This section describes some strategies for cancelling or withdrawing from a car sale An agreement that the law will enforce..
The basic strategy
In getting out of a car deal, you want to cancel or withdraw from the car sale contract and retrieve your deposit and any car you have traded-in.
Cancelling or withdrawing from a car sale contract
The legal cancellation of a contract is called The ending of a contract in a manner that places the parties to the contract in the position they were in before the contract existed (where restitution is possible). For example, in a rescission of a contract for the sale of a car the seller would get back the car and the buyer would get back their purchase money. See also termination.. In addition to rescission, you have the right to withdraw from a sale contract in certain circumstances (s 88B MCT A written law made by parliament. Also called an ‘Act of parliament’, ‘statute’ or legislation.). The procedure is set out below in ‘Motor Car Traders Act (ss 45, 88B)’.
You must rescind or withdraw from a contract quickly. It has been decided in several contract rescission cases that where one A person or organisation directly involved in a court case. Parties include the plaintiff or applicant, the defendant, and any third party added to the action, but not independent witnesses. to a contract has an option to rescind, that party must do so within a reasonable time and cannot do so after doing anything to affirm the contract. To affirm a contract means to do something that shows you recognise that you are bound by the contract.
The rescission or withdrawal must be communicated to the seller. Essentially, this amounts to posting or personally delivering a letter to the seller stating that you are rescinding or withdrawing from the contract (see sample letters in appendices A, B, C and D at the end of this chapter) and returning the car to the seller if you have taken delivery of it.
You must notify the seller as quickly as possible. Speed is essential, as it is strong Material presented to a court to prove or disprove a fact. It can include what witnesses say as well as documents and other objects. of an intention to rescind or withdraw. It also minimises the loss or damage that the seller may claim to have suffered. If the seller is a car trader, it is also a good idea to send a copy of the letter to Under the Australian Consumer Law, a person who buys goods or services for less than $40 000 or for personal or home use. Affairs Victoria (see ‘Contacts’, below, for contact details) and inform the car trader that you have done this. It can help to pressure the car trader into rescinding or acknowledging your withdrawal from the contract.
Retrieving a deposit or trade-in vehicle
If a contract is Revoked or cancelled. or withdrawn from, both you and the seller must be placed in the same position that you were in before the contract was entered into. The exception is when the The time allowed for a purchaser to change their mind and legally withdraw from a contract after signing it. A contract to buy a house or a car in Victoria will often have a cooling-off period of three business days (excluding weekends and public holidays) after signing the contract. under section 43 of the MCT Act is relied upon, in which case the car trader retains:
- in the case of a used car contract: $100 or one per cent of the purchase price, whichever is greater; or
- in the case of a new car contract: $400 or two per cent of the purchase price, whichever is greater.
The seller gets back the car sold to you. You get back the money paid, together with any trade-in vehicle (or, where the car trader has already sold the trade-in vehicle, the equivalent monetary value of the trade-in). (For used cars, see s 41 MCT Act; reg 23 sch 2 MCT Regulations.)
If the car trader disputes that the contract has been legally rescinded or withdrawn from and refuses to return your money and any trade-in vehicle, you need to force the car trader’s hand by applying to VCAT for orders stating that the contract has been rescinded or withdrawn from and ordering the deposit or trade-in vehicle, or both, be returned. A car trader who disputes you getting out of a contract may To take legal action in a civil case. you for A court order for money to be paid to someone to compensate them for a loss suffered as a result of a civil wrong or breach of contract. For example, a person who caused a serious permanent injury to another person can be ordered by the court to pay damages that compensate the injured person for their loss of income from being unable to work. See also aggravated damages; compensatory damages; general damages; liquidated damages; nominal damages; special damages. in the Magistrates’ An independent body that hears legal claims brought by parties and decides between them. Serious cases are heard by a judge and jury, or just a judge. Less-serious cases are heard by a magistrate.. If this seems likely, then it’s a good idea to make a ‘pre-emptive strike’ and bring your own application in VCAT first (this is much cheaper than having to defend a Magistrates’ Court claim).
If the car trader gets in first, you can apply to have the case transferred from the Magistrates’ Court to VCAT. If VCAT or the court does not agree that the contract has been rescinded or withdrawn from, then you have wrongfully broken the contract (see ‘What if a contract has not been cancelled or withdrawn from properly?’, below).
