Dealer gets to keep deposit – Court confirms

legal_updates

The sale could not proceed through no fault of the dealer.

Author: Kiril Moskovchuk
Published:
Reading time: 3 minutes

This article is 2 years old.

Read our disclaimer keyboard_arrow_down

This website content is intended as a general guide to law as it applies to the motor trade. Lawgistics has taken every effort to ensure that the contents are as accurate and up to date as at the date of first publication.

The laws and opinions expressed within this website may be varied as the law develops. As such we cannot accept liability for or the consequence of, any change of law, or official guidelines since publication or any misuse of the information provided.

The opinions in this website are based upon the experience of the authors and it must be recognised that only the courts and recognised tribunals can interpret the law with authority.

Examples given within the website are based on the experience of the authors and centre upon issues that commonly give rise to disputes. Each situation in practice will be different and may comprise several points commented upon.

If you have any doubt about the correct legal position you should seek further legal advice from Lawgistics or a suitably qualified solicitor. We cannot accept liability for your failure to take professional advice where it should reasonably be sought by a prudent person.

All characters are fictitious and should not be taken as referring to any person living or dead.

Use of this website shall be considered acceptance of the terms of the disclaimer presented above.

In a recent court case, a car dealer, with help and advice from Lawgistics, successfully defended against a claim brought by a customer for return of the deposit.

The customer had a look at one of the dealer’s cars, took it on a test drive and decided to buy it. The customer offered to part-exchange his car towards the sale price, and this was accepted. The customer then signed the sales invoice and paid a deposit. The invoice had a statement that all deposits paid are non-refundable and that the customer warrants, amongst others, that the car to be part-exchanged had never been involved in an accident or written off by the insurers. Immediately after the salesman took the deposit, he ran an HPI check on the part-exchange car. The check revealed the car at some point was a ‘Category D’ write-off, of which the customer in all likelihood was not aware.

The sale was called off. The customer tried to raise finance to buy the chosen car but was not successful. The customer then asked for his deposit back and was refused. Court proceedings followed.

The court reminded the customer that on payment of the deposit he entered into a binding contract. The customer confirmed that his car to be part-exchanged had not been a write-off and the dealer was entitled to rely on this representation.

The sale could not proceed through no fault of the dealer. The court agreed that the dealer was entitled to recover loss and expense caused by cancelation of the deal and to keep the deposit.

What helped greatly in persuading the court to dismiss the claim was the documentary evidence the dealer disclosed, which clearly showed the non-refundable nature of the deposit and the customer’s declaration regarding the state and condition of part-exchange car. As the customer signed the invoice, there could be no reasonable argument that the customer was not aware of the terms of the sale.

Normally the court will accept the deposit amount as an adequate measure against the dealer’s losses agreed by the parties, known in legal speak as liquidated damages. Only when the damage caused by the customer withdrawing from the purchase will be out of any proportion to the deposit paid, for example, the car had some extensive works done at the customer’s request, the court may be prepared to award a sum exceeding the deposit amount.

Kiril Moskovchuk

Legal Advisor

Read more by this author

Getting in touch

You can contact us via the form or you can call us on 01480 455500.