Misrepresentation Resulting in Rescinding the Sale

Misrepresentation Resulting in Rescinding the Sale

California Law provides a number of reasons to justify rescinding a contract to purchase or lease a new or used automobile. In other words, California allows an automobile purchase or lease agreement to be rescinded if it is based on fraud, mistake, or significant non-disclosure or misrepresentation. The basic concept is that there must be a “meeting of the minds” in order for a contract to be valid.

A contract that is put in writing tends to eliminate significantly “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.

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.

Some examples of misrepresentation justifying rescinding the sale may include the following:

  • 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 finance or sales 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 soon after the sale, since the buyer’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, as it has such basic safety features as brakes, brake lights, turn signals, lights, etc. Invariably, this “safety” check is described by the salesperson as the service department has gone over the entire vehicle with a fine tooth comb, and found it to be in superior mechanical condition good for at least another 100,000 miles.
  • 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.

These are just a few examples of facts which would justify rescinding a sale, and you are encouraged to call us for a consultation.