How to get out of a car sale contract: Overview
There are a number of grounds on which a car sale contract can be legally cancelled or withdrawn from. These include:
- Cooling-off period;
- Motor Car Traders Act (ss 45, 88B);
- Failure of a A condition that delays the coming into effect of a right, usually under a contract (q.v.), until that condition is fulfilled.;
- Making a statement or doing something that is false, to try to get someone to do something they would not otherwise do, for example buy goods of poor quality.;
- Waiver and (1) In general, not being permitted (being stopped) from making a particular argument or claim in court. (2) Equitable estoppel: stopping someone going back on what they did or said they would do, when what they said has been relied on by another person who would be disadvantaged if the situation changed.;
- Withdrawal of The first step in agreeing to make a legally binding agreement. An offer must be accepted before there can be a legally enforceable contract. For example, a person can offer to sell their car for $5000 and a buyer can accept the offer and pay that purchase price.;
- Delivery is delayed;
- Using the National A debt that does not have to be paid until some future time. Being allowed to pay later, in the future, for something you are getting now. Code.
1 Cooling-off period
A cooling-off period is the time during which a purchaser can withdraw from a contract after signing it.
Section 43 of the MCT Act provides for a cooling-off period after the purchase of a new or used car from a car trader. Under the MCT Act, a purchaser can cancel a car sale contract within three clear days after signing it, unless:
- the purchaser is a car trader or A body corporate created by registration of a plan of subdivision or a plan of strata or cluster subdivision. See also prescribed owners corporation.;
- the purchaser has accepted delivery of the car;
- the car is a commercial vehicle; or
- the car was purchased at a public auction.
A car trader cannot sell any trade-in vehicle during the three-day cooling-off period (s 43(3) MCT Act; penalty: 50 pu). If you suffer loss as a result of the car trader selling the trade-in vehicle during the cooling-off period, you can claim compensation from the Motor Car Traders’ A binding promise made as reassurance that another person will carry out their legal obligations (e.g. paying a debt). The person making the promise is called a guarantor. If the person being guaranteed fails to pay, the guarantor becomes responsible for the debt. Fund (s 76). (The Motor Car Traders’ Guarantee Fund is administered by Consumer Affairs Victoria; for CAV’s contact details, see ‘Contacts’ at the end of this chapter.)
This cooling-off period also applies to ‘off-trade-premises sales agreements’ for new or used cars. An off-trade-premises sales agreement is made in the presence of the purchaser and the car trader (or a person acting on either party’s behalf) at a private residence or the purchaser’s workplace (unless the agreement was made at either premises at the purchaser’s request). Note that ‘private residence’ does not include a private residence that is also the car trader’s business premises.
Cancelling a car sale contract within the cooling-off period
To cancel a car sale contract within the cooling-off period, you must, within three clear days of signing the contract, notify the car trader in writing that you are terminating the contract (see the sample letter in appendix A at the end of this chapter). If you accept delivery of the car, the cooling-off period ends.
Three clear days means three whole days, not including the day the contract was signed, and not including weekends or days that are wholly or partly observed as public holidays in Victoria. For example, if you sign a contract on Thursday, you have all day Friday, all day Monday, and until the close of business on Tuesday in which to notify the car trader.
Posting the notification letter is risky due to the limited amount of time. It is best to personally hand the notice to the car trader or an employee at the car yard. If possible, take along a friend to act as a A person who can provide direct information based on their own knowledge about a relevant fact, and appears in court to give evidence about it. In some cases a witness may provide an affidavit or deposition setting out their evidence if they are not able to attend court..
As there is a penalty involved in cancelling a car sale contract under section 43 of the MCT Act (i.e. the car trader retains a small proportion of the purchase price), you should state in your notification letter if you have other grounds for rescission. This shows the car trader that you are aware of your right to cancel the contract. In this situation, An approach to dispute resolution where both parties discuss the matter in dispute between them, with the aim of reaching a settlement through a consensus, compromise or agreement. See ADR (alternative dispute resolution); arbitration; conciliation; mediation. may lead to the contract being cancelled without a penalty.
After terminating a car sale contract
After the car sale contract has been terminated under section 43 of the MCT Act, the car trader must:
- where it is a sale of a used car, pay you all money received under the contract, less $100 or 1 per cent of the purchase price, whichever is greater;
- where it is a sale of a new car, pay you all money received under the contract, less $400 or 2 per cent of the purchase price, whichever is greater; and
- return any trade-in vehicle to you.
