Bo 2010


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This presentation on Motor Vehicle Dealer purchase agreements was given at the National Association of Dealer Counsel Conference in April of 2010

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Bo 2010

  1. 1. National Association of Dealer Counsel April 11-13 2010
  2. 2. New Ideas for BUYERS’ ORDERS Presented By: Michael J. Dommermuth of McGloin, Davenport Severson & Snow, P.C. Denver Colorado
  3. 3. The Name - Buyers Orders
  4. 4. The Name - Buyer’s Orders <ul><li>History </li></ul><ul><li>It is an Order but . . . . </li></ul><ul><li>Contract to buy and sell a motor vehicle </li></ul><ul><li>Prefer “Purchase Agreement” </li></ul><ul><li>More accurate description </li></ul><ul><li>“ a rose by an other name would smell as sweet…” </li></ul>
  5. 5. What are the essential terms of a contract for the purchase and sale of a motor vehicle?
  6. 6. Essential Terms (Continued) <ul><li>Writing required: UCC 2-201 </li></ul><ul><ul><li>SOF $500.00 or more </li></ul></ul><ul><ul><li>Conduct </li></ul></ul><ul><li>UCC 2-204 “a contract for the sale of goods may be made in any manner sufficient to show agreement…” </li></ul><ul><li>UCC 2-204(3) “even though one or more terms left open a contract does not fail for indefiniteness” </li></ul><ul><li>UCC Gap fillers, e.g. 2-305 open price </li></ul>
  7. 7. Description of the Vehicle <ul><ul><li>Specific Description of goods: </li></ul></ul><ul><ul><ul><li>VIN </li></ul></ul></ul><ul><ul><ul><li>Year </li></ul></ul></ul><ul><ul><ul><li>Make / Model </li></ul></ul></ul><ul><ul><ul><li>Stock Number </li></ul></ul></ul><ul><ul><ul><li>New/Used </li></ul></ul></ul><ul><ul><li>Descriptions to Avoid: </li></ul></ul><ul><ul><ul><li>Number of Cylinders </li></ul></ul></ul><ul><ul><ul><li>Color </li></ul></ul></ul><ul><ul><ul><li>Special equipment or designation (eg LTD) </li></ul></ul></ul><ul><ul><ul><li>Mileage </li></ul></ul></ul>
  8. 8. <ul><li>Price </li></ul><ul><li>Negotiated Price </li></ul><ul><li>Agreed Price </li></ul><ul><li>Selling Price </li></ul><ul><li>Price Terms to Avoid </li></ul><ul><li>MSRP </li></ul><ul><li>Sale Price </li></ul><ul><li>Special Price </li></ul>
  9. 9. LINE ITEMS <ul><li>Taxes </li></ul><ul><li>Dealer Handling or Doc Fees </li></ul><ul><li>GAP-Credit Life-Service Contracts </li></ul><ul><li>After Market Products-itemize cost </li></ul><ul><li>Taxes </li></ul><ul><li>Trade Accounting </li></ul>
  10. 10. TRADE <ul><li>Year </li></ul><ul><li>Make </li></ul><ul><li>Model </li></ul><ul><li>VIN </li></ul><ul><li>Estimated Payoff </li></ul><ul><li>If actual payoff exceeds . . . </li></ul>
  11. 11. <ul><li>Front Side Provisions: </li></ul><ul><li>Seek Independent Advice </li></ul><ul><li>FTC Buyers Guide: </li></ul><ul><li>The </li></ul>
  12. 12. TITLE PROVISION ON TRADES <ul><li>Salvage </li></ul><ul><li>Lemon </li></ul><ul><li>Wrecks </li></ul><ul><li>Dealer is the expert-look closely </li></ul><ul><li>Not salvage, wrecked, totaled, destroyed, damage by flood, fire, collision, accident, reconstruction, reassembled. </li></ul>
  13. 13. TRADE-INS <ul><li>Delayed Delivery – reappraisal </li></ul><ul><li>Clear Title </li></ul><ul><li>No liens or competing interests </li></ul>
  14. 14. WARRANTY <ul><li>Three Types: Express Warranty, Implied Warranty of Merchantability, Implied Warranty of Fitness for a Particular Purpose </li></ul><ul><li>What warranty, if any do you offer? </li></ul><ul><li>Manufacturer warranty only… </li></ul><ul><li>AS IS </li></ul>
  15. 15. DISCLAIMERS OF WARRANTY <ul><li>Conspicuous </li></ul><ul><li>Express Or Implied </li></ul><ul><li>Must specifically mention implied warranty of fitness for a particular purpose in order to disclaim </li></ul>
