When eBay Motors started online car auctions, I was sure it would never last. There was just too much potential for crooks to cheat people, and the venue would collapse once people figured that out. I guess in retrospect, I was half right. There’s a lot of fraud, but online car-sales activity just continues to grow. It now occupies a large segment of the collector car market, and doesn’t seem to be going anywhere. Caveat emptor, Latin for “buyer beware,” is very much alive and well in the online marketplace. Although less obvious, the seller also needs to be careful, as […]
When eBay Motors started online car auctions, I was sure it would never last. There was just too much potential for crooks to cheat people, and the venue would collapse once people figured that out. I guess in retrospect, I was half right. There’s a lot of fraud, but online car-sales activity just continues to grow. It now occupies a large segment of the collector car market, and doesn’t seem to be going anywhere.
Caveat emptor, Latin for “buyer beware,” is very much alive and well in the online marketplace. Although less obvious, the seller also needs to be careful, as there are scams working in the other direction.
Pictures lie
If you’re the buyer, you have to know that pictures always lie. Much of that is inadvertent, as no matter how high the resolution is, details can be hard to make out. Some of this can be intentional. Lighting, camera angles, lens focal length and shot selection can easily hide imperfections.
If you’re the seller, you have to know that the buyers are going to be looking at the photos you post very closely. If there is a defect you want them to see, make sure it is evident. If there is a defect you don’t want them to see, then that’s another matter.
You are much better off disclosing defects and facing the consequences, as buyers are frequently willing to try to unwind a sale after they get the car and are dissatisfied with its condition. Why buyers think they can do this is beyond me, but many of them have no hesitation about buying cars sight unseen and then suing the seller when the vehicles don’t measure up to the condition they dreamed of.
Inspections
If you’re the buyer, there is just no substitute for actually seeing the car with your own eyes before buying it. Travel can be a pain, but it’s less pain than seeing the car come off the transporter with visible or mechanical issues that you didn’t know about.
If you can’t go see the car, have someone local you know and trust, who knows cars, inspect it for you and report to you. Or, at least, do a FaceTime inspection.
Regardless, it’s still a good idea to have the car professionally inspected before the purchase to avoid surprises. Every car model has its specific mechanical issues that you may not really know about or recognize that a specialist mechanic can tell you about. You can see the car and drive it yourself and think everything is just fine, but when a skilled mechanic inspects the car, they can find mechanical issues, things that are not authentic, and signs of hidden issues such as rust.
Fake sellers
“Legal Files” has reported previously about fake-seller websites. The crook creates their own phony website using dealer website software that is easily attainable. They then copy legitimate sales listings off other sites and paste them into theirs, always with a really attractive offer price that makes you think you’ve fallen into a smoking deal.
The point of the scam is to get you to wire a deposit to the “dealer.” Once the wire is sent, the funds disappear into an unidentifiable account in some other country, and you never hear back from the fake dealer. They then close down the website and start over with an altogether new one. The really good ones can juggle several fake deals before they have to shut down their website and start over.
If you think you’ve run across a really good deal, be aware that you probably haven’t. Make full inquiries into the dealer, and be sure someone actually lays eyes on the car for you. Having a pre-purchase inspection solves a lot of this and should be done without exception, no matter what the seller tells you about “free” or “no-hassle” returns.
As-is
Most every sale agreement contains an “as-is” provision. That is, the buyer agrees to buy the car in whatever condition it is in, subject to all faults. Sellers see that as a get-out-of-jail-free card, but it isn’t.
Under the law of every state, “as-is” simply means that the seller is not making any express or implied warranties about the condition of the car. If the car does not meet your expectations, you cannot sue for breach of contract.
However, an “as-is” provision does not eliminate a misrepresentation claim. “Misrepresentation” is the legal term for lying about the car’s condition. If the seller misrepresents the car, and does so with regard to a statement on which you should reasonably be able to rely, then you can either unwind the transaction and get your money back or recover damages for the difference between what was promised and what was delivered.
Misrepresentation
Misrepresentation has its limits. We had a case where the seller made all sorts of statements about how great the car was, and how it was in such great condition. Unfortunately, everything the seller said fell into the category of seller opinion about the general condition and qualities of the car, which the law considers “puffing.” That is, the law recognizes that sellers have the right to say things about how great their product is, and buyers are supposed to know that these statements are just the seller being a seller. Everyone knows that they should not rely upon any of these statements, and the buyer can’t make a good misrepresentation claim based just on puffing.
What the buyer needs is specific statements about condition. Claims such as “rust-free,” “never crashed,” “matching numbers,” “original paint,” etc. are all specific enough to be representations that you can reasonably rely upon. At least so long as they aren’t easy things to verify on your own. For example, the seller’s claim that the tires only have 1,000 miles on them won’t protect you if anyone can look and see they only have 1/16th of an inch of tread.
If you’re the seller, this is what you have to watch out for. It’s pretty easy to get carried away talking about how great the car is, and when the buyer decides you exaggerated things and wants their money back, it’s not a pretty picture. For example, we had a case where the seller said the car was rust-free. After buying it, the buyer had a shop disassemble it to do a restoration and found rust that was located in a place where it wasn’t visible without disassembly.
The buyer sued for misrepresentation. The seller insisted he had no idea about that rust, which everyone knew was true. But, was the car rust-free? Apparently not. Was the buyer entitled to rely on that statement as being an absolute? He thought he was.
If you’re the buyer, be sure to save the entire internet listing on the car, as that is where the misrepresentations are always made. The listings might not last for long once a car is sold.
Contracts
Few car deals are made with good contracts. It’s always preferable to have one, and better yet, one written by your attorney. The contract should be specific about the terms of the deal, the condition of the car, and what is included. On that last point, we had one case where the buyer insisted that the car included the spare engine, which the seller disputed.
If you’re the seller, you want the contract to have an “as-is” provision. If you’re the buyer, you want some specifics. It’s also important for the contract to be clear about what is being sold. Is the car really a Shelby GT350, or is it a regular Mustang that was made into a GT350 clone?
Dispute resolution
It’s also important to address how contract disputes get resolved. Are disputes going to be litigated or arbitrated? Either way, where?
You can always sue the other party where they live. Or you can sue in whichever state the sale took place. We have a case where an Oregon seller sold a non-running car to a Washington buyer. Rather than have the buyer hire a tow truck to haul the car a few miles across the Columbia River, the seller offered to deliver the car on his trailer. The buyer gave the seller the money when the car was delivered. Now, either party can sue the other in either state. That is unusual.
Usually, the lawsuit has to be brought in the seller’s state, as that is where the deal was made. If that is on the other side of the country, the buyer is at a real disadvantage. Of course, the contract can specify where and how disputes are to be resolved.
The best course of action is to avoid reaching the point where you have to resolve a dispute. Protect yourself whenever you buy or sell a car by doing your due diligence.
John Draneas is an attorney in Oregon and has been SCM’s “Legal Files” columnist since 2003. His recently published book The Best of Legal Files can be purchased on our website. John can be contacted at john@draneaslaw.com. His comments are general in nature and are not intended to substitute for consultation with an attorney.