If the car trader arranged finance, or referred you to a lender:
- any finance contract that was entered into for purchase of the car is cancelled; and
- any An interest in or power over property to secure payment of a debt or obligation, generally in the form of a mortgage, charge or lien. the lender has in the car that relates to such finance is cancelled.
If you already have the car, you must return it to the car trader. If, due to a defect beyond your control, the car is unroadworthy or cannot be driven, you must let the car trader collect the car. You are liable for any damage (other than fair wear and tear) that occurs to the car while it is in your (1) Having control over property. Possession is not the same as ownership. For example, a bicycle you have borrowed from a friend is in your possession but you do not own it. (2) Having illegal drugs on your person or property..
2 Motor Car Traders Act (ss 45, 88B)
Rescission of a car sale contract
Under section 45 of the MCT Act, a purchaser can apply for a court order to rescind a car sale contract where:
- a false representation has been made in relation to the car’s odometer reading;
- the contract does not contain the prescribed particulars, terms and conditions; or
- the used car is substantially different from the description in the prescribed notice required by section 52(1).
If the cash price of the vehicle does not exceed $40 000, the purchaser can apply for a court order from the Magistrates’ Court or from VCAT. If the cash price of the vehicle is greater than $40 000, the purchaser must apply to the Magistrates’ Court. The application to the court or VCAT must be made within three months of the date the car sale contract was signed.
However, once the purchaser notifies the car trader that they are rescinding the car sale contract, the three-month period no longer applies. The purchaser has one month from the date of notifying the car trader in which to make the application. The MCT Act makes no provision for the court or VCAT to extend these time periods.
The rescission letter notifying the car trader should set out how the car trader has breached the MCT Act (see the sample letter to rescind a car sale contract in appendix C at the end of this chapter). The purchaser may also want to point out to the car trader that by failing to comply with section 41 (used car) or section 42 (new car), an A criminal act prohibited by state or commonwealth criminal law. An offence is either a summary offence (minor) or an indictable offence (serious). has been committed against the MCT Act.
Withdrawal from a car sale contract
Under section 88B of the MCT Act, a purchaser can withdraw from a car sale contract (regardless of whether the car is in the possession of the purchaser or the car trader).
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;
- 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 88B of the MCT Act 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).
Section 88B of the MCT Act does not give the purchaser the right to apply to a court or 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 The end of something. Contracts terminate when the parties have done what they agreed. A contract can also be terminated without being completed, for example if one party breaks the contract, or it is impossible to carry out. 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 Failure to do something that is legally required. For example, a person who fails to make a payment on their car is in default on the loan; if they continue to be in default the creditor may issue a default summons to take the debtor to court. 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 (1) A defendant’s response to the legal claims made against them in court by a prosecutor or plaintiff. (2) A lawful excuse for conduct: for example, causing minor injuries to someone while saving them from certain death. (3) ‘The defence’ is also a way of referring to the defendant and their legal team. 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 compensation from the Motor Car Traders’ Guarantee Fund (s 76) (see ‘Motor Car Traders’ Guarantee Fund’, above). However, this claim cannot be made until any section 45 rescission application has been heard and determined by the Magistrates’ Court or VCAT (s 45(5)).
You can rescind a car sale contract if it does not contain the prescribed particulars (s 45 MCT Act). You can also withdraw from the contract if it does not comply with section 41 (used cars) or section 42 (new cars) (s 88B).
A contract for the purchase of a new car (where the seller is not a lender and the purchaser is not a car trader or special trader) must contain the following particulars (s 42 MCT Act; reg 24 sch 3 MCT Regulations; penalty: 20 pu):
- the car trader’s name or the name of the car trader’s employee who negotiated the deal;
- the car trader’s licence number;
- a description of the car;
- the vehicle identification number (if known);
- the price and other charges to be paid;
- the time and manner in which these payments are to be made;
- the value allowed for trade-in (if applicable);
- the serial number of the agreement.
The car trader must give the purchaser a copy of the contract at the time of the sale (ss 83A, 83C MCT Act; penalty: 50 pu).
