Motor Trade. Lincolnshire County Council s Voluntary Registration Scheme

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1 PLEASE NOTE THAT THIS PACK WAS ORIGINALLY DESIGNED TO BE PRINTED DOUBLE-SIDED. SOME BLANK PAGES HAVE BEEN REMOVED FROM THIS ONLINE VERSION IN ORDER TO MINIMISE WASTED PAPER. THE PAGE NUMBERING IS THEREFORE NOT ALWAYS CONSECUTIVE. Lincolnshire COUNTY COUNCIL Motor Trade Sales This pack is intended to provide reference material for businesses on the rules relating to the sale of vehicles and associated goods. We also produce a pack for service and repair which you may find useful. The pack includes information on: Descriptions Safety Pricing Faulty goods Guarantees and warranties Lincolnshire County Council s Voluntary Registration Scheme At Lincolnshire County Council Trading Standards, our aim is to assist Lincolnshire businesses to comply with current legislation. We have put this information pack together so that we can help your business to comply with the law in this area. Whilst we appreciate that Trading Standards Regulations can be, and often are complex, they are necessary in order to look after legitimate businesses producing and selling safe products in a fair manner and to protect them from unfair competition. Please bear in mind that legislation other than that detailed in this pack also exists which may have further specific requirements that you will need to comply with, such as the Sale of Goods Act 1979 (as amended), the Consumer Credit Act 1974 and the Business Names Act Lincolnshire County Council Trading Standards Service can also supply you with guidance notes on such legislation therefore please ask us for further assistance. Version 1.1 November 07

2 Motor Trade Sales Contents Descriptions 1 Safety Pricing 5 7 Restricted Statements & Business Names 9 Contracts 11 Voluntary Registration Scheme 15 Useful Contacts 17 These notes are for general guidance only. They should not be taken as an authoritative view of the law. If in any doubt about your responsibilities under the law, please contact Trading Standards.

3 Motor Trade Sales 1 4 Descriptions If you apply a description to any goods, including vehicles that you supply, you must ensure they are correct. Any claims may be considered as a trade description for the purposes of the Trade Descriptions Act This is regardless of whether or not it is not your normal business to sell vehicles or associated goods. Such a claim or description may be made by you, or may have previously been made by another person and you supply the vehicle with that description applied to it. How can a description be made? A description can be made in several ways, including: Any pictures Anything you say Anything you write A description may appear: On a sign, for example in the windscreen of a car In an advertisement In a catalogue or brochure Common problem descriptions include the following: Misrepresentation of mileage by clocking or turning back the car s odometer Falsely stated vehicle features and specifications, e.g. ABS, 16V, Power Steering, Air Con etc. Indications of performance, such as towing ability and fuel economy Other vehicle history such as number of keepers, and service information such as recent cam belt change Another point to note is that in a service book, if you stamp the service book and add nothing to the contrary, it will be accepted that the service was in accordance with the manufacturer s schedule for the age/milage of the vehicle. The Trade Descriptions Act 1968 makes it an offence to either apply a false trade description to a vehicle or supply a vehicle that has a false trade description applied to it. The same applies to any other goods supplied.

4 2 4 Odometer readings The mileage shown by an odometer on any vehicle is a trade description and steps should be taken by the supplier of any vehicle to verify that the odometer reading is correct. As a dealer you must exercise caution. If you sell a vehicle with an incorrect odometer reading, or have one on display for sale, you may commit an offence. A defence may be available if you have a system of checking the true mileage of vehicles you buy in, and by keeping full records. Such checks should include: Wherever possible obtain a declaration from the previous owner that the mileage is correct. If the registration document is with the vehicle, contact the previous owners and keep a record of your check. If the registration document is not available immediately, contact the DVLA to obtain details of previous owners, who should then be contacted as soon as possible. Check the vehicle condition looking for signs of excessive wear etc and any indication of true mileage, e.g. service records or stickers. You should keep records of all transactions involved in acquiring vehicles and the checks made on them. If, despite taking steps such as the above, you remain unable to verify whether or not the odometer reading is correct then a disclaimer should be used to inform customer that the odometer reading is meaningless and not to be relied upon. In order to be effective a disclaimer must be: As bold, precise and compelling as the odometer reading itself. If you are aware of the vehicle s true mileage then that figure must be placed close to the false reading. The wording of the disclaimer must indicate the status of the vehicle, e.g. The mileage shown on this vehicle is being checked and should be regarded as INCORRECT We have been unable to verify the mileage of this vehicle and so it should be regarded as INCORRECT The mileage shown on this vehicle s odometer is INCORRECT An odometer indicating Zero is NOT A DISCLAIMER and is regarded as a trade description in its own right. Verbal disclaimers are ineffective. Should a vehicle be offered for sale and its odometer unit is found to be faulty and needs to be replaced - either with a new or second-hand unit, you must disclose the true mileage and the reason for the difference to any prospective customer. You are strongly advised to include the wording of the disclaimer in your sales invoice and obtain the buyer s signature on the form.

