect throughout the trade.

To try and defend yourself when the offence has occurred is too late. You might as well sit back and face the music. Precautions and diligence are essential and need to be put in to practice immediately.

They need to have commitment from the top and through the managerial pyramid down to the sharp end with the customers.

These systems will give the controls you need throughout the organisation not only to minimise the risk of problems arising but also to be offered as your legal defence when the inevitable error occurs.

Any 'people system' cannot be perfect and problems will arise. The law however will allow that to happen so long as you have your back-up defence system in place.

The Need for Mileage Accuracy

The Need for Mileage Accuracy

The mileage reading on the odometer of a vehicle is a 'trade description'; if it is wrong then it is a 'false trade description'. Wherever that reading is used or displayed constitutes a separate offence.

A false trade description or a failure to comply with the Consumer Protection from Unfair Trading Regulations 2008, is a breach of the law and is treated as a criminal offence.

If you enter the mileage on the Order Form, Invoice, Warranty or other documentation then that entry is a trade description, and if wrong a separate offence occurs on each occasion. The issue can also be seen as a misrepresentation of goods.

The same applies to any other misdescription or inaccuracy.

If the vehicle is placed on display, offered for sale to a prospective customer, or eventually supplied to a customer after the contract for sale and the odometer reading can be seen, then that reading is a trade description. If it is wrong then it is a false trade description.

Without taking suitable precautions you have already committed at least one offence or possibly more, for which you may be prosecuted.

If you advertise a car, in the press, on the Internet, on the premises or anywhere else and include the mileage, or any other description, which later proves to be inaccurate, you have committed another offence.

The law on mileage discrepancies is strict. You do not have to know it is wrong. You can in fact believe it to be accurate. It is simply a question of fact. If it is wrong you have committed an offence.

If you change the recorded mileage (also known as mileage clocking) or replace the speedometer with one with a different reading then clearly the act of changing the odometer is applying a false trade description and an offence.

If you offer a vehicle for sale or even supply a vehicle which has been clocked, although not by you, nor for you, and even if you are unaware that it has been clocked, you have committed an offence.

The difference in the two scenarios is the penalty imposed. For the first (changing the mileage) the fine may be nearer to the maximum or even a sentence of imprisonment, for the latter (offering/supplying) the fine is likely to be slightly less.

What is false has been the subject of much interest in the courts. If the mileage difference is to a material degree then the description is false.

This may mean, say, on a new car 500 miles or less may be significant and constitute an offence, whereas on a vehicle having travelled 60,000 miles the difference of 500 miles may not be to a material degree.
The situation would of course change if a small mileage change was made to make the vehicle more acceptable to a specific customer, or to secure finance or to avoid a Mileage penalty. The act of deception in such circumstances could move the offence to one of theft.

It must be noted that any mileage displayed on a vehicle or document is a trade description and if wrong is a false trade description. It DOES NOT require anyone to give the mileage. The vehicle describes itself. Just being there is enough.

If anything is said or written down this just adds an extra dimension and possible offence.

Verbal descriptions also leave you vulnerable; by just saying or implying the mileage is correct, when it is not or you just don't know, may get you in trouble.

It is unlikely that any sales person will say 'I guarantee the mileage' unless they are 100% sure they are right BUT many salesmen give descriptions, which they believe but may not be able to support.

Phrases you must NOT use when talking to customers about mileage:

"The recorded mileage is 34,000" the implication is that you are an expert and the mileage is 34,000 which is correct.
"We check all our vehicle mileages" this means that you have checked the mileage on this vehicle and it is correct.
"It's about 34,000" this means it's about 34,000 and that is correct.
"We wouldn't buy any vehicle if we thought the mileage was wrong" this means "The mileage on the car is correct."
"We bought it with 34,000 on the clock" this means "We bought it with 34,000 on the clock and this is correct."
The law sees you, and your staff, as experts. It does not matter that your sales person has only started today and this is the first customer - what is said is said as an expert and the customer is entitled to rely on it.

Phrases you CAN use:

As you are an expert your opinion is that of an expert. What you say, you say as an expert.

If you merely repeat what you have been told by a third party then you are not speaking as an expert, only relaying information you have received.

So, when asked as to the accuracy of the mileage, you could say (assuming what you say is correct):

"The previous owner has warranted the mileage to us. We are making checks to see if that is correct and until we have received information from the previous keepers we cannot be sure."

"We have no reason to doubt the mileage but we are checking its accuracy. Until we have got that confirmation you should disregard it and judge it on its other qualities"

You can protect yourself by the use of the Mileage Disclaimer; where these are used on the vehicle and accompanying documentation any description will be negated. Beware though that anything that is said about mileage overrides the disclaimer, and takes away its usefulness.