A contract for the purchase of a used car (where the seller is not a lender and the purchaser is not a car trader or special trader) must contain the following particulars (s 41 MCT Act; reg 23 sch 2 MCT Regulations):
- the car trader’s name or the name of the car trader’s employee who negotiated the deal;
- the car trader’s licence number;
- a description of the car;
- the registration number of the car (if registered);
- if not registered, the car’s vehicle identification number – if this is not reasonably ascertainable, any other number identifying the car;
- the price and other charges to be paid;
- the time and manner in which these payments are to be made;
- the value allowed for trade-in (if applicable);
- the distance travelled by the car as recorded on the odometer and whether the car trader believes this is true;
- the serial number of the agreement.
The contract must also contain the specified terms and conditions and other information set out in schedule 2 of the MCT Regulations. You should carefully check the contract, as car traders often fail to properly complete contracts and one or more of the prescribed particulars may be wrong or missing.
The car trader must give the purchaser a copy of the contract at the time of the sale (s 41(2) MCT Act; penalty: 20 pu; s 83A, 83C; penalty: 50 pu).
Prescribed notice – used cars
A used car (not a commercial, veteran, vintage, classic or historic car) that is offered for sale by a car trader must have a notice in the prescribed form (see reg 11 MCT Regulations) attached to it containing:
- the name and business address of the owner of the car (usually the car trader);
- the distance shown on the odometer when the car trader acquired the car;
- the cash price of the car and the total price inclusive of all the fees (unless it is to be sold at auction);
- the compliance date of the car;
- the model designation (if any) of the car;
- the registration number (if any) of the car;
- the vehicle identification number or, if there is no vehicle identification number, another number identifying the car, such as a chassis or engine number;
- the built date (if it appears) and the compliance date of the car;
- whether the car is on the written-off vehicle register.
Upon sale, the car trader must get the purchaser to sign a copy of the notice and must retain the copy (s 52(6) MCT Act; penalty: 10 pu). The notice must not contain a false or misleading statement or representation (s 52; penalty: 10 pu).
Section 45 of the MCT Act lets a purchaser rescind a contract if the car is substantially different from the car described in the notice.
It may be difficult to get a copy of the notice. While you may be sure that there was a discrepancy, the car trader may have ‘lost’ the notice. The car trader is subject to a penalty of 50 pu for failing to either retain the notice for at least six years or give a copy of the notice to the purchaser as soon as possible after the sale (s 83A, 83C; regs 29, 30).
You can take action in the Magistrates’ Court or VCAT to obtain a copy of the notice.
Under section 37 of the MCT Act, a car trader must not knowingly buy from (or take in exchange), sell or give to, or receive possession of, a used car from a person apparently under the age of 18. A purchaser may withdraw from a sale contract if the contract does not comply with section 37 (s 88B).
3 Failure of a condition precedent
A contract is subject to a condition The doctrine that courts must follow past rulings of higher courts in very similar cases. For example, the County Court of Victoria must follow relevant rulings of the Supreme Court of Victoria. The precedent comes from the reasons a judge has given for their decision in a case. See also case law. when the seller and the purchaser agree that the contract does not come into being until a certain event has occurred. Therefore, this condition must be fulfilled before any contractual obligations come into operation.
These conditions may be written into a car sale contract. The conditions usually include the words ‘subject to’. If a condition was made verbally and not written into the contract, you can argue that the contract is subject to a condition precedent. However, if the car trader disagrees, it is one party’s word against the other, and you face the difficult task of proving that the car trader agreed to the condition.
Subject to finance
The most common condition precedent is that the ‘agreement is subject to and conditional upon the purchaser obtaining finance on or before the delivery date’, or wording to a similar effect. A deal can be called off if a contract is subject to finance and the purchaser cannot get finance after making reasonable efforts to do so (i.e. the purchaser must have at least applied for finance and been refused) (for used cars, see s 41 MCT Act; reg 23 sch 2 MCT Regulations).
However, care must be taken with the wording of the condition precedent. Stating that the contract is ‘subject to finance’ does not mean that it is subject to finance on the terms, and at the interest rate, the purchaser chooses. The car trader may arrange finance at a high interest rate. If you specify ‘bank finance’ or something similar in the car sale contract, you can’t be forced to take the car trader’s finance, which is often very expensive.
Under the NCC (s 134), if:
- the purchaser makes it known to a car trader that they need finance;
- the finance is not provided by the car trader; and
- the purchaser makes reasonable attempts to obtain finance on reasonable terms, but can’t do so,
- then the purchaser is entitled to terminate the sale contract.
The NCC only applies if the finance contract would have been a ‘provision of credit’ that is regulated by the NCC. For more information about finance contracts, see ‘9 Using the National Credit Code’, below).