5 If you do not intend to make the necessary checks on mileage you can avoid action under the Trade Descriptions Act1968 by effectively disclaiming all mileages on vehicles you are unsure of. If you choose this option you should be aware that any attempt to give customers any reassurance the mileage is correct may result in a false trade description being given. 3 4 Remember The Trade Descriptions Act 1968 makes it an offence for any person in the course of a trade or business to: Apply a false description to any goods, or Supply or offer to supply goods to which a false trade description has been applied A person who applies the false trade description, e.g. by turning back the odometer reading, cannot use a disclaimer as a defence. Penalties Conviction at Magistrates Court - 5,000 fine per offence Conviction at Crown Court - Unlimited fine and/or two years imprisonment If you are convicted, you are in jeopardy of losing any Consumer Credit Licence that you hold.

6 Motor Trade Sales 5 Safety All vehicles must be safe when offered or exposed for supply and when they are supplied. This also means that when a car is returned after service or repair, it must be safe for supply. This includes any test drives. The Sale of Goods Act 1979 (as amended) states that any goods supplied shall be of a satisfactory quality. Satisfactory quality includes safety and fitness for purpose. Consumers should be able to purchase a vehicle which is in a reasonable mechanical condition bearing in mind the age of the vehicle and all other relevant circumstances. The Road Traffic Act 1988 requires that ALL vehicles must conform to the legislation affecting their construction and use. Are there any exemptions from the rules? One exemption to the rules would be vehicles which are supplied for repair or recondition before use. This exemption only applies where this is made clear to the prospective customer before the sale is made. However you may have to prove that the customer was made aware as to the specific conditions of the supply of the vehicle. What must I do when supplying a vehicle to a consumer for use on the road? The steps you must take are not defined. However, as an aid to avoid committing an offence, the following should be considered: Keep a record on file of the checks you have made, the faults found and the steps taken to rectify them (there is a check sheet at the rear at this pack which may be useful). If you do not feel qualified to check the safety of vehicles arrange for an engineer to do this for you and provide a record of the check. What must I do when supplying a car for repair or reconditioning? Again there are no defined steps, but the following may be considered: Do not allow a test drive Always try to obtain a customer s signature to confirm the terms of supply - i.e. for repair or reconditioning before use

7 6 4 Ensure that the buyer takes the car away on a trailer - or deliver it on a trailer yourself Either DO NOT supply an MOT Certificate with the vehicle or mark it with the phrase Historical Use Only You should state on any invoice the potential problems and obtain a signature from the customer or the representative accepting the description. If the customer is unwilling to sign, you should bear in mind that if you supply an unsafe vehicle, you are ultimately responsible. At the end of this pack we have included a Basic Vehicle Safety Check Sheet. You may wish to adapt and use this within your own business. We would however, advise that the check list is not exhaustive and you may wish to include other areas of your work.

8 Motor Trade Sales Pricing 7 The Price Marking Order 2004 states that any business has to clearly indicate the selling price of any product offered for sale to a consumer. Any price given has to be in sterling and include VAT, plus any other taxes applicable. Where the consumer has to pay extra for items in order to obtain the goods, then the price of these items must be included. Examples here would include customer-requested specially ordered parts and any delivery charges or return fees if wrong parts are ordered by the customer. The Price must be clearly legible, unambiguous and easily identifiable as referring to the goods in question. The price should also be placed so that it is easy for the customer to see without needing any assistance. You must indicate if you charge different prices for different classes of purchaser; for example Cash and Credit or Debit card customers. If you conduct sales over the telephone or via the internet, any price indication given should be clear and relate to the subject of the sale itself. If your on-line price is different to your forecourt price you will need to make it clear which price is applicable. What about vehicles sold via Consumer Credit Agreements? Price Indications about consumer credit must comply with the Consumer Credit Act Published advertisements for the sale of vehicles via credit terms, must comply with the Consumer Credit (Advertisements) Regulations please ask us for a copy of our advertisement check sheet if required. Misleading Price Indications The Consumer Protection Act 1987 makes it an offence for a person in the course of his business to give consumers a misleading price indication about goods or services. This applies irrespective of the manner in which the price is conveyed, e.g. in an advert, leaflet, orally or on a price ticket. If you charge a customer more than the advertised price you may commit an offence. If you decide to run a special offer on goods you must take care how you advertise the price reductions. Unless otherwise indicated, goods must not be marked down in price unless they were previously offered at the higher price for at least 28 days in the previous six months. The Code of Practice for Traders on Price Indications gives good practical advice on how to avoid giving misleading price indications in a wide range of circumstances. The Code of Practice is available from the Department of Trade & Industry at - the unique reference number for this document is 05/1573. Alternatively, please ask us for a copy.

