Legal Article - Business Law

Civil Law in the Motor Retail Industry: An Overview

This article covers Civil law, as it relates to the motor retail industry.

Civil law covers remedies for disputes between two people, most often the retailer and the customer. It sets out what should happen and then what happens when things go wrong, because one or other of the two people don't follow the rules.

The biggest area of Civil law relates to contracts (which are basically legal agreements). The sale of an item is a contract and as you might know, or will do when you've read this article, there are lots of rules about selling. 

The hire or loan of a vehicle is a contract, the use of a telephone is a contract, and taking a ride on a bus is a contract.

Gentlemens Agreement - Is a Handshake Good Enough?

Gentlemen's Agreement - Is a Handshake Good Enough?

Contracts are simply legal agreements.

Generally they do not need to be in writing (the gentleman's agreement) although to avoid argument we would always recommend they are. Putting it in writing means you can PROVE what has been agreed.

Exceptions to the rule about being in writing include contracts for the sale of land and contracts of guarantee. Under the Consumer Credit Act a regulated contract e.g. HP agreement, Hire agreement, must be in writing to be enforceable.

Are Contracts with Minors Enforceable?

Are Contracts with Minors Enforceable?

A contract with a minor (under 18 years of age) is generally unenforceable unless it is classed as something necessary for his standard of living and it is beneficial to him.

The contract becomes enforceable if the minor ratifies it after becoming 18 and the Courts can order the return of goods acquired before the age majority.

However as a general rule try to avoid selling anything or entering legal contracts with under 18's. If there is a parent or other suitable adult available then sell to them in preference.

Car Sales: Terms and Conditions

Car Sales: Terms and Conditions

If the terms of the agreement are vague or if a material part of the agreement is
missing then it becomes a voidable contract.

So if a deal on a car is discussed and the details are set out on an Order Form, but the price is left blank, don't expect sympathy from the Court if you try and argue a particular price has been set.

Contracts are frequently broken down to find an Offer and an Acceptance. If you are selling a car, you might be saying "You can have this car for £5,000".

The customer may say "Yes" in which case the contract can go ahead. If the customer says "Yes I would like it but I will give you £4,500 for it" then this is seen as a counter offer.

You are then in the position of accepting it or otherwise. If you don't give an answer to the offer then there is no contract.

The detail of a contract is set down in terms. Terms can be 'express', that is specifically agreed for that contract. Such terms are the 'small print' on legal documents or verbally agreed between the two parties.

Other terms are referred to as 'implied'. This means that such terms are always part of such a contract whether they are written down, said or not.

Common examples are the implied terms laid down in the Sale of Goods Act 1979, the Supply of Goods and Services Act 1982 and the Supply of Goods (Implied Terms) Act 1973.

These require every contract for the transfer of goods (selling, barter, part exchange etc) to have the implied terms that the goods must:

- correspond with the description
- be of satisfactory quality
- be fit for their purpose

and that the person transferring the goods has the right to transfer the property in the goods.

Car Service: Terms and Conditions

Car Service: Terms and Conditions

If the terms of the agreement are vague or if a material part of the agreement is missing then it becomes a voidable contract.

So if some work on a car is discussed and the details are set out on an Order Form, but the price is left blank, don't expect sympathy from the Court if you try and argue a particular price has been set.

Contracts are frequently broken down to find an Offer and an Acceptance. If you are repairing a car, you might be saying 'This will cost you £400'.

The customer may say 'Yes' in which case the contract can go ahead. If the customer says 'Yes I would like it but I will only give you £350 to do the work' then this is seen as a counter offer.

You are then in the position of accepting it or otherwise. If you don't give an answer to the offer then there is no contract.

The detail of a contract is set down in terms. Terms can be 'express', that is specifically agreed for that contract. Such terms are the 'small print' on legal documents or verbally agreed between the two parties.

Other terms are referred to as 'implied'. This means that such terms are always part of such a contract whether they are written down, said or not.

Common examples are the implied terms laid down in the Supply of Goods and Services Act 1982.