Beware though, disclaimers cannot be used to hide behind. If you have information about the mileage, good or bad, you must relay this to the customer. You cannot 'blanket disclaim' neither can you turn a blind eye and not carry out the necessary checks hoping that the mileage will be correct.

Advertisements also pose a problem area. If you include a mileage in an advertisement then you are effectively saying that you guarantee the mileage to be accurate.

Only include mileages when you have possession of the full history and you are satisfied the mileage is correct.

Declaring Registered Keepers

Declaring Registered Keepers 

The number of previous owners is a particular danger area which many dealers inadvertently fall within. The following matters, although simple and perhaps obvious, do cause problems.

The V5 registration document records the current keeper and the number of previous keepers. Always remember that when asked how many keepers the vehicle has had you MUST add the current keeper to the number of previous keepers.

- A Driving School vehicle or hire vehicle may have only one keeper but several drivers. In the light of the cases that have been before the courts and in breach of the regulations, it would be wise to indicate to a prospective purchaser the use to which the vehicle has been put.

- The vehicle may have been pre registered, or it may be your policy to register the vehicle in the Company's name for taxing or some other purpose. When the vehicle is then supplied to the first purchaser the vehicle may already be a one keeper vehicle, the first keeper being you.

Remember although you talk about ownership you really mean registered keeper because, of course, the vehicle may have any number of owners who are not personally keepers e.g. the manufacturer, or even you, before you sell it. The V5 records keepers not owners.

New Vehicle Specifications

New Vehicle Specifications

A vehicle can only be described as New if certain criteria can be met. If any one of the criteria is missing then, although it may be described as new for VAT purposes, for the Consumer Protection Regulations, it MUST NOT be described as a new vehicle.

This criteria was first laid down in a case against Ford Motor Company but has been reinforced in later decisions.

Remember ALL criteria must be met for it to be described as NEW.

a) The vehicle should not be the subject of a retail sale.

The situation is confused where the vehicle had been sold and registered but then subsequently deregistered. To be able to legally deregister a vehicle it must not have been driven on the highway and yet by the very act of registering the vehicle for sale a contract for sale would have taken place.

Further complications would arise if the warranty or any guarantee or warranty were registered, even if not taken up.
In such circumstances, even though to all intent it is a 'new' vehicle its description should be qualified.

*It is also worth noting that if you deliver brand new vehicles prior to the issue of the new Registration Mark letter you will still be liable to the DVLA if the new owner uses them on the road prior to the tax applying.

The vehicle will then be downgraded to the previous registration letter and the new registration letter lost. To avoid this situation use a Lawgistics letter of indemnity to protect yourself.

b) The vehicle should have no more than delivery mileage.

What is delivery mileage is a matter of fact. If the vehicle has been delivered on a transporter then it may only be 4 or 5 miles. If it has been driven from A to B then it is that distance.

Remember if you disconnect the odometer in order that the mileage remains low, or turn the odometer back, then that constitutes an offence for which you may be prosecuted.

c) The vehicle should not have sustained substantial damage prior to supply.

This applies even if the repairs were carried out to an acceptable standard or even better than the original.

What then is substantial damage? This is very subjective or may vary from case to case. As a general guide the following may assist.

Small scratches, which can be buffed, out - not substantial.
A new body shell - substantial.
Everything in between is a grey area but where a vehicle had to have a new wing, which had to be welded on, this was considered substantial.

As always in these situations only the court can determine the final outcome. However to ensure that you are not the test case, err on the side of caution and advise any prospective customer of the nature and extent of any damage and repair prior to sale.

Remember that on all new vehicles on display you must also display the Fuel Consumption Figures in accordance with the Regulations. For further information Contact Lawgistics.

Vehicle Classification: What Customers Need to Know

Vehicle Classification: What Customers Need to Know

It is not unknown for a vehicle to be manufactured and then to be stock piled and eventually sold at a later date. The vehicle may legitimately be described as 'new' although it may not be to the latest vehicle specification. Such transactions present problems of which you need to be aware.

By describing the vehicle as new, without further qualification, it is reasonable for the prospective purchaser to assume that the vehicle is of the latest specification. 

 If it transpires that that is not the case, then they may have a civil claim and the Company be liable for prosecution for misleading claims.

To avoid this situation all descriptions of 'new' should be qualified by either stating the model or year or detailing the vehicle specifications, which are absent. This will be of particular importance to vehicle importers.

Where a vehicle has been first registered in the Channel Islands or Northern Ireland and then reregistered in the UK, merely stating that the vehicle was first registered in the UK on a specific date will be considered misleading. 

You must additionally state that it had previously been registered and indicate where.

