Trade Sales – tips and myths

legal updates

The purchase of a car from an auction is very much on the basis of 'buyer beware' (the Latin phrase is 'caveat emptor').

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Clients frequently question the validity of buyers complaints and it is not uncommon to hear that the buyer bought the car on ‘Trade Sale’ terms so what are ‘Trade Sale’ terms?

Perhaps the most common analogy for Trade Sales is when the motor dealer buys cars through the auction.  The auction is very much a business to business arena (although increasingly private consumers are using them to advantage) and as dealers will know the purchase of a car from an auction is very much on the basis of ‘buyer beware’ (the Latin phrase is ‘caveat emptor’).  This means that you don’t have Sale of Goods rights (ie the car does not have to be of satisfactory quality or fit for its purpose) and your rights to claim compensation or return the car are severely limited depending on the auction terms and conditions.  Your rights to redress are much stronger in regard to the descriptions used for the vehicle (eg Full Manufacturer Service History, Warranted Mileage etc).

A genuine ‘Trade Sale’ between you and the customer would be very similar.  You can take away Sale of Goods rights but mis-descriptions will still be actionable. 

The critical point with a ‘Trade Sale’ is that the buyer must be in the business of buying cars.  The law would see such a person as having enough knowledge to know what to look for and make the deal based on that superior knowledge.   

What will often happen, however, is that a private customer comes along to buy a car at the lowest rock bottom price.  The motor dealer bamboozles the customer into signing an invoice or order form under ‘Trade Sale’ terms and sends the customer away with the car expecting they will not see that customer and more importantly, the car, again.  Two weeks later you’ve guessed it – the customer returns and makes a complaint that something is wrong with the car.  The battle lines are then drawn.  The dealer has sold the car at a price which has no margin for profit, let alone repairs to the car.

There is no reason why a motor dealer business should not buy a car on ‘Trade Sales’ terms.  So, as a very minimum, if a customer wants to buy on ‘Trade Sales’ terms explain that you can only do the transaction if the customer is a motor dealer and if he is there complete the invoice with the name of the customers business, not his/her private name eg Jack Dupp Car Sales. 

By doing this you will have a good piece of evidence if a legal argument arises when Mr Dupp suggests he was buying as a private customer.  

In addition, you must make it clear on the invoice that it is a ‘Trade Sale’.  It is arguable but for the motor trade it is highly likely that the words ‘Trade Sale’ would suffice.  However, there is no harm in also putting additional wording such as ‘no warranties or implied terms’.   

Remember though this wording can only be used for genuine ‘Trade Sales’.   

NB we are aware that a number of motor retailers are called ‘Trade Sales’ or similar.  This article has no connection with such sellers and should not be interpreted as inferring any attributes to such organisations. 

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