These require every contract for the provision of a service to have the implied terms that the person must provide the service:

- With reasonable care and skill

The law takes the view that you are the professional and therefore if a customer entrusts you to carry out some work then they are entitled to a reasonable level of skill and care. There is overlap here with 'negligence' which we will come upon later.

It is fairly self-explanatory and is the equivalent of satisfactory quality under the Sale of Goods Act for sellers of goods. Basically whatever service you are providing e.g. recovering a car, carrying out a service or repair, diagnosing a fault, putting the car through a valet etc, etc then the work must be of a reasonably high standard.

The word reasonable is important however. So if you can repair a component instead of fitting a new one, or if you fit a pattern part and not from the car manufacturer then this is acceptable (providing, of course, you have not specifically agreed to do otherwise).

- Within a reasonable time

Again this is fairly self-explanatory. It is clearly not acceptable to take in work and just 'leave it round the back' until there isn't much else to do. If a particular time is quoted then this is part of the contract. If not, then the time is what is reasonable.

If a part has to be ordered from abroad then this is still reasonable. If you order the wrong part and have to reorder then this is not. Immediate response is generally not expected but if you take on too much work then it is unreasonable.

You MUST operate a time management scheme to prevent overbooking. Failure to do so may render you liable to a criminal offence.

- At a reasonable price

Generally competition tends to iron out prices. So if you are a franchise garage then your rates may be different from an independent garage.

An independent garage will charge a different amount from an 'evening and weekend' arrangement. Clearly if the job requires merely new brake pads it is not reasonable to do the discs as well, if they are not ready to be changed.

 

Car Sales: What Makes a Contract Legally Binding?

Car Sales: What Makes a Contract Legally Binding?

You might be buying a car from a customer and you happen to say that you will give them a lift to the station.

Unfortunately you get tied up with a delivery and the customer is left fuming in reception, misses an important business meeting and claims to have lost a deal over the issue.

Could they sue you?

In the circumstances described the answer is probably no because neither you nor the customer saw the delivery to the station as a binding contract.

If, however, before the purchase of the car was agreed the customer had offered; 

 'You can buy my car for £10,000, I can deliver it on Friday at 10 o'clock and you must take me to the station immediately afterwards'  and you had said 'Yes' in acceptance then the situation could have been different and would have been reinforced if the customer had explained the need to get away promptly for the business meeting.

A contract in writing and the giving of a deposit are generally seen to be with the intention of being legal contracts.

Car Service: What Makes a Contract Legally Binding?

Car Service: What Makes a Contract Legally Binding?

You might be doing some work for a customer and you happen to say that you will give him/her a lift to the station.

Unfortunately you get tied up with a delivery and the customer is left fuming in reception, misses an important business meeting and claims to have lost a deal over the issue.

Could he sue you? In the circumstances described the answer is probably no because neither you nor the customer saw the delivery to the station as a binding contract.

If, however, before the work was agreed the customer had said 'You can repair my car for £200, I can deliver it on Friday at 10 o'clock and you must take me to the station  immediately afterwards' and you had said 'Yes' in acceptance then the situation could have been different and would have been reinforced if the customer had explained the need to get away promptly for the business meeting.

A contract in writing and the giving of a deposit are generally seen to be with the intention of being legal contracts.

 

What is Consideration of a Contract?

What is Consideration of a Contract?

There are four elements of a contract
  • Offer
  • Acceptance
  • Intention to create legal relations
  • Consideration
Consideration is sometimes the one thing which can affect whether an item is purchased, repaired or serviced. The main consideration can often be the price.

However consideration doesn't always refer to price. It is essentially the substance of the agreement. It must be something of value on either side given and received. Price is the obvious one but the consideration on the other side when buying a car is the car itself.

Although it must be something of value it doesn't have to be a sensible commercial value. So if you want to sell a car or fit a clutch for £1, and both sides agree, then that is fine.

What is Communication of Acceptance in Contract Law?

What is Communication of Acceptance in Contract Law?

The timing of a contract can be crucial because up to the point when the contract is made then neither side have obligations. In many cases the contracting period is very short. You pop in the local shop, select a newspaper, pay for it.

