Legal Article - Business Law

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.

Published: 10 Mar 2011


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