Other conditions precedent
Other common conditions precedent include clauses in a car sale contract stating that the contract is subject to:
- a satisfactory check by a mechanic of the purchaser’s choice, or a test drive;
- a RACV or VACC check; or
- approval by parents or a spouse.
If you deposit money or valuables with a car trader prior to a test drive or mechanical test and subsequently return the car and do not enter into a contract to buy it, the car trader must return the money or valuables immediately (reg 22(1) MCT Regulations; penalty: 10 pu).
Regulation 22(2) has identical conditions for a conditional contract to buy a car where you subsequently decide not to continue with the contract.
When relying on a condition precedent to get out of a used car contract, use the letter in appendix B at the end of this chapter.
Even though a contract may not state that a seller must guarantee the quality of the car being sold, guarantees of quality are nevertheless included in the contract. These guarantees are sometimes called ‘implied conditions and warranties of quality’. Breaches of these guarantees can help purchasers in any battle with a car trader.
These guarantees should not be confused with the Found in a statute of delegated legislation. For example, a statutory authority or body is aperson or organisation that has special powers given by parliament to do work for the public benefit. A promise in a contract. For example, a promise by a manufacturer that goods will be repaired or replaced if they turn out to be faulty. for used cars required by section 54 of the MCT Act. The section 54 statutory warranty gives the purchaser the right, in certain circumstances, to require the car trader to repair a used car, but it does not give the purchaser the right to rescind the car sale contract.
Implied conditions and warranties of quality can be found in chapter 3 of the Australian Consumer Law (ACL), which is schedule 2 of the Competition and Consumer Act 2010 (Cth). Chapter 3 applies to:
- goods that are ordinarily acquired for personal, domestic or household use; or
- other goods that cost $40 000 or less; or
- the purchase of any vehicle or trailer to be used principally for the transport of goods on public roads (s 3).
Section 54 of the ACL creates an implied condition that the goods are of acceptable quality. Goods are of acceptable quality if they are:
- fit for the purpose for which they are commonly bought;
- acceptable in appearance and finish;
- free from defects;
- safe; and
as judged by a reasonable purchaser who is fully acquainted with the condition of the goods, considering the nature of the goods, their price and terms of sale.
Section 55 of the ACL creates a guarantee that the goods are reasonably fit for a particular purpose:
- that is made known by the purchaser to the seller, the seller’s A person who acts for someone else. They can make decisions, carry out tasks or make agreements for the other person. For example, if you ask someone to bid for you at an auction they will be acting as your agent. or the manufacturer; and
- for which the seller represents they are fit.
The clear intention and effect of sections 54 and 55 of the ACL is to require goods to be of sufficient quality.
Proving a car is defective: Expert reports
There is no exact definition of ‘sufficient quality’ in relation to a car. If you are relying on lack of quality, you should get the RACV, VACC or an independent mechanic to check the car to establish this, as soon as possible. This A document that sets out what a person wants to happen to their money and other property after they die. not conclusively prove that the car is of insufficient quality, but it may be used as evidence.
It is important that you get an independent, recognised car expert. This will help your negotiations with the car trader. Importantly, VCAT requires independent expert evidence that the car is not of sufficient quality. If possible, the car expert should provide a brief written report that includes information about the car’s defects, whether it was unreasonable for a car to have those defects given its sale price, age and use, and the cost to repair the car. You will probably have to pay for the report.
You should read VCAT’s Practice Note 2 on Expert Reports. This practice note sets out what an expert report must contain if it is to be used at VCAT.
Remedies if a car is defective
A breach of a guarantee allows the purchaser to take action where the seller sells the car as part of a business activity. The remedy for the breach depends on whether the failure to comply with the guarantee is a ‘major failure’. A major failure can allow the purchaser to reject the car in some cases (s 259 ACL).
However, the purchaser loses the right to reject the car if they do not act within a reasonable time, or if they do something to the car so it cannot be returned in substantially the same state as when it was sold.
For further information, see Chapter 7.3: Consumer guarantees.
If a seller makes a statement to you about a car, and the statement both induces you to enter a car sale contract and is untrue, the statement is called a misrepresentation.
A common misrepresentation is where a purchaser is persuaded to sign a contract and pay a deposit after being told by the car trader that the contract is not a binding agreement but only a way of holding the car. Other common misrepresentations relate to the quality of the car, such as it being ‘an original’ or ‘a single-owner car’.
