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Minnesota Court Rules Dealership's Fraud Invalidates "As Is" Disclaimer

Even though many dealers sell vehicles “as is” there remains a lot of confusion over what the term means both between dealers and the general public. A recent court case in Minnesota illustrates this confusion. As guest bloggers Thomas B Hudson and Nicole F Munro document in this week's blog post (excerpted from their CARLAWYER column) the Minnesota Supreme Court ruled a dealership's fraud invalidated the implied warranty disclaimer. Read more about the details below and then reacquaint yourself with Michael W. Dunagan's review of the laws regarding this issue in order to avoid a similar fate. 

Dealership's Fraudulent Misrepresentations Regarding Condition of Used Vehicle Invalidated Implied Warranty Disclaimer

By Thomas B. Hudson and Nicole F. Munro
Excerpted from The CARLAWYER

During a test drive of a truck with a salvage title, the potential buyer noticed that the check-engine light was on and the truck smoked. The salesperson explained that the truck smoked because it was a diesel and that the check-engine light was due to a faulty oxygen sensor that would be easy to fix.
 
The buyer bought the truck "as is" and received a third-party vehicle protection plan at no cost. Within days of purchase, the truck lacked power and continued to smoke. The dealership refused to diagnose or repair the truck. The buyer had the truck inspected and was advised that the engine needed replacing.
 
The buyer sued the dealership, alleging fraud and breach of the implied warranty of merchantability and seeking attorneys' fees under the Magnuson-Moss Warranty Act. The trial court granted judgment for the buyer, awarding her $14,366 in damages based on the price she paid for the truck and the cost of the inspection, plus attorneys' fees and costs. The dealership appealed.
 
The appellate court affirmed, as did the Supreme Court of Minnesota in this decision. The dealership argued that the "as is" disclaimer barred the buyer's claim. The state high court disagreed, finding that, under Minnesota law, a warranty disclaimer is effective "unless the circumstances indicate otherwise." The high court concluded "that [the dealership's] fraudulent statements about the fitness of the truck for the purpose for which a truck is purchased are a circumstance that make the 'as is' disclaimers of implied warranties in the purchase documents ineffective." See Sorchaga v. Ride Auto, LLC, 2018 Minn. LEXIS 111 (Minn. March 21, 2018). 

Tom (thudson@hudco.com) is Of Counsel and Nikki (nmunro@hudco.com) is a Partner in the law firm of Hudson Cook, LLP.  Tom has written several books and is the publisher of Spot Delivery®, a monthly legal newsletter for auto dealers.  He is the CEO of CounselorLibrary.com, LLC and the Senior Editor of CounselorLibrary.com's CARLAW®, a monthly report of legal developments for the auto finance and leasing industry.  Nikki is Editor in Chief of CARLAW®, a contributing author to the F&I Legal Desk Book and frequently writes for Spot Delivery®. For information, visit www.counselorlibrary.com. © CounselorLibrary.com 2018, all rights reserved. Single publication rights only, to the Association. (5/18).  HC/4822-8265-6869v1.

 

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