National Association of National Association of Dealer CounselDealer Counsel

April 11-13April 11-13

20102010

New Ideas for New Ideas for BUYERS’ ORDERSBUYERS’ ORDERS

Presented By:Presented By:

Michael J. Dommermuth ofMichael J. Dommermuth ofMcGloin, Davenport Severson & Snow, McGloin, Davenport Severson & Snow,

P.C.P.C.

Denver ColoradoDenver Colorado

The Name -The Name - Buyers BuyersOrdersOrders

The Name - Buyer’s OrdersThe Name - Buyer’s Orders

HistoryHistory It is an Order but . . . .It is an Order but . . . . Contract to buy and sell a motor vehicleContract to buy and sell a motor vehicle Prefer “Purchase Agreement”Prefer “Purchase Agreement” More accurate descriptionMore accurate description ““a rose by an other name would smell as sweet…”a rose by an other name would smell as sweet…”

What are the What are the essentialessential terms of terms of a contract for the purchase and a contract for the purchase and

sale of a motor vehicle?sale of a motor vehicle?

Essential TermsEssential Terms(Continued)(Continued)

Writing required: UCC 2-201Writing required: UCC 2-201

• SOF $500.00 or moreSOF $500.00 or more

• ConductConduct

UCC 2-204 “a contract for the sale of goods may be made UCC 2-204 “a contract for the sale of goods may be made

in any manner sufficient to show agreement…”in any manner sufficient to show agreement…”

UCC 2-204(3) “even though one or more terms left open a UCC 2-204(3) “even though one or more terms left open a

contract does not fail for indefiniteness” contract does not fail for indefiniteness”

UCC Gap fillers, e.g. 2-305 open price UCC Gap fillers, e.g. 2-305 open price

Description of the VehicleDescription of the Vehicle

• Specific Description of goods:Specific Description of goods: VINVIN YearYear Make / ModelMake / Model Stock NumberStock Number New/UsedNew/Used

• Descriptions to Avoid:Descriptions to Avoid: Number of CylindersNumber of Cylinders ColorColor Special equipment or designation (eg LTD)Special equipment or designation (eg LTD) MileageMileage

PricePrice

Negotiated PriceNegotiated Price

Agreed PriceAgreed Price

Selling PriceSelling Price Price Terms to AvoidPrice Terms to Avoid

MSRPMSRP

Sale PriceSale Price

Special PriceSpecial Price

LINE ITEMSLINE ITEMS

TaxesTaxes Dealer Handling or Doc FeesDealer Handling or Doc Fees GAP-Credit Life-Service ContractsGAP-Credit Life-Service Contracts After Market Products-itemize costAfter Market Products-itemize cost TaxesTaxes Trade AccountingTrade Accounting

TRADETRADE

YearYear MakeMake ModelModel VINVIN Estimated PayoffEstimated Payoff

If actual payoff exceeds . . .If actual payoff exceeds . . .

Front Side Provisions:Front Side Provisions: Seek Independent AdviceSeek Independent Advice FTC Buyers Guide:FTC Buyers Guide: The The

TITLE PROVISION ON TRADESTITLE PROVISION ON TRADES

SalvageSalvage

LemonLemon

WrecksWrecks

Dealer is the expert-look closelyDealer is the expert-look closely

Not salvage, wrecked, totaled, destroyed, Not salvage, wrecked, totaled, destroyed, damage by flood, fire, collision, accident, damage by flood, fire, collision, accident, reconstruction, reassembled.reconstruction, reassembled.

TRADE-INSTRADE-INS

Delayed Delivery – reappraisalDelayed Delivery – reappraisal Clear TitleClear Title No liens or competing interestsNo liens or competing interests

WARRANTYWARRANTY

Three Types: Express Warranty, Three Types: Express Warranty, Implied Warranty of Merchantability, Implied Warranty of Merchantability, Implied Warranty of Fitness for a Implied Warranty of Fitness for a Particular PurposeParticular Purpose

What warranty, if any do you offer?What warranty, if any do you offer? Manufacturer warranty only…Manufacturer warranty only… AS ISAS IS

DISCLAIMERS OF DISCLAIMERS OF WARRANTYWARRANTY

ConspicuousConspicuous

Express Or ImpliedExpress Or Implied

Must specifically mention implied Must specifically mention implied warranty of fitness for a particular warranty of fitness for a particular purpose in order to disclaimpurpose in order to disclaim

FTC BUYER’S GUIDE FOR USED FTC BUYER’S GUIDE FOR USED VEHICLESVEHICLES

Overrides any contrary provision in Overrides any contrary provision in Contract.Contract.

FINANCING CONTINGENCYFINANCING CONTINGENCY

Seller can cancel if financing not approved.Seller can cancel if financing not approved.

Give dealer permission to negotiate alternative terms.Give dealer permission to negotiate alternative terms.

