Recently here at McNees, we have been involved with dealer issues that have focused the light on the forms used in the vehicle sales process. There are numerous forms that need to be used to document the final sale of a vehicle, such as the:
Retail Installment Sales Contract;
Not Required to Purchase Products for Financing Form;
Odometer Disclosure Statement;
PennDOT Forms (MV-1 or MV-4ST, etc.);
Buyer’s Guide Window Sticker; and
Warranty Disclosure Documents.
While this required form usage listing is not inclusive (by any fashion!), in addition to these required forms, there are numerous other forms a dealer has learned to use in order to protect the dealership from various events or instances that could occur. The forms are used to disclose or to place a customer on notice, or to disclaim or emphasize to the customer the details, if certain events occur, how the matter is to be handled. While the dealer and customer generally believe the sale will be smooth sailing, and 99.9% of the time it will be, for that .1% of all sales that do encounter a problem, these other forms try to anticipate that where a certain event occurs, how the event is to be worked through. Recently, three of these forms came into play with three different dealers, each of which the use of the form will hopefully add benefit for the dealer in the customer dispute process where these issues have arisen.
Buyer’s Order Arbitration Provision
With the uptick in the economy, we have seen an increase in customers suing dealers, big and small, city and country, for numerous reasons tied to the sale of the vehicle, from failure to disclose information about the vehicle, to failing to repair the vehicle properly under warranty. There has been some debate over whether submitting such a customer dispute to arbitration instead of allowing the matter to be handled through the court process is a better way to address problem customer sales related issues. Some have found that arbitration can be a more streamlined, quicker, final/not appealable and a less expensive approach versus being in the court process. This can vary based on where the dealer is located, the amount in dispute, and other factors like the number of customers that might be involved in a suit. Regardless of the factors, dealers have been successful in limiting time, effort and expense of legal actions of customers by requiring the dispute to proceed through arbitration instead of the court system. These suits can be addressed in arbitration instead of the courts through the addition of an “arbitration is required” provision in the Buyer’s Order or agreement of sale for the vehicle being sold to a customer.
For example, in a recent case, a customer sued the dealer over costs resulting from an alleged failure to disclose the true condition of the vehicle at sale. The dealer requested arbitration of the matter in lieu of proceeding through the court system, as the customer’s sale included an arbitration provision as part of the vehicle sales process document file. The dealer filed an objection to the court proceeding stating that the dispute is subject to be decided in arbitration and not before the court. The customer defended that among other things, there was not a meeting of the minds to agree to arbitrate, and that the requirement to arbitrate was a one-sided document and the customer did not have an opportunity to negotiate. The judge held in favor of the dealer indicating there was sufficient grounds for the arbitration agreement to be upheld based on the facts in front of the judge, such as the arbitration wording was in writing that was part of the sale and that Buyer’s Order reflected a signature of the customer. By being required to proceed through the agreed upon arbitration, this dealer will hopefully be able to avoid some of the time, effort and expense related to addressing a customer legal issue through the court process.
Even though the likelihood of a customer sale being that .1% that could go horribly wrong might be pretty remote, a dealer should consider whether there are benefits to be gained by using an “arbitration is required” provision as part of the standard Buyer’s Order format. As a dealer never knows which sale could go in the wrong direction, if used, an arbitration provision could protect the dealer from the additional time, effort and expense associated with proceeding through the court process.
Insurance Verification Not Update/Transfer Policy Notice
Another form that a dealer has been using to put a customer on notice involves the dealer informing the customer that the dealer is not responsible for the update/transfer of the customer’s vehicle insurance coverage for the new vehicle purchased; instead the customer is responsible. The dealer is getting a separate, customer signed document outlining the specifics that the dealer is only contacting the customer’s insurance provider to verify insurance is present on the vehicle to allow registration to be issued on the new vehicle being purchased. The form goes onto disclose that it is the customer’s responsibility to contact his insurance provider to update the insurance policy regarding adding the new vehicle to the policy. This form is then signed and dated by both the customer and the dealer.
Recently a dealer encountered this type of related customer lawsuit. The customer sued the dealer after being in a car accident, but the insurance coverage was not updated to add the new vehicle that was involved in the accident. The customer alleged the dealer represented was going to contact the customer’s insurance agent to update the policy, but did not. The dealer defended it was not the dealer’s responsibility to add the new vehicle, but was the customer’s responsibility. To aid its position, the dealer produced its completed notice of its “update/transfer of insurance is customer’s” form, which was signed and dated by the customer. Hopefully, as the case proceeds, this form will help limit the dealer’s exposure in this lawsuit.
Again, even though the likelihood of a customer failing to update the vehicle’s insurance policy is remote, it does happen, and when it does, a customer is looking to limit liability, and put the blame on someone else. As such, a dealer should consider adding this type of notice of “customer is responsible for updating/transfer of insurance policy” form as part of the sales document file being completed.
Customer Responsible if Lien Payoff Amount Incorrect
Finally, another form should help to pay dividends where the customer trade-in vehicle payoff difference is incorrect. While it is few and far between that a bank will get a customer trade-in payoff amount wrong, it does happen. The use of a notice disclosing that the customer is responsible for the payment of any deficiency not properly calculated by the bank is used in numerous forms and designs, from a simple statement on a Buyer’s Order to a separate form, that is signed by the customer at the time of the sales transaction.
Recently, a dealer was notified by the bank that the payoff amount was incorrect well after the customer sale was completed and finalized. The dealer has presented the separate form that the customer signed and dated disclosing the customer agreed that the customer would be responsible for any deficiency payoff amount relating to the customer’s trade-in vehicle. As this matter proceeds, hopefully this disclosure form will allow for the customer to understand and agree that it is the customer’s responsibility to make good on the payoff deficiency. While it is rare a bank gets a payoff amount wrong, it does happen, and this type of disclosure form could aid a dealer in emphasizing and transferring that responsibility to a customer whose trade-in payoff amount was misquoted.
While these types of forms are not required, over the years, dealers have come to understand there is value in getting these extra documents signed by the customer, as a dealer never knows which sale is going to be that .1% sale that goes totally off course.