Customers’ claims based on spoken misrepresentations have become a real and regular danger for car dealerships. Almost every demand letter and lawsuit/arbitration complaint we see has some sort of oral or spoken misrepresentation claim against the dealer.

Here is an couple of examples:

• You sold a used car As-Is. After 2 years of driving the car, the buyer hires a lawyer and you receive a demand letter asking for you to take the car back, pay THOUSANDS of dollars in damages and attorneys fees. In that letter, the customer claims that the dealer misrepresented the condition of the car by mentioning the car was in "good condition," but the car developed a problem shortly after the sale, such as the sunroof not opening. In this hypothetical situation, the buyer may argue that the seller knew or should have known that saying the car was in “good condition” was false. Therefore even if the car was sold As-Is, the customer can claim they have legal recourse against the dealership for “lying” to them regarding the condition of the car. Fighting this type of claim without strong documented evidence could be a long and expensive road before you get in front of a judge, jury, or arbitrator, who may not believe you in the end.

To minimize the risk of misrepresentation claims, sellers should provide clear and accurate information about the product or service being sold. This may include having strong up to date disclosures at the time of sale, implementing the use of a compliance software, as well as answering any questions the buyer may have honestly and completely.

In addition, sellers should verify that any marketing materials or advertisements are truthful and do not make any false or misleading claims. Don’t put stickers on your cars that say “Great condition”! Sellers can prepare guidelines to promptly address any issues or concerns raised by buyers, as this can help to prevent minor problems from escalating into more serious disputes.