Auto Dealer Monthly Magazine is the daily operations publication serving the retail automotive industry. This automotive publication serves dealer principals, officers and general managers with the latest best practices.
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By Tom Hudson LEG A L 'THIS LAWYER WALKS INTO THE F&I; OFFICE …' The magazine's legal expert found several common mistakes in the paperwork for his new car, each of which could cause trouble for the dealer. Te f rst problem that jumped of the page was a violation of the Federal Trade Commission (FTC)'s Used Car Rule. Tat rule requires that a certain notice appear in the contract of sale. It also requires that the notice be "conspicuous." Te dealer's form contained the required notice, but it appeared in the same type size and font that was used in most of the rest of the document. Te failure to use a "conspicuous" notice violates the Used Car Rule, exposing the dealer to the FTC's tender mercies. Te second jump-of-thepage problem was similar to the frst. Te Uniform Commercial Code (UCC) provides that a sale of goods (that includes vehicles) is subject to certain "implied warranties." Tese warranties Thomas B. Hudson is a partner in the law firm of Hudson Cook LLP and the author of several widely read compliance manuals available at CounselorLibrary.com. ©Counselor Library.com 2013, all rights reserved. Based on an article from Spot Delivery. Single print publication rights only, to Bobit Business Media. HC# 4819-2014-3636 (8/13). THudson@AutoDealerMonthly.com 16 AUTO DE ALE R MONTHLY • SE P TEMBE R 2013 ©ISTOCKPHOTO.COM/DEVONYU I broke down and bought a new b ca car recently. Because I spend a lit little more than half of my time in South Carolina, I decided to do business with a dealer in My Myrtle Beach. Te sales guy, the F& F&I; guy and I all did our little dance, and pretty soon it was time to sign on the dotted line. Te buyers order was the f rst document I looked at, and I instantly saw two problems with it. When you look at as many buyers orders as I do, you get a pretty good feel for the sorts of mistakes that the drafers of these forms make when they don't do their homework. Sure enough, the drafer of this form made a couple of common mistakes. I signed it anyway, because no one was paying me to fx the thing, and because both of the problems worked in my favor or could be used for leverage if I had problems with the deal, the dealer or the car. I won't identify the dealer, by the way, because I'd just as soon not tip of some plaintif 's lawyer to the dealer's problems. apply whether the buyer and seller expressly agree to them or not. Te UCC, however, permits a seller of goods to "disclaim" any implied warranties, provided any such disclaimer is conspicuous. Tis dealer's disclaimer, like his Used Car Notice, was not conspicuous. You can bet a car buyer would argue that the failure to use a conspicuous disclaimer results in the disclaimer being inefective. When I arrived home with my new ride, I sat down and perused the paperwork more closely. Tat turned up an additional issue: One of the documents I had signed was an arbitration agreement. I read through it and concluded that it wasn't in bad shape, except for one little problem. Te drafer had provided in the arbitration agreement that South Carolina's arbitration law would apply, which is a bad idea. When we draf arbitration agreements, we specifcally state that arbitration under the agreement will be pursuant to the Federal Arbitration Act. Te reason we reference the FAA is that there are a number of business-friendly published court decisions that say the FAA trumps, for the most part, state judicial and legislative attempts to prohibit or limit the ability of businesses to use arbitration agreements as a means of defending themselves against class action lawsuits and potentially large "runaway" jury verdicts. Electing the state's arbitration law to govern the document deprives the dealership of the beneft of these favorable precedents. Afer thinking some more, I decided that it would be a waste not to at least mention these problems to the dealer. So I called up the nice F&I; man and explained what I'd found. I'm sure he immediately alerted the owner of the dealership of the form's defciencies, and that they then immediately called the dealership's lawyer to f x the problems. Sure he did.