Sellers’ representations – best taken with a pinch of Salt?

Purchasing a classic car is an exciting yet sometimes daunting experience and misrepresentation can be a considerable problem, even if you are buying from a seemingly reputable source. What can you do if you have purchased a car that turns out to be not what you were told by the seller?

Mr Salt purchased a Cadillac CTS 3.6 litre Sport Luxury car from specialist car sellers, Stratstone, who had described the car to him as “brand new”. Mr Salt later discovered that the Cadillac was a used car with defects. Unsurprisingly, he wanted to return the car and get his money back. The seller argued that Mr Salt was only entitled to damages of £3,250 and not the £21,895 purchase price he had paid.

At first instance, the County Court decided Mr Salt was only entitled to damages of £3,250. Mr Salt appealed to the High Court, which agreed that Mr Salt was entitled to return the car and get a refund due to the seller’s misrepresentation. Stratstone, perhaps fearful that other purchasers may be entitled to refunds following Mr Salt’s victory, appealed the High Court’s decision, taking the matter to the Court of Appeal.

The Court of Appeal agreed with the High Court and Mr Salt was allowed to return the car, eight years after he had purchased it. The Court of Appeal decided that although such a delay could in some circumstances stop a purchaser being entitled to return a car, much of the delay had been caused by the court proceedings and in this instance, the delay should not be a barrier to the reversal of the contract.

The Court noted that although the car had been registered to Mr Salt after the sale, this did not mean that restoration of the parties’ positions was impossible. Registration did not change the physical entity of the car. Depreciation and the fact that Mr Salt had, from time to time, enjoyed use of the car also did not make the return of the car impossible. The Court said it had to look at whether, in returning the car, “practical justice” could be done.

Often, a seller’s misrepresentation is only recognised when a purchaser begins to restore or modify the classic car he has bought. The practical effect of this is that strictly, the court cannot return the seller to his original position by unwinding the contract, since the car will have been altered. Previously, it was believed that this would prevent the court from unwinding the contract, leaving the buyer’s only remedy in damages, which could be minimal. This decision, however, suggests that even if minor works have been completed to the car before the buyer seeks to return it for misrepresentation, provided “practical justice” can be done, a buyer may still be entitled to return the car.

Misrepresentation is a complex area of law. If a buyer enters into a contract as a result of a misrepresentation, a key question will often be whether they can return the goods and obtain a refund (known as rescission) or whether he is limited to claiming damages. Although a party may no longer have a contractual right of rejection, the right to reject may still exist if there has been a pre-contract misrepresentation. This decision displays a greater willingness to allow purchasers to undo contracts entered into in reliance on a misrepresentation in order to achieve a just result. As shown by Mr Salt’s case, rescission can be far more advantageous.

For more information about 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; he is experienced in acting on claims for breach of contract, misrepresentation and negligence.