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The New Car Contract
Q. Must a car contract be in writing?
A. Yes, according to the Statute of Frauds of the Uniform Commercial
Code (UCC).
- The UCC, which is in effect in some form or another in every state
but Louisiana, regulates
sales of goods and securities and governs many kinds of commercial transactions.
Since it
has been adopted, with minor variations, by every state legislature except
Louisiana's, it
governs most auto transactions in the country, and it will be referred
to often in this
chapter.
- The UCC says any sale of goods of five hundred dollars or more must
be in
writing and signed by the party against whom enforcement is sought. If
the contract is
challenged, the courts will not be permitted to enforce it unless it is
in writing.
Terms That the Contract Should Include
The sales contract should describe the car and include the vehicle
identification number
(VIN). You can find it on the driver's side of the dashboard near
the windshield. The
contract also should state whether the car is new, used, or has had
a previous life as a
demonstrator, rental car or taxicab. In addition, the contract should
include price terms
consistent with your oral agreement, and details on any trade-in you
will supply, including
mileage and the dollar amount credited. Insist on a cancellation provision
that enables you
to get your deposit back. The contract should state the warranty terms
very clearly. (See
the "Warranties" section) The contract's financing terms
should state price,
deposit, trade-in allowance, annual percentage rate of interest (APR),
and length of term. |
Q. Who signs the contract?
A. Besides you, either an authorized salesperson or a supervisor
or manager signs it.
Before you sign, make sure you understand and accept all the contract
terms, because
you'll probably have to abide by a contract you have signed, even if you
have not read it.
Read the contract carefully. Ask questions. Cross out blank spaces to
avoid any additions
after you sign. Make sure that the dealer's promises appear in the contract.
Do not sign
until the contract satisfies you. The contract you sign binds you, and
escape from the
contract is both difficult and expensive.
Q. May I change a seller's preprinted contract?
A. Yes, if the seller agrees. If you do change terms, cross out
the unwanted language, and
write or type in the substitute terms. Both you and an authorized dealer
representative
should initial the changes. Handwritten or typed changes to both copies
of a printed
contract overrule printed terms.
Q. May I cancel the contract even after I sign it?
A. It depends. If you were a minor when you signed it (under
18 in most places), and you
contracted with an adult, you can dodge the agreement at any time for
any reason while
you are still underage, or within a reasonable time after reaching the
age of majority, as
long as the car is not considered a "necessary" akin to food
or clothing. For example, if
you are a minor but you are out on your own, and you must have the car
in order to get to
the work that supports you, the car will be considered a necessary, and
your youth will not
be an acceptable excuse for you to cancel the contract. The law protects
inexperienced
young people from being bound by bad deals with tricky adults. Most car
dealers know
this rule, however, so they will avoid contracting with a minor. These
dealers will insist
that the car be bought by, or in the name of, a financially responsible
adult.
Q. How else may I get out of the contract?
A. If, for example, the car you buy is not what the dealer promised,
the dealer may have
breached its warranty. (See the "Warranties" section in this
chapter) If so, then you might
attempt to cancel the contract because of the breach. Or you might try
canceling for no
reason. However, you risk losing your deposit. The dealer also might file
a lawsuit to
recover lost profits, for time spent with you and on your car, and other
damages.
Sidebar: What Happens To Your Deposit If You Cancel the
Contract?
If you cancel the sales contract, what happens to your deposit depends
on the stage of the
transaction and on the contract terms you signed. The earlier in the
deal, the more likely
the dealer will refund your deposit and the less likely you will be
sued. Some states entitle
you to a refund if, for example, you decide to cancel before the dealer
representative signs
the contract. Some states also allow you to get a refund if you cannot
get financing,
despite your best efforts, provided the contract is subject to getting
financing. |
Q. If we wind up in court in a contract dispute, may I offer
information in addition
to the contract?
A. The court, under the "parol evidence rule," may
ignore any additional routine terms that
don't appear in your original document. Consistent additional terms that
explain or
supplement, but don't change the contract's meaning, may be considered
by the court.
Generally, though, the court confines itself to the "four corners"
of the document that you
present. The court assumes that both parties read and understood the contract
before
signing it, and disallows prior inconsistent terms that vary or contradict
the contract. You
may be able to present evidence of an oral agreement made after the written
agreement.
Also, you may admit outside facts to prove that there actually was no
contract or to prove
that fraud induced you to sign.
Q. What if I want to add something after I sign the contract?
A. Ask the dealer to write a contract addendum (a supplement),
or write it yourself. Both
parties should sign it. Make sure that whoever signs for the seller has
the legal power to do
so. Mention the original contract in the addendum, state that everyone
should consider it
an inseparable part of the original contract and that the addendum overrides
any
inconsistent terms in the two documents. This will help you avoid the
parol evidence rule
discussed above.
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Advertising/Sales Practices
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Bank Loan Versus Dealer Financing
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