Let’s face it, many of the readers of VSANY are passionate about unique and/or collectible vehicles. That being said, most of us have at some point come across a situation where a car owner has unfortunately found himself/herself in a dispute over the sale of a vehicle. For instance, among car enthusiasts, a gentleman’s handshake is often sufficient to conduct a sales transaction. For some, thought, nothing is final until they are handed the keys in exchange for a bank note, or better yet, a cash payment. And for others, a contract is a good practice to memorialize all the terms associated with a deal. A person’s right to use their vehicle should never be disputed without a written agreement setting forth the terms of the deal whereby a buyer and a seller agreed to transfer the right to use said vehicle. The use of a vehicle is a very important right, and akin to a lease or license. A person cannot simply enter upon the property of another and take something as valuable as a vehicle without an agreement of some sort. For our purposes, we will assume that an agreement was reached between the buyer and seller.
A termination for cause generally means that one or both parties to a contract has acted in a manner that causes them to be in breach of their respective obligations under the contract. As examples, let’s look at two different situations that may apply when it comes to vehicles. First, a buyer of a vehicle may assist a third party with circumventing the sale agreement and purchase the vehicle from that third party. Or a buyer may fail to submit payment for a vehicle. In either of those situations, a seller may be within their rights to resell the vehicle without any recourse to the initial sale. Second, in a lease or license situation, a tenant may sublet the space to a third party without the lessor’s permission. Or a tenant may use the space for illegal purposes or purposes not contemplated by the agreement. In these situations, the lessor can terminate the agreement.
A vehicle sale contract typically has a few critical provisions. First, there is a provision that address issues such as who owns the vehicle, what condition the vehicle is in, how and when inspection may be conducted, and how title is to change hands. It may also provide agreements that no liens must be paid upon before title is transferred (Sellers of classic cars, for example, often have liens placed on cars that are transferred to banks or credit unions where the car’s seller has taken out loans). If the seller is receiving payment through a banker’s check or installment payments, there may provisions that address due dates and amounts of payment. There may also be a termination for cause provision. “Termination for cause” provisions generally mean that if the parties arrive at a dispute over the contract, the party bringing the action to recover on a contract has demonstrated that they were somehow wronged, and gives them the option to terminate the contract and move forward with litigation.
If a contract is terminated, then the aggrieved party may be entitled to a number of damages. Those damages could mean any earnest money was returned to the aggrieved party, that the aggrieved party is saved from any obligation under the terminated contract, and the aggrieved party may be able to recover its damages (which are contemplated by the contract). For termination for cause, the aggrieved party may also recover attorney’s fees and expenses. If the default party did not act in good faith, then that party may be liable out of contract for all damages the aggrieved party sustained. Likewise, if a lease or license agreement terminates for cause, the lessor has broad remedies and options that it can select to terminate the agreement with the aggrieved party. For instance, the lessor has the option to terminate the agreement without liability, or make an election of remedies and bring suit against the aggrieved party for trespass or other damage remedies.
Okay, so what does this mean? Well, if you are buying classic cars, or selling them, keep in mind that any contract you sign will be enforceable under the law. Even more importantly, keep in mind what that means. As I try to convey in all of these posts, make sure you consult with local counsel before making a costly purchase that involves complicated agreements to be in place after the car is purchased. Many people realize all too late that their contract terms are woefully inadequate. In certain situations, the contract may need to be negotiated in advance and re-executed as an official dealer contract. Other times, it may require consultation with several experts. If you find yourself in contract dispute, there are many ways for disputes to be resolved in order to avoid the high costs of litigation and courts resolving the issues. Despite popular belief, suing someone may be your last option.