If a misrepresentation has been made, you can rescind the car sale contract by notifying the seller before accepting the car or within a reasonable time after accepting it (s 24 Australian Consumer Law and Fair Trading Act 2012 (Vic) (‘ACL&FTA’)). Acting quickly is important because if you do not rescind the contract within a reasonable time, you may be taken to have chosen to continue the contract (s 26 ACL&FTA).
Under section 25 of the ACL&FTA, when a purchaser rescinds a sale under section 24, the purchaser must return the goods to the seller. The seller must return the money paid by the purchaser. The purchaser is liable for any damage caused to the car by wilful or negligent action.
Note that under the ACL&FTA (s 27), a seller is liable for the representations and warranties of their agents and representatives.
In addition, section 84A of the MCT Act prohibits a person from giving information or making a statement that is false or misleading in relation to any document required by the MCT Act, by either including false or misleading matter or omitting Relevant or important. For example, material evidence is something that helps to prove an argument in a criminal case. matter (penalty: 50 pu).
If you are claiming that a seller has made a misrepresentation, it may also be possible to claim that the seller has breached the ACL.
The ACL defines and prohibits:
- Something done by a manufacturer or seller that is unfair, dishonest or likely to mislead a consumer when buying goods or services. (ss 18, 19);
- false representations (s 29);
- Behaviour that takes unfair advantage of a vulnerable person in a contract or other transaction. The vulnerability can be due to factors such as poor education, disability, language difficulties or being affected by alcohol. (ss 20–22);
- unfair terms (ss 23–28); and
- misleading conduct in relation to the nature, manufacturing process, characteristics, suitability for their purpose or quantity of goods (s 32).
The ACL&FTA allows purchasers to bring proceedings in VCAT for breaches of the ACL. Sections 103 to 106 deal with the A form of alternative dispute resolution. The parties negotiate with the help of an independent person called a conciliator. The aim is to sort out the dispute by mutual agreement, rather than having a decision made by a court or tribunal. See also arbitration; mediation; negotiation. of, and instituting or defending proceedings in relation to, disputes about the supply of goods, by Consumer Affairs Victoria. Sections 107 to 113 deal with the A finalisation, especially a decision made by a court or tribunal to finalise (determine) a case. of fair trading disputes by VCAT in relation to a supply of goods. Sections 108 and 109 set out VCAT’s powers, which include making orders to pay money to the purchaser, or to cancel or vary a contract.
Section 158 sets out the orders a court may make in proceedings for contravention of the ACL&FTA to compensate for loss or damage suffered. These include orders to pay money to the purchaser or to declare Having no legal effect. A void agreement has something wrong with it, so it cannot be a legally binding contract. For example, a verbal agreement to buy land would be void, because the law says those contracts have to be in writing. or vary a contract or collateral agreement (e.g. a finance contract). Section 159 allows purchasers to bring proceedings in a court or VCAT for loss or damage caused by a breach of the ACL&FTA. Section 160 gives a court the power to (1) A standard set of working conditions, including pay rates, for a particular industry. (2) A court decision that a party receive compensation, such as an award of damages to compensate them for physical injuries. compensation for humiliation or distress suffered as a result of conduct constituting an offence under the ACL&FTA.
When claiming that a seller has made a misrepresentation or engaged in unconscionable conduct, you should add these grounds to the rescission letter (see the sample letter to rescind a car sale contract in appendix C at the end of this chapter).
For further information on these issues, see Chapter 7.2: Consumer protection laws.
6 Waiver and estoppel
If party A, by their conduct:
- leads party B to believe that the rights arising under the contract will not be strictly insisted upon; and
- intends that party B should act on that belief,
and party B acts on the belief, then party A is not allowed to insist afterwards on the strict legal rights under the contract, when it would be unfair to do so. Party A has ‘waived’ their rights and is ‘estopped’ from asserting them. A waiver of rights may lead to a car trader losing their rights to insist that a purchaser is bound by a car sale contract.
In a dispute with a car trader, there are often oral waivers of rights under the original contract. A common example is that the purchaser is allowed to exchange the car in dispute for another car. Other representations at or soon after the signing of the agreement (e.g. that the contract is not binding, or that the purchaser can get their money back if dissatisfied) may constitute a waiver. In these cases, the purchaser could argue that the car trader has waived the right to To make people obey a law or the terms of an agreement, using police powers or court orders. the agreement and that the agreement is therefore at an end.
