The Law Handbook 2024

638 Section 6: Houses, communities and the road This can occur where: • the contract does not comply with section 37, which prohibits car traders from dealing with young people; • the contract does not comply with section 41 (used car) or section 42 (new car): these sections provide that a car sale contract must contain the prescribed particulars and a copy of the contract be supplied to the purchaser at the time of sale; or • the car trader has committed an offence under section 38 in relation to the car: this section prohibits odometer tampering and falsely representing the accuracy of a car’s odometer reading. To withdraw from a car sale contract, you must notify the car trader, in writing, that you are exercising the right conferred on you by section 88Bof theMCTAct and briefly give your reason for withdrawing from the contract (s 88B(3)) (see sample letter in appendix D at the end of this chapter). This must be done within three months of the date the car sale contract was signed (s 88B(2)). Upon withdrawal from the contract, the parties must do everything possible to restore themselves to the position they were in before they entered the contract (s 88B(4)). In particular, the car trader must refund any money paid (s 88B(5); penalty: 50 pu). NOTE Section 88B of the MCT Act does not give the purchaser the right to apply to a court or to VCAT to seek a declaration that a contract has been validly withdrawn from. The car trader may contest the validity of the withdrawal and sue you for damages. If the car trader refuses to accept your withdrawal from the contract, you should consider taking action first (therefore avoiding the cost and trouble of having to defend any court action by the car trader) by bringing the dispute before VCAT under the Australian Consumer Law and Fair Trading Act 2012 (Vic). Effect on finance contracts A significant difference between applying for a court order for rescission under section 45 of the MCT Act and withdrawing from the car sale contract under section 88B, is that the latter does not of itself affect any finance contract you may have signed to finance the purchase of the car. In a section 45 rescission application, the court or VCAT has the power to make further orders in relation to any collateral credit agreement. This is a finance contract arranged by the car trader for the sale of the car (s 3). Therefore, if a court or VCAT upholds the rescission of a car sale contract, it may also make an order for the termination of any collateral credit agreement (s 47(2)). However, withdrawal from a sale contract under section 88B – which has the benefit of being a low-cost option as it does not require applying to the Magistrates’ Court or to VCAT – also has its drawbacks. You may still have to repay money lent under the finance contract (unless you can rely on section 21 of the National Credit Code ( NCC ), which is sch 1 of the National Consumer Credit Protection Act 2009 (Cth), to terminate the finance contract because credit has not yet been provided). Any default by you under the finance contract may leave you exposed to legal proceedings by the lender. If this occurs, you may be able to argue in your defence that as the car sale contract was withdrawn from under section 88B, your obligations under the sale contract have been consequentially ‘discharged’ under section 135 of the NCC. Section 135 allows a purchaser to rescind a finance contract if the sale contract has been rescinded or discharged, where the car trader referred the purchaser to the lender (and had an arrangement with this lender to regularly refer potential purchasers). There may, however, be an issue as to whether a withdrawal from the sale agreement amounts to ‘discharge’ for the purposes of section 135. Finance contracts are discussed further below; see ‘9 Using the National Credit Code’. False representation of odometer readings The MCT Act (s 38) prohibits odometer tampering (penalty for a person: 240 pu or two years’ jail (or both); penalty for an owners corporation: 1000 pu) and falsely representing the accuracy of a car’s odometer reading when selling the car (penalty for a person: 100 pu; penalty for an owners corporation: 500 pu). If the car trader has committed an offence under section 38, you can withdraw from the contract (s 88B). You can rescind the contract on the basis that a false representation has been made in relation to the car’s odometer reading (s 45). If you suffer loss as a result of a car trader’s failure to comply with section 38, you can claim