Recalls and Duty to Disclose Known Vehicle Defects

A TIADA delegation of dealers and association leadership visited Washington D.C. last week to advocate on behalf of our members. One of the popular topics discussed was open recalls. Passions are still ignited by them and how auto dealers should handle vehicles on their lots which are subject to a recall. As the law stands today, auto dealers are permitted to sell vehicles that are subject to a recall. If a dealer knows or should know (because anyone can search a VIN on to determine whether a specific vehicle is subject to a recall), then that dealer has a duty to disclose that information. The post below is a refresher on the association's position on open recalls. 

TIADA's Compliance Consultation Service (CCS) received a call from a dealer who asked whether a dealer is required to notify potential buyers that a vehicle may be subject to an airbag recall.  The answer is no, disclosure is not required by law, but it is a very good idea.
A dealer has a duty to disclose any known issue or defect that might affect the merchantability of a vehicle. This includes, but is not limited to, damage sustained in a prior collision (even if repaired), flood damage, and whether the vehicle is subject to an open safety recall. The key word is “known.” It is impossible to know, for example, whether an airbag is defective without deploying the airbag.  A dealer can only disclose that information of which he or she has knowledge. You cannot disclose something that you do not know is wrong.
The association recommends that dealers run the VIN for all vehicles in their inventory through the Safecar.Gov lookup tool at the time of closing a sale. Vehicle history databases are updated constantly, so the information you pull before bidding on a vehicle at auction may not be complete by the time you sell that vehicle.  Print out the results and have the customer sign and date the document. Other items that a dealer might have a customer sign include any reports that the dealer received about the vehicle from an auction, and any vehicle history report(s) that the dealer obtained. Finally, consider including an Airbag Disclosure and/or a Known Defects Disclosure form as a regular part of your sale documents. See the examples of these below:

Airbag Disclosure Form

Known Defects Disclosure Form 
Keep copies of any signed vehicle reports in the deal jacket. Following these recommendations can go a long way toward demonstrating that a dealer made a good faith effort to disclose the most accurate vehicle history and recall information available at the time of sale. 


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