Vehicle Condition and the Declarations you Must Make

Vehicle Condition and the Declarations you Must Make

When you stock good quality vehicles you may be tempted to advertise them using glowing phrases and words. Whilst in many cases this is justified and will not cause grounds for concern you should be aware that what you say may not convey what you mean. 

It may also have legal connotations as it could breach Consumer Protection legislation.

If you describe a vehicle as 'excellent condition throughout' then be aware that the description applies to the mechanical condition and condition of the bodywork alike and by comparison to a vehicle of similar age to the vehicle in question.

Similar phrases such as 'beautiful'  'mechanically sound' 'immaculate' 'pristine' will be interpreted as a matter of fact as applied to the vehicle in question. Any comparison or reference point will be a vehicle of similar age and/or mileage.

Where a defect has been masked, and was one, which should have been apparent to an 'expert' motor dealer, then, if it is resold without the prospective purchaser being made aware of the defect, an offence of omission will have been committed.

The vehicle condition alert register will highlight this.

Vehicles, which have been the subject of insurance write offs as a result of an accident, are a particular problem. To describe such vehicles as not having been in an accident perhaps because of no entry on the HPI Register would lead to an offence.

It is deemed as a misrepresentation of goods.

If no description is applied, and nothing is said about the vehicles previous history and you were unaware of that history, then no offence would be committed.

If however you knew of the previous history and chose to say nothing, an offence of omission is committed and it could be a matter that the Director General of Fair Trading would consider in respect to unfair business practices when deciding whether or not you are a fit person to hold or continue to hold a Consumer Credit Licence.

Vehicles damaged in an accident, not resulting in a total loss must have their details passed on to prospective purchasers despite the damage having been repaired to a satisfactory and acceptable level.

The difference between the two situations as you are probably aware is that as soon as a car is registered on the V car Register, the value depreciates.

Naturally you cannot describe the vehicle as never having substantial accident damage if it has.

Most vehicles have paintwork repairs carried out during their lifetime but it is only if substantial work has been carried out and the customer's decision may be affected that it becomes an offence not to disclose the information.

Vehicle Identification Badges: Areas of Caution

Vehicle Identification Badges: Areas of Caution

One particular danger area, which you should constantly check, is that of incorrect badging.

It is not unknown for customers to 'virtually upgrade' their vehicle by the addition of a badge indicating 'GLX' 'SRi' 'TURBO' or other specific models. 

Clearly such a description is inaccurate and would constitute an offence if you offered it for sale with the badge still affixed.

It does not matter whether or not you are aware of the true model, if you have not spotted the badge, and/or removed it, the vehicle misdescribes itself. You do not have to say anything.

It is essential that EVERY vehicle taken in for eventual resale should be checked to ensure its badging and other markings are consistent with its registered description.

In exactly the same way, other features should also be checked. In particular, although the list is not exhaustive;

- The engine capacity

- Appropriate specifications eg ABS, Air Conditioning

- Insurance Group

- Chassis No

- Additional features - radio, CD etc

- Mechanical Condition

- Vehicle roadworthiness

Vehicle Advertising Rules and Regulations

Vehicle Advertising Rules and Regulations

All advertisements must comply with the various consumer legislation as well as meeting the stringent Advertising Standards Authority Guidelines.

Here it is only the Consumer Legislation that is considered. For specific advice on the Advertising Standards Authority guidelines or on Radio or TV advertising Contact Lawgistics direct.

All descriptions contained in motor advertising are capable of being trade descriptions. Equal care must be given to the compilation of such advertising as with other descriptions. 

 If the advertisement contains reference to the availability of finance then it will also have to comply with the Consumer Credit Act and Regulations. Wherever price or pricing offers are contained then reference should be made to the pricing legislation.

In addition to the above, all advertisements must comply with certain administrative issues. In particular the trade name used MUST be included as on the Consumer Credit Licence.

In the event of a competition or draw being included then that too must comply with certain legislative requirements. Contact Lawgistics for specific queries. 

Of course motor advertising is not limited to the media. It occurs on the premises, displayed on vehicles, on mail shots, promotional literature, posters, point of sale material, leaflets and in many other ways. 

The legislation outlined above applies equally to each of those areas and careful consideration should be given to each.

Lawgistics offers a complete Health Check to ensure that all aspects of your business meet the legislative requirements.
In large organisations the advertising function is passed to a separate division within the company or to an outside advertising agency.

Where it is to a separate division within the same company then it is essential that there is an audit trail of each advertisement from conception to publication with an authorised person signing off each stage. 

Written instructions and guidelines should be given to each department/person responsible for its publication.

Where the advertising function is put out to an outside and independent agency, the contract with that agency should contain an indemnity clause. Clear written instructions as to policy and the guidelines can be provided by Lawgistics.