Other situations can be different, however. Normally the contract is concluded when the person accepting the offer communicates acceptance to the person making the offer.

So you offer a car for sale at a bargain price and the customer shows an interest. You say to them: 

'Do you want the car for £5,000'. After a sharp intake of breath and much muttering about when the Will is to be sorted out, or the insurance pays out, or what their respective partner is going to do or say, the customer toddles off saying they will think about it. In the meantime another customer comes in and buys the car.

The first customer has no comeback whatsoever since they did not communicate the 'Yes' back to you and therefore there was no binding contract.

Likewise, you offer a trolley jack for sale at a bargain price and the customer shows an interest. You say to them 'Do you want it for £20?' After a sharp intake of breath, the customer toddles off saying they will think about it. In the meantime another comes in and buys the jack.

The first customer has no comeback whatsoever since they did not communicate 'yes' back to you and therefore there was no binding contract.

On the other hand previous case law has established the general rule that communication of acceptance of an offer occurs, in the case of post, when the letter is put in the post-box.

So, in the case above, if the first customer had put a letter in the post-box confirming he/she wanted to buy the car before the second customer came in to buy then the first customer is entitled to the car or claim damages for breach of contract.

Finance deals are another special area. The majority of finance deals for cars are three party agreements - the customer, the dealer and the finance company.

It is quite common for the customer and dealer to sign the finance document at the dealer's premises but the document to then be sent to the finance company for signature.

Up until the point that the finance company have signed the document and put in the post the document signed by the three parties, then there is no contract.

This can present some difficulties since customers invariably wish to take the car away once they've signed up.

You are therefore faced with holding the car back until the finance company sign up or letting the car go with the prospect that they may be getting free car hire. The reality is that up until the point that the contract is concluded any one party can pull out of the prospective agreement.

The customer could get free car hire but it sometimes works in the dealer's favour if they have second thoughts about pursuing the deal.

What must be remembered however is that if the prospective deal is cancelled any deposit or part exchange car handed over must be returned to the customer. If the part exchange car has been sold then its value must be returned to the customer.

This can be a further difficulty if the dealer over-allows on the part exchange price for 'creative accounting' reasons and raising the value of the car for sale by an equivalent amount. Customers become very deaf when you try and argue that you over-allowed on the part exchange for their benefit!

The Pre-Contract Negotiations Process

The Pre-Contract Negotiations Process

If one person, in pre-contract negotiations, makes a false statement and the other person relies on that statement when entering into the contract then the aggrieved party can make a claim for misrepresentation.

The law entitles people who have been misled in this way to unwind the contract, providing both sides can substantially get back to square one. If they can't or if the misrepresentation was made negligently or fraudulently then the aggrieved party can claim compensation.

A not uncommon scenario is when you can or cannot represent a car as New.

A vehicle can only be described as New if certain criteria can be met. If any one of the criteria are missing then, although it may be described as new for VAT purposes, it MUST not be described as a new vehicle to the customer.

These criteria were first laid down in a case against Ford Motor Company but have 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 a sale or 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.

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.

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 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 and if it transpires that that is not the case then they may have a civil claim.

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 the 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.

Misrepresentation of Goods and the Motor Industry

Misrepresentation of Goods and the Motor Industry

If one person, in pre-contract negotiations, makes a false statement and the other person relies on that statement when entering into the contract then the aggrieved party can make a claim for misrepresentation.

The law entitles people who have been misled in this way to unwind the contract, providing both sides can substantially get back to square one. If they can't or if the misrepresentation was made negligently or fraudulently then the aggrieved party can claim compensation.

As an example you may advertise a large service at a promotional price. The customer may ask for a large service on a vehicle but you only carry out a small service. The customer is entitled to the cost of having the rest of the service items carried out. 

 In practice of course you would offer to do it for them. Because of the misrepresentation theoretically the customer could seek a reversal of the deal but given the difficulties of such reversal the courts would generally favour the compensation route.

Note though if the customer asks for a large service but only receives the small a criminal offence also occurs for which you may be liable.

 

 

Author: David Combes

Published: 10 Mar 2011

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