  16. 16. FTC BUYER’S GUIDE FOR USED VEHICLES <ul><li>Overrides any contrary provision in Contract. </li></ul>
  17. 17. FINANCING CONTINGENCY <ul><li>Seller can cancel if financing not approved. </li></ul><ul><li>Give dealer permission to negotiate alternative terms. </li></ul><ul><li>Bailment – risky but does create leverage </li></ul><ul><li>Return Vehicle </li></ul><ul><li>State Disclosure Law </li></ul><ul><li>Buyer agrees to execute new document if new financing terms arranged (No backdating) </li></ul>
  18. 18. DEALER INSTALLED ACCESSORIES <ul><li>Manufacturer’s item – Cost </li></ul><ul><li>Disclaim warranties </li></ul><ul><li>Specifically itemize on contract with cost identified. </li></ul><ul><li>Can the consumer buy a comparable vehicle without the adds? </li></ul>
  19. 19. Delivery <ul><li>No damages for delay in delivery </li></ul>
  20. 20. ARBITRATION <ul><li>Simple and Fair </li></ul><ul><li>Federal Arbitration Act governs </li></ul><ul><li>Who to use as an arbitrator? </li></ul><ul><li>Single arbitrator </li></ul><ul><li>Dealer pay cost (or at least most). </li></ul><ul><li>Class Action Waiver </li></ul><ul><li>Jury Trial Waiver </li></ul><ul><li>Mutual? </li></ul>
  21. 21. Insurance <ul><li>“ This contract does not provide for automobile liability insurance and Buyer states that he or she has if effect an automobile liability policy as defined by CRS 42-7-103(2) on the motor vehicle sold by this contract.” </li></ul>
  22. 22. Integration and Severability <ul><li>All terms are written </li></ul><ul><li>Oral promises are unenforceable </li></ul><ul><li>Contracts and forms complete expression of the parties agreements </li></ul><ul><li>Use a “WE OWE” form. Get the buyers signature on it. </li></ul><ul><li>If any part of contract is unenforceable the other provisions remain in full force… </li></ul>
  23. 23. DEFAULT <ul><li>What happens if buyer refuses to take delivery? </li></ul><ul><li>Keep Deposit </li></ul><ul><li>10% of Price as liquidated damages </li></ul><ul><li>No Penalty </li></ul>
  24. 24. MANUFACTURER’S RIGHT TO CHANGE DESIGN OR SPECIFICATIONS <ul><li>What? </li></ul><ul><li>Ever happened? </li></ul><ul><li>Is this provision necessary? </li></ul>
  25. 25. TAX <ul><li>Taxes calculated based on the information that is supplied by the buyer. </li></ul><ul><li>If additional amounts owed – they are to be paid by the buyer. </li></ul>
  26. 26. EXCLUSIVE REMEDY – DAMAGES <ul><li>Buyer damages limited to return of purchase price. </li></ul><ul><li>No consequential, incidental, loss of use, loss of income. </li></ul>
  27. 27. SECURITY INTEREST <ul><li>For all consideration due under the contract </li></ul><ul><li>For Downpayment </li></ul><ul><li>Other monies or trades due from customer </li></ul><ul><li>Secondary Position if RISC assigned </li></ul>
  28. 28. ATTORNEYS FEES <ul><li>Dealer wins, buyer pays. </li></ul>
  29. 29. OUT OF STATE SALES <ul><li>Dealer is licensed in Colorado </li></ul><ul><li>Sale occurs in Colorado </li></ul><ul><li>Delivery takes place in Colorado </li></ul><ul><li>Avoid getting dragged into court in some other state. </li></ul>
  30. 30. SIGNATURES <ul><li>Buyer certifies that buyer is 18 years of age. </li></ul><ul><li>Not binding until signed by management. </li></ul><ul><li>Conspicuous acknowledgement of terms on back. </li></ul><ul><li>Signatures on backside – </li></ul><ul><li>if you do make sure you get 100% </li></ul><ul><li>compliance (rare) </li></ul><ul><li>Recommend that Buyer seek independent professional assistance if they do not understand any of the documents they are signing </li></ul>
  31. 31. Thank You! Michael J. Dommermuth Attorney at Law 303 863-9800 303-571-1600 Fax 1600 Stout Street Suite 1600 Denver, CO 80202-3103 [email_address]