If in any advertisement, the design of such does not make it immediately apparent that it is a trade advertisement then you must include the word 'Trade' within the advertisement.

When the Car Salesperson Gets It Wrong

When the Car Salesperson Gets It Wrong

Even though you establish endless precautions it always seems that you are at the mercy of your newest recruit. Whatever they say, whatever they do, commits you. You are responsible.

You may train them, give them clear written instructions, check their work BUT you cannot be with them all the time. If they exaggerate, embellish the facts, guess, open their mouths before engaging their brains, you are liable.

But not all salespeople are like that. Your staff may be well trained honest and truthful, taking great care and thought in all that they do.

You are still vulnerable, for, as we all know, it's not always what is said that causes the problem, but what is heard, or chosen to be heard, or understood by the customer that forms the basis of an allegation.

Whatever the system there is always a weakest link. That link is often the verbal communication between your Salespeople and Customer.

It is because of this vulnerability that Lawgistics have constructed and can provide for you a comprehensive Stautory Legal Defence programme designed to reduce your risk and exposure to a minimum. Contact Lawgistics for further details.

Misleading prices

 Misleading prices

Misleading price problems relate to:

 - Price comparisons (eg sales, 'was/now', comparing with other trades/manufacturers prices)

 - Free offers

 - Incorrect prices 

 - Call out charges

Pricing Alterations

Pricing Alterations

The law requires you to make pricing alterations clear. So phrases like '20% off' or 'sale price £19.95' should refer to what the reduction is from. The other price should generally be quoted and identified so that the reduction can be assessed.

Where a sale e.g. 'was/now' pricing is used then generally the higher price should have been offered for 28 days prior to the reduction unless it is clearly stated as otherwise.

If therefore, say the last car came into stock 7 days ago and you now want to do a sale on all vehicles in stock, then you would need to explain to the customers that the 'was' price was valid for at least 7 days before the price reduction.

With the fall in car prices sellers of imports or used vehicles often want to compare prices with new UK vehicles. The same rules apply but make it clear how the product differs e.g. an imported cars specifications may differ from the UK version so the comparison is not like for like.

You should not use abbreviations generally except 'RRP' for a recommended retail price and 'man.rec.price' for manufacturers recommended price. Obviously any compared prices must be up to date and accurate. 

 Not surprisingly the law regarding free offers is that whatever is being offered should genuinely be free. If the price has been bumped up to get the free offer, or if the price is reduced to customers who do not take it up, then it is not free.

If customers must make a special purchase to get the free offer then this must be made clear. In some instances a certain number of items may have to be purchased before the free offer takes place or certain conditions apply. In such instances then the full conditions must be explained.

If you quote something as 'free' then it could be held to be technically incorrect if you break it down on the invoice at a price and then reducing the price of the other product for sale accordingly.

If you do wish to invoice in this way we recommend that you say the additional item is 'included in the price' rather than free.

The legal problems with incorrect prices are simply that if you state a particular price you are going to sell something at, then that should be the price it is actually sold at. Problems commonly arise when a wrong price is inserted in an advertisement, this results in the advertised price and the car screen price not matching. 

Legally you do not have to sell the car but you will be inviting the customer to race hot foot to the Trading Standards if you don't. Always quote prices including VAT.

Call out charges can be a problem for many retail sectors. In the motor trade, the common problem arises for break down services. In such cases the customer must be made aware of the charge, whether it is a minimum charge, whether the actual price may be higher and in what circumstances.

Price changes are always a risky time. When there is a price increase always ensure that the details of the new prices are changed before the actual price is charged. Problems also arise when new price lists are issued in newspaper/magazine advertisements.

The legal position here is that unless stated otherwise a price in a weekly newspaper/magazine will be valid for the 7 days when the advertisement is current.

If at any point a price indication becomes misleading then you should always make the customer aware of this before they commit to purchasing.

The Selling Price of Cars

The Selling Price of Cars

The Price Marking Amendment Order 2009 requires that for a trader anything that is for sale must be marked with its selling price which is defined as 'the final price for a unit of a product, or a given quantity of a product , including VAT and all other fares'.

Essentially anything that is displayed for sale must have its final selling price marked on it. In the case of the selling price of cars, this must include the delivery charge. If it is described as an 'on the road price' it must include at least 6 months road tax.

The requirements also extend to advertisements which encourage a customer to buy from the advertisement catalogues, price lists, containers and labels. Several products including most foods need to have a unit price marked. 

At motor retailing and garage sites the following may apply:

Product Unit per price

Oil (for vehicles) litre

Other lube oils 100ml

Coal 50kg

The selling price markings must be:

a) unambiguous, easily identifiable and clearly legible

b) close to the product

c) available to view without assistance

Published: 16 Mar 2011


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