Q: What circumstances would justify
canceling this auto contract?
A: California Law provides a myriad of reasons to
justify rescinding a contract to purchase or lease a new or used automobile. Basically, California allows an automobile purchase
or lease agreement to be rescinded if it is based upon fraud, mistake, or significant non-disclosure or concealment. The basic
concept is that there must be a "meeting of the minds" in order for a contract to be valid.
contract that is put in writing tends to eliminate significant "he said-she said" arguments over what exactly was
agreed to, since the significant terms of the contract are usually contained in the writing. California law requires that
the contract have no blank spaces when signed, and that the consumer receive a copy of any contract after signing, before
driving off with the car.
However, California provides consumers
with vast protections against misrepresentations that are made during the negotiations for the purchase or lease of goods
or services. Further, there is no requirement that the salesperson intended to make a misrepresentation; the fact that a representation
was made during the negotiations which in fact is not true is all that is required.
examples of misrepresentations, which would justify rescinding the sale, may include the following, especially if more than
one of them is present:
The inaccurate representation that the
vehicle (or other consumer product) is new, when in fact it is used or reconditioned (if your "new" vehicle had
several hundred miles on the odometer, it was not likely a "new" vehicle);
Any inaccurate representation concerning the quality or benefits of goods or services (this would usually cover anything told
to you by the salesperson, or sales and finance manager, including how mechanically sound the used car is, how much you'll
be protected by the service contract, that the finance rate is the best available, etc.);
Significant non-disclosures of information required to be disclosed (such as the fact that the vehicle was a "demonstrator,"
was previously totaled due to body damage or flood, has a salvaged title, was a previous "lemon law buy-back", was
involved in an accident involving damage to the frame, and a whole host of other problems which should have been disclosed
but were not).
Often, used car dealers will attempt to persuade
you that you bought it "As-Is", and therefore whatever problem you are experiencing is your problem. However, this
is not true with respect to most problems discovered after the sale by consumers, non-professional buyers, since
the consumer's decision to buy "As-Is" was usually based upon some representation made about the vehicle that
proves not to be true.
The most basic of these misrepresentations concerning the mechanical
condition of a used vehicle center on the requirement that the DMV requires all dealers to have a basic safety check performed
on the vehicle to verify that the vehicle is safe to operate on the road, that it has such basic safety features as brakes,
brake lights, turn signals, lights, seat belts, etc. Invariably, this "safety" check is described by the salesperson
as the service department having gone over the entire vehicle with a fine tooth comb, and found it to be in excellent mechanical
The most egregious examples of misrepresentation can
be found at any used car dealership catering to individuals with bad credit, who are often persuaded to buy pieces of junk
for over-inflated sales prices and interest rates. These poor individuals think no one else will sell them a car, so pay large
down-payments on useless vehicles so they can get to work and pay their bills, only to find out their car payment money is
being spent making repairs to a vehicle that should be retired, with the end result that the car gets repossessed, and, you
guessed it, sold to the next poor individual with poor credit.
Other misrepresentations are common.
SECRET SCOOP: The car deal works like this: You show up at a dealership,
either out of curiosity or due to advertising, which may or may not be misleading, and meet with a salesperson. This
salesperson, and the entire dealership, has one goal, and one goal only; to make a sale, get you to sign a contract and
drive off the lot in their car, and thereby make money. When there, the salesperson who is "up"
will go out and do the "meet and greet" (smile, look you in the eye, introduce him/herself, shake your hand, and
interest you in a car, which you may or may not test drive). The salesperson knows that if you walk off the lot without
buying, you will likely not come back, and they may be fired.
A worksheet is often created,
with the price of the new/used vehicle price (normally in black felt pen so that you think it is non-negotiable), your proposed
downpayment, and most importantly, your monthly payment (how much can you afford a month-heh heh, up to what?), and what they
are willing to pay for your trade-in, if any (so that they can make a profit on that as well). Once these numbers are hashed
out with the sales manager (whom you may or may not interact with directly) approving, they get you to agree to buy on those
terms, and a worksheet is often presented for you to sign or initial, so that the salesperson has earned his/her commission,
so s/he can then get back on the "up" list, and you get passed on to the F & I department. The salesperson
has now earned his/her commission, assuming you drive off the lot in their car.
The Finance &
Insurance (F & I) manager earns his living off a percentage of the predominantly useless add-ons s/he adds into
your contract, often to bring the car and add-ons up to the monthly payment you agreed you could afford (often
referred to as "loan packing"). This may happen by diddling with the interest rate, or by extending the term
of the loan to 84 months, or whatever. It is his/her goal in life to sell you these, for the most part, useless, overpriced,
add-ons. The only exception is perhaps a service contract from the vehicle manufacturer that you need to extend
protection beyond the manufacture's original warranty, and not from some useless out-of-state
company that excludes most problems you may actually encounter, that you buy for double what that company charges
the dealer; and perhaps GAP protection, but only if the fair market value of your new purchase is substantially less
than the amount you are financing.
The above are just a few examples
of facts which would justify rescinding a sale, and there are many, many more, and you are encouraged to contact us for