Proving an oral waiver can be difficult. Even if the waiver is proved, the car trader may be able to enforce the contract subject to the waiver (i.e. the waiver may only amend the contract, not cancel it).
7 Withdrawal of offer
A contract is not made until the purchaser receives notice of the seller’s acceptance of the offer to purchase. The purchaser can withdraw their offer at any time before the seller accepts. (For more information, see ‘1 Offer and acceptance’ in Chapter 7.1: How contract law works.)
8 Delivery is delayed
If the time for delivery of a new car is an essential term of the car sale contract (i.e. a condition of the contract rather than a contractual warranty) (the definition of ‘essential term’ is considered in Associated Newspapers Ltd v Bancks  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.)
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 A restriction attached to ownership of property to secure the repayment of money borrowed. The mortgage stops the owner of the property selling it until they have paid off the debt. 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 A person who owes a debt. may terminate the contract (in writing) unless:
- any 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 A credit provider who has an agreement with someone selling goods, for example a car. If a customer wants to buy goods but needs to borrow the money, the seller will suggest the buyer go to that credit provider. for loss or damage caused by misrepresentation, breach of contract Failing to do what was agreed in a contract. or failure of Something of value, such as money, given by one person to another person as part of a contract. 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 Legal responsibility, enforced by civil or criminal courts. 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 (1) To fulfil an obligation or be released from an obligation. For example, a debtor can discharge a debt by paying it; a prisoner can be discharged (released) from jail. 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 By authority of, or in accordance with, or as directed by, some court order or legislation. a A contract relating to the giving of credit. (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.
The purchaser may also be able to recover civil penalties if the finance contract breaches the NCC; for example, for not being in writing (s 14) or for improperly disclosing required information (s 17).
The purchaser could also apply to have the finance contract re-opened if it is unjust (s 76). That application can be made to either the Federal Court or to the Australian Financial Complaints Authority (AFCA) (see ‘Contacts’ at the end of this chapter). Applying to the Federal Court can be costly. However, it is free to apply to AFCA, and there is no risk of having to pay court The amount charged by a lawyer for legal work. Lawyers can only charge the amount agreed with the client in a costs agreement or the amount stated by a court in its rules. The party who loses a case usually has to pay all their own costs plus most of the costs reasonably incurred by the other side. See also indemnity costs..
For further information on finance contracts and consumer credit Statutory rules made by parliament or by bodies the parliament delegates power to, for example a local council or a registration authority. See delegated legislation; statute., see Chapter 5.7: Understanding credit and finance.
What if a contract has not been cancelled or withdrawn from properly?
If a contract has not been legally rescinded or withdrawn from, the purchaser may have wrongfully broken the contract. The effect of breaking a contract depends on whether or not the purchaser has already taken delivery of the car.
If the purchaser refuses to take delivery of the car and is subsequently found to have breached the contract, the purchaser is liable to pay damagesto the seller. ‘Damages’ are the loss the seller has suffered because the sale has not been completed.
The seller must always attempt to minimise their loss. This requires the seller to use their best endeavours to sell the car to someone else.
However, the purchaser is liable to compensate the seller for ‘the estimated loss directly and naturally resulting in the ordinary course of events’ from the breach (s 56(2) Goods Act).
The seller must prove this ‘loss’ and does this by proving the non-recoverable loss of profit that resulted from the purchaser wrongfully breaking the contract (see Kargotich v Mustica  WAR 167 and W & J Investments Ltd v Bunting  NSWLR 331 for the method of assessing damages).
When dealing with difficult sellers, it is important for purchasers to assert that they are only liable for A small amount of damages a court can order a defendant to pay when a right has been violated but no real damage of monetary value has been done to the plaintiff. For example, a person can sue for trespass if a person goes onto their property without permission. The court would order nominal damages if no harm was done to the property. under section 56(2) of the Goods Act, as it may encourage the seller not to dispute the purchaser getting out of the contract.
As mentioned, if the purchaser has already taken delivery of the car and they want to rescind or withdraw from the contract, they need to return the car and seek either a refund of money paid to the seller or a termination of the credit contract that financed the purchase.
If you are in this situation, you should maintain credit contract payments until either the seller accepts the termination of the sale contract or an order is obtained from a court or VCAT. If you stop making payments and you are found not to have properly rescinded or withdrawn from the contract, you will be in default of the credit contract.