Internet buyers think that when the car doesn’t meet their fantasy image they can return it for a full refund, just like sale pants at Nordstrom’s 1940 Ford Deluxe Convertible. Just redone by a well-known local shop. Beautifully restored with no expense spared. All aspects are correct and highly-detailed. Undercarriage immaculate, etc., etc. $58,950. Sound pretty nice? The buyer thought so when he saw this ad in an Internet listing, so he called the dealer, who was located 3,000 miles away. The conversation went well, but ended abruptly when the buyer made what the dealer thought was a lowball offer. The […]
Internet buyers think that when the car doesn’t meet their fantasy image they can return it for a full refund, just like sale pants at Nordstrom’s
1940 Ford Deluxe Convertible. Just redone by a well-known local shop. Beautifully restored with no expense spared. All aspects are correct and highly-detailed. Undercarriage immaculate, etc., etc. $58,950.
Sound pretty nice? The buyer thought so when he saw this ad in an Internet listing, so he called the dealer, who was located 3,000 miles away.
The conversation went well, but ended abruptly when the buyer made what the dealer thought was a lowball offer. The buyer called back the next day and tried again, making a slightly higher offer that was also summarily rejected.
The next day, he asked to talk to the local restorer, which was fine with the dealer. The restorer described the car as a beautiful, driver-quality car. He was clear that the body had been redone to a high standard, but the undercarriage was still original, although it looked pretty good for a 70-year-old car.
The buyer tried again. This time, the conversation ended in a shouting match, with the dealer hanging up on the buyer. Ever persistent, the buyer tried again, with the same results, and the dealer shouting, “I would never sell my *!@#&%* car to you!” as he hung up on the buyer again.
Apparently motivated by the challenge, the buyer called back again, and a deal was struck at $54,500.
The buyer sent a cashier’s check and a friend to pick up the car. When the buyer received the car, he promptly called the dealer. He boasted to the dealer that the car was even better than described, and had been sold too cheap. Result—another hangup.
A few weeks later, the buyer called again, this time demanding his money back and reimbursement for his transport costs. He claimed that a local shop told him that the car needed about $20,000 of work to be proper, most of it to the undercarriage and to redo some rust repairs in the trunk floor that were done in fiberglass instead of new sheet metal. He also claimed that the shop advised the car could not be licensed because it would never pass the local DMV safety inspection.
When the dealer refused to take the car back, the buyer filed a claim against the dealer’s surety bond—and a consumer protection complaint with the dealer’s state Attorney General. At this point, the dealer asked our firm to represent him.
The legal analysis
Under the Uniform Commercial Code, a seller’s descriptions of a car are enforceable as express warranties as to its condition. The major exception is that generalized statements about the qualities of the car (e.g., this is the best example in the country) are not enforceable, as the seller is allowed some leeway to boast about the car—referred to as “puffing.”
As a separate legal claim, false statements and descriptions of the car can constitute misrepresentation, which allows the buyer to unwind the deal. However, the buyer must be reasonable about relying upon the statements in order to have that claim.
What do words really mean?
Dissecting the dealer’s ad starts with “beautifully restored.” Does that necessarily connote a frame-off restoration? Or does a top-only restoration qualify?
“No expense spared” sure sounds like puffing—how could anyone really not save a buck somewhere? But applying fiberglass to the trunk floor does seem like an expense spared. Does “undercarriage immaculate” mean it was restored? Or just that it was really clean?
The battle intensifies
On balance, we saw the warranty issues as legitimate concerns, but they were defensible. We weren’t worried about the misrepresentation claim, as we didn’t think the buyer could have reasonably relied upon the ad after talking to the restorer about the car.
So, we sent a lengthy letter to the buyer explaining why he should go away. His response was to push the bonding company and the Attorney General. The dealer was confident that the buyer would never spend money on an attorney, and chose to wait him out.
Recognizing he had to put up or shut up, the buyer retained an attorney located in the dealer’s state, but 175 miles away. Would this guy actually file a lawsuit, or was he just the buyer’s brother-in-law working for free? The attorney wrote letters insisting he was going to sue and would easily win, but he also pushed harder with the bonding company and the AG, which were both free weapons in this legal battle. These mixed signals encouraged the dealer to hang tough.
Reality bites
The bonding company and the AG backed away from the battle, but the buyer’s attorney stepped up the demands. By now, the dealer’s legal bill was approaching $5,000, and he was starting to see he was going to lose one way or the other.
The litigation costs would make no sense for either party, as each would easily spend $25,000 or more fighting the case. If the buyer could make out that the dealer’s conduct constituted an unfair trade practice, as defined in the state statute, he would recover his legal fees; otherwise, he would have to pay them out of his own pocket. He had little chance of recovering his transport costs, and he would have to double them to send the car back to the dealer’s state for the litigation. All of this made it cheaper to just fix the car and have a higher end value to show for it.
For the dealer, it was a no-win deal either way. If he lost, he would be out his legal fees and have to resell the car in a now-depressed market. If he won, he would still be out his legal fees. That made it cheaper to take the car back and resell it, even at a loss.
The dealer knew that the litigation made no economic sense for the buyer, but worried that he might be angry or stubborn enough to pull the trigger. The buyer felt exactly the same way about the dealer’s situation.
The lawyers knew that there were only two outcomes here—either one party would have to back down completely and lose face, or the situation was going to get very ugly very quickly. The lawyers explained to both parties that this was their best opportunity to settle, as once a lawsuit was filed, they would each be many thousands of dollars down the litigation road before another settlement opportunity came along.
The dealer offered $6,500, the buyer countered at $20,000, and a deal was struck at $11,000.
Lessons to learn
The dealer made three mistakes:
He did exaggerate—at least a little—about the car in the ad. He made a deal with a buyer he thought was a nut. And, finally, he failed to get a tight, as-is, no-representations contract signed as part of the deal. He insists he won’t make either mistake again.
The buyer’s mistakes sound a louder alarm for all of us in the collector car hobby.
It’s crazy, it doesn’t make sense, but it’s today’s reality that collector car buyers have succumbed to the mystique of the Internet. They now believe—in increasing numbers—that they can buy a car from a long distance away without ever seeing it themselves or having it inspected, and when the car arrives in their garage and it doesn’t meet the image they created in their minds, they can return it for a full refund, just like their sale pants at Nordstrom’s.
Of course, that’s an amazingly crazy thing for a buyer to do, and none of us should buy a car that way unless we are willing to lose all our money (pay attention, Publisher Martin).
But this is also a pretty scary reality for sellers. Most of us are old enough to remember when we didn’t have an Internet, and cars were sold through classified newspaper ads. Back then, it didn’t matter much what the seller said about the car, as all the ad really did was get the buyer to come look at the car.
But that is not the case today.
Once you publish your ad on the Internet, you have to realize that prospective buyers are going to focus on every positive word you write, downplay every negative word, and imagine the best possible meaning to everything. They aren’t going to notice the things you don’t mention. And your pictures, in their miserable, low-resolution glory, are all going to make the car look beautiful.
“Legal Files” really hates to say this, as it speaks so badly about where we have come, but if you are going to sell your car to someone a long distance away who doesn’t come to see it personally, you really have only two good alternatives:
Invest the money in a skilled attorney to draft a very tight sales contract for you—or just say no.