Bailment – risky but does create leverageBailment – risky but does create leverage

Return Vehicle Return Vehicle

State Disclosure LawState Disclosure Law

Buyer agrees to execute new document if new financing Buyer agrees to execute new document if new financing terms arranged (No backdating)terms arranged (No backdating)

DEALER INSTALLED ACCESSORIESDEALER INSTALLED ACCESSORIES

Manufacturer’s item – CostManufacturer’s item – Cost

Disclaim warrantiesDisclaim warranties

Specifically itemize on contract with cost Specifically itemize on contract with cost identified. identified.

Can the consumer buy a comparable vehicle Can the consumer buy a comparable vehicle without the adds?without the adds?

DeliveryDelivery

No damages for delay in deliveryNo damages for delay in delivery

ARBITRATIONARBITRATION

Simple and FairSimple and Fair Federal Arbitration Act governsFederal Arbitration Act governs Who to use as an arbitrator?Who to use as an arbitrator? Single arbitratorSingle arbitrator Dealer pay cost (or at least most).Dealer pay cost (or at least most). Class Action WaiverClass Action Waiver Jury Trial WaiverJury Trial Waiver Mutual?Mutual?

InsuranceInsurance

““This contract does not provide for This contract does not provide for automobile liability insurance and automobile liability insurance and Buyer states that he or she has if effect Buyer states that he or she has if effect an automobile liability policy as defined an automobile liability policy as defined by CRS 42-7-103(2) on the motor by CRS 42-7-103(2) on the motor vehicle sold by this contract.”vehicle sold by this contract.”

Integration and Integration and SeverabilitySeverability

All terms are writtenAll terms are written Oral promises are unenforceableOral promises are unenforceable Contracts and forms complete expression Contracts and forms complete expression

of the parties agreementsof the parties agreements Use a “WE OWE” form. Get the buyers Use a “WE OWE” form. Get the buyers

signature on it.signature on it. If any part of contract is unenforceable the If any part of contract is unenforceable the

other provisions remain in full force…other provisions remain in full force…

DEFAULTDEFAULT

What happens if buyer refuses to take What happens if buyer refuses to take delivery?delivery?

Keep DepositKeep Deposit 10% of Price as liquidated damages10% of Price as liquidated damages No PenaltyNo Penalty

MANUFACTURER’S RIGHTMANUFACTURER’S RIGHTTO CHANGE DESIGN OR TO CHANGE DESIGN OR

SPECIFICATIONSSPECIFICATIONS

What?What? Ever happened?Ever happened? Is this provision necessary?Is this provision necessary?

TAXTAX

Taxes calculated based on the information Taxes calculated based on the information that is supplied by the buyer.that is supplied by the buyer.

If additional amounts owed – they are to If additional amounts owed – they are to be paid by the buyer.be paid by the buyer.

EXCLUSIVE REMEDY –EXCLUSIVE REMEDY –DAMAGESDAMAGES

Buyer damages limited to return of Buyer damages limited to return of purchase price.purchase price.

No consequential, incidental, loss of use, No consequential, incidental, loss of use, loss of income.loss of income.

SECURITY INTERESTSECURITY INTEREST

For all consideration due under the contractFor all consideration due under the contract

For DownpaymentFor Downpayment

Other monies or trades due from customerOther monies or trades due from customer

Secondary Position if RISC assignedSecondary Position if RISC assigned

ATTORNEYS FEESATTORNEYS FEES

Dealer wins, buyer pays.Dealer wins, buyer pays.

OUT OF STATE SALESOUT OF STATE SALES

Dealer is licensed in ColoradoDealer is licensed in Colorado Sale occurs in ColoradoSale occurs in Colorado Delivery takes place in ColoradoDelivery takes place in Colorado Avoid getting dragged into court in Avoid getting dragged into court in

some other state.some other state.

SIGNATURESSIGNATURES

Buyer certifies that buyer is 18 years of Buyer certifies that buyer is 18 years of age.age.

Not binding until signed by management.Not binding until signed by management. Conspicuous acknowledgement of terms Conspicuous acknowledgement of terms

on back.on back. Signatures on backside – Signatures on backside – if you do make sure you get 100%if you do make sure you get 100% compliance (rare) compliance (rare) Recommend that Buyer seek independent Recommend that Buyer seek independent

professional assistance if they do not professional assistance if they do not understand any of the documents they are understand any of the documents they are signingsigning

Thank You!Thank You!

Michael J. DommermuthMichael J. Dommermuth Attorney at LawAttorney at Law 303 863-9800 303 863-9800 303-571-1600 Fax 303-571-1600 Fax 1600 Stout Street 1600 Stout Street Suite 1600 Suite 1600 Denver, CO 80202-3103 Denver, CO 80202-3103 miked@mdsslaw.commiked@mdsslaw.com