LET THE DEALERSHIP BEWARE – “AS-IS” CLAUSE NOT AN ABSOLUTE
Dealerships are required to place a Buyers Guide, ordinarily affixed to the window, in each and every used vehicle they offer for sale, pursuant to the Federal Trade Commission’s Used Car Rule. The Buyers Guide must tell the customer: whether the vehicle is being sold “as is”, or with a warranty, what percentage of the repair costs a dealer will pay under the warranty, the major mechanical and electrical systems on the car, and other essential information about the vehicle.
Often, used vehicles are sold “as-is,” that is, without a warranty. However, the “as-is” sale disclaimer does not absolutely insulate a dealership from litigation claims, as some courts have disregarded the “as-is” sale and found dealerships and principals or key salespersons liable for failing to disclose, for example, prior damage to the vehicle which the dealership knew about. In these instances, the dealership’s liability is compounded where salespersons make certain representations about the vehicle’s quality, condition, salability or value. Thereafter, and subsequent to the purchase when the customer learns of the undisclosed prior damage, the customer may attempt to assert that he or she would not have bought the vehicle from the dealership had he or she known, or been told about, the prior damage.
The customer might also file a lawsuit against the dealership for nondisclosure of the damage the dealership knew about or for intentional omission of material information, alleging violations of state or federal consumer protection and unfair and deceptive trade practices laws. While the dealership can seek to defeat these claims on the basis of the “as-is” clause, this effort may not be successful, but will cause the dealership to incur legal costs and fees in waging its defense.
The contractual “as-is” protection afforded dealerships is not absolute, and in some instances, may not be controlling, despite the fact that the “as-is” language was included in the Buyers Guide and in the dealership’s contractual and transactional documents. Increasingly, courts are finding that fraudulent misrepresentations or nondisclosures of material information by the dealership, coupled with analysis of the circumstances underlying the transaction, may defeat the dealership’s protection afforded by the “as-is” disclaimer.
In other words, an “as-is” clause does not necessarily nullify causation and will not always overcome customer challenges under consumer protection and uniform deceptive trade practices statutes. Among the circumstances of the transaction which may be scrutinized by the courts are considerations of the relative bargaining positions of the parties to the transaction and whether the dealership has or sought an unfair advantage, as well as the language of the “as-is” clause itself, including whether that contractual language is boilerplate in nature. Additionally, courts will evaluate what verbal claims or statements were made by dealership personnel in connection with the “as-is” vehicle sale.
Importantly, dealerships cannot fully insulate themselves against liability for purchasers’ claims simply by affixing the Buyers Guide “as-is” sticker to the vehicle window or by including boilerplate “as-is” disclaimer language in their transactional documents. There may be exceptions to enforceability of the “as-is” clause and a court may decline to allow the “as-is” disclaimer to negate a claim against the dealership. For all of the above reasons, cautious dealerships will ensure they employ best practices in the sale of all vehicles and their employees and staffs are regularly trained in these current best practices. Additionally, dealerships should consider undertaking a review with their legal counsel of the contractual “as-is” language and disclaimers utilized in their dealership contractual and transactional documents.