The Law Handbook 2024

Chapter 6.7: Buying a car 643 rather than a contractual warranty) (the definition of ‘essential term’ is considered in Associated Newspapers Ltd v Bancks [1951] HCA 24) and the car trader fails to deliver the car as specified in the contract, then the purchaser may be able to rescind the contract. The purchaser’s right to rescind is easier to assert if the contract specifically states that time is of the essence (see ss 15, 16 Goods Act 1958 (Vic) (‘ Goods Act ’)), or states that the contract may be terminated for failure to comply with the delivery conditions. (For further information on contract law issues, see Chapter 7.1: How contract law works.) Used cars Where delivery of a used car by a car trader is delayed by more than 14 days after the delivery date stated in the car sale contract, the purchaser may terminate the contract by notifying the car trader in writing. The contract cannot be terminated if the purchaser caused the delay (s 41 MCT Act; reg 23 sch 2 MCT Regulations). 9 Using the National Credit Code Usually, purchasers of cars enter into a number of contracts: there is a car sale contract between the purchaser and the car trader, a separate finance contract between the purchaser and a lender, and a mortgage over the car, to protect the lender’s interest. If the purchaser arranges their own finance, the NCC usually applies to the finance contract between the purchaser and the lender. Under section 21 of the NCC, after a finance contract is made, the debtor may terminate the contract (in writing) unless: • credit has been obtained under the contract; or • a card or other means of obtaining credit provided to the debtor by the credit provider has been used to acquire goods or services for which credit is to be advanced under the contract. However, fees or charges incurred before the termination may be payable. If a car trader arranged the finance or introduced the purchaser to the lender, the purchaser may have remedies under the NCC in respect of the sale contract and the finance contract. The NCC’s linked credit provisions (ss 125–141) enable a purchaser, in certain circumstances, to obtain damages from both the car trader and the trader’s linked credit provider for loss or damage caused by misrepresentation, breach of contract or failure of consideration in relation to the sale contract. This means that a purchaser may be able to take action against both the car trader and the lender and use the liability of the car trader as a defence to proceedings brought by the lender. A linked credit provider of a car trader is defined in section 127 of the NCC. A lender is a linked credit provider if: • the trader has a trade contract, arrangement or understanding with the lender to finance the supply of goods or services to the trader; • the trader, by arrangement, regularly refers people to the lender to obtain finance; • the trader, by arrangement, has the lender’s contracts, loan applications or offer forms available to purchasers; or • by arrangement, loan documents are signed at the trader’s premises. However, the credit provider may not be liable in certain circumstances (see s 129(2)). If the trader arranged the finance or referred you to the lender (as part of an arrangement between the trader and the lender), and you rescind or discharge your obligations under the sale contract, you can also rescind the finance contract. Any mortgage or guarantee related to the finance contract will be terminated too (s 135). If a car sale contract is cancelled during the cooling-off period under section 43 of the MCT Act, any finance contract related to the car contract is not automatically terminated (ss 43(6), 43A). However, upon cancellation, the seller must return to a lender any money received pursuant to a credit contract (s 43(4)). The purchaser should contact the lender directly to ensure that the refund has been paid to the credit account and ask whether any further payments are needed to terminate the credit contract (the purchaser may be liable to pay fees or charges that have already been incurred under the credit contract). Other useful provisions are sections 39 and 40 of the Consumer Credit (Victoria) Act 1995 (Vic). These provide that a finance contract and any mortgage in relation to that contract are unenforceable if the annual percentage rate of the contract exceeds 48 per cent. In this case, the purchaser may be able to keep the car but not have to make payments on the finance contract. If the annual percentage rate exceeds 30 per cent, the mortgage is void.