porsche article

Don’t make promises you won’t keep…

Imagine Mr Hughes’s elation! He thought he had just secured the car of his dreams, a limited edition of the 911 GT3 RS4 model – the last four litre 911 that Porsche was to produce. Knowing that demand would outstrip availability and there would be a race to buy the cars, Mr Hughes had swiftly made enquiries, paid the required deposit and signed a vehicle order form with his usual Porsche dealer. That seemed to complete the deal, subject only to the dealer being allocated the model by Porsche. However, the deal did not end happily. Instead, upon the dealer being allocated only one vehicle, it chose to sell it to someone else. It did so on the basis that it thought Mr Hughes was not a genuine Porsche enthusiast and that he would resell the vehicle to make a profit.

The key problem in Hughes v Pendragon Sabre Ltd (t/a Porsche Centre Bolton) [2016] EWCA Civ 18 was that the dealer did not appear to think it was under an obligation to sell the vehicle to Mr Hughes.   Dealers (and their customers) need to be cautious about the promises they make and recognise when they are legally committed to a transaction. In this case, the failure cost the dealership £35,000 in damages – not to mention the costs of taking the case to the Court of Appeal.

When Mr Hughes paid his deposit and signed the vehicle order form the dealership had not yet acquired the car to sell. On the form the goods were described as “911 GT3”, with 6 speed manual transmission, exterior colour black, and trim colour “black leatherette interior, seats leather/Alcantara”. Across the face of the box covering the description and price were the words “Subject to Price + Spec”. Shortly after the deposit was paid and the form was signed, the dealership confirmed to Mr Hughes by email that he had “placed an order for the next version of the GT3” and that he would get the first one from the dealership if they got one.

In due course, when faced with an aggrieved Mr Hughes, the dealership argued that the vehicle order form was simply an acknowledgment of an expression of interest and there was no contract between the parties. Further, the dealership argued that its terms and conditions provided that it was not obliged to fulfil orders in the sequence in which they were placed.

The Court of Appeal did not agree with the dealer. It said it was “as plain as a pikestaff” that a contract had been entered into. It noted that under the Sale of Goods Act 1979 there can be an agreement to sell future goods – these include goods to be acquired by the seller after the making of the contract of sale. That can depend on a contingency which may or may not happen.

The fact that there was no vehicle at the time of any agreement to sell, and that the dealership might not be allocated one, were not fatal to the existence of a contract. The vehicle order form was binding even though it was stated to be “Subject to Price + Spec”. The price of goods need not be fixed but could be “left to be fixed in a manner agreed by the contract, or may be determined by the course of dealing between the parties”. Further, the terms and conditions expressly contemplated that the specification might not be complete – the procedure for that eventuality, as well as how the price would be calculated (the importer’s recommended retail price taking into account the cost of the specification details), were expressly set out in the order form. It also did not matter that there was no delivery date – where no time is fixed goods are to be delivered within a reasonable time.

The Court held that the email which had been sent by the dealer was a clear expression of what had been agreed. In certain circumstances such a statement can be treated as having contractual effect – this is particularly so where one party enters the main contract because the statement is an assurance on a certain point.  Here, the dealer’s actions created a side contract. This varied the term of the main contract which otherwise enabled the dealer to exercise a discretion not to fulfil orders in the order they were received.

Under the Sale of Goods Act damages for non-delivery are usually calculated by the difference between the contract price and the market or current price at the time delivery should have taken place (or was refused). However, in order to do this there needs to be an available market in the goods. In this instance, Porsche had only manufactured a limited number of the Porsche 911 GT3 RS4 model – it seemed that at most about 30 were supplied to the UK. None appeared to be for sale.

In the absence of an available market the measure of damages was said to be the loss directly and naturally resulting, in the ordinary course of events, from the seller’s breach of contract. This was based on the value of the contract goods at the time and place of the breach – that could be assessed by any relevant evidence, such as the cost of the nearest equivalent vehicle.

On the evidence, the price Mr Hughes would have paid would have been some £135,000. The value of the model had since appreciated and the resale value was in excess of the price as new. Evidence showed similar vehicles being available at £170,000. Consequently, Mr Hughes was awarded the difference – £35,000.

Whether or not this course of action was worthwhile for the dealer remains unknown –we still do not know what price the car was actually sold for. As for Mr Hughes, he is left, at least for the time being, with a pipedream and £35,000 – that is unlikely to be enough to quell his disappointment in not obtaining the car of his dreams. He may not be returning to his usual Porsche dealer in the future…

Buyers and sellers alike should avoid getting caught up in the moment:

  • Parties should make their intentions totally clear – do the parties want to commit to buying/selling or are they simply expressing or gathering interest?
  • Ensure any documents presented reflect those intentions.       Read any terms and conditions and other documents carefully so you know exactly what you and the other party is obliged to do;
  • Remember verbal or written statements can form part of the contractual terms – confirm verbal assurances in writing if they are important.
  • Be cautious, you don’t need to sign anything at all to create a legally binding contract;
  • If you think you have been wronged make sure you act very swiftly.       In this case Mr Hughes had to withdraw his claim for specific performance (which would force the dealer to sell him the car) because the allocated vehicle had already been sold elsewhere. Had Mr Hughes found out the position earlier, he may have been able to obtain an injunction from the court to prevent the sale of the car until his dispute was resolved. Injunctions can be costly and carry a high element of risk. You should discuss whether an injunction is appropriate with your solicitor immediately.
  • If in doubt, seek legal advice to ensure your position is protected from the outset. For the sale and purchase of unique or particularly expensive cars, it is usual for the parties to agree a bespoke contract drafted by their lawyers, rather than one in standard form. Such contracts usually include detailed provisions that clarify when exactly a sale takes place.

For more information on how we can help you, please contact David Stedman. David is a solicitor advocate in our Commercial & Private Client Litigation team specialising in the classic car sector, experienced in acting on claims for breach of contract, misrepresentation and negligence.