9 8 Deposits Deposits are usually considered to be non-refundable. However, if you are in breach of contract, or if you agreed that the deposit would be refundable as an express term of the contract, then you should return the customer s deposit. You would also be under a duty to mitigate your losses - i.e. only take from the deposit any losses that you have actually made. If the deposit was taken as part of a sale which was to be completed via a finance agreement, then the deposit must be refunded if the finance agreement is cancelled. Consequential Loss A customer may have a claim against you if they incur financial losses as a result of your breach of contract. This is sometimes called consequential loss. These financial losses must be either those which: Have occurred naturally and as a direct result of your breach of contract; and The potential losses must have been in the mind of both parties at the time the contract was made Any claim must be for losses that are reasonably foreseeable. A customer has a duty in these circumstances to mitigate their losses, i.e. they should take reasonable steps to make sure that they keep any consequential costs as low as possible. Examples of this type of claim include the cost of: Changing insurance details where a vehicle is ultimately rejected as being faulty Travelling costs for returning a vehicle for repeated repairs

10 Motor Trade Sales 9 Restricted Statements & Business Names Restricted Statements The Consumer Transactions (Restrictions on Statements) Order 1976 prohibits the display of any sort of notice which either implies or suggests to customers that their rights to redress are restricted. Examples of this include: Signs stating no refunds or similar Restrictive statements on invoices Signs stating no refund unless customer has till receipt. Any proof of purchase may suffice such as a credit card statement Signs stating sold as seen This list is not exhaustive and also applies to signs with similar wording. The best practice is to have no sign - however, if you insist on having some form of sign, then please ask us for further assistance. Business Names The Business Names Act 1985 requires Traders to display business ownership details at the following places: Anywhere that you carry on your business and where you deal with customers or suppliers Business letters Written orders for the supply of goods or services Invoices and receipts Written demands for the payment of business debts The information that you need to disclose includes: The corporate name or The name of each partner or The individual person's name and In relation to each person named, an address at which documents can be served

11 10 Who does this apply to? Any company which trades under a name which is not its corporate name, e.g. ABC Limited, trading as Magic Motors. A partnership which does not trade under the names of all the partners An individual who trades under a name which is not his/her surname. More detailed advice on the Business Names Act 1985 can be obtained from or alternatively ask us for a copy of the Business Names leaflet produced by Companies House.

12 Motor Trade Sales 11 Contracts Every time a customer purchases goods and /or services from you as a trader you are both entering into a legally binding contract. The contract places legal obligations on both you and the customer. Contracts can be made verbally and in writing, both are legally binding. Contracts are made up of terms. Some terms are implied by law and relate to the quality and description of goods for example and some terms are express. Express terms are those that are agreed between you and your customers through mutual agreement or negotiation, such as delivery dates. For a term to be legally binding it must be incorporated into the contract. Therefore, all terms should be agreed before, or at the time of the contract. They do not have to be written however, if you seek to rely on the term you will have to prove its incorporation into the contract. The Unfair Contract Terms Act 1977 and the Unfair Terms in Consumer Contract Regulations 1999 render void any terms within a contract that try to exclude or limit one party's liability for breach of contract or negligence. Generally this requires that all terms must be fair and reasonable. Breach of Contract If you, or your customer do not meet with the terms of your contract then either of you may be considered to be in breach of contract. A breach of contract can be resolved in several ways including refund and compensation. The exact nature of the remedy due will be based on the circumstances and extent of the breach. Sale of Goods Act 1979 (as amended) Under this Act, there is an implied term that the person selling/transferring the goods must have the right to do so and the goods must: Correspond with the description given to them Be fit for purpose intended Be of satisfactory quality (which includes) Appearance and finish Freedom from minor defects Safety Durability Any other relevant characteristics The customer s remedy if any of these implied terms are breached include rejecting the goods and receiving a ful refund providing that they have not accepted the goods. Accepting the goods means that the customer has personalised the goods, had them in their possession for more than a reasonable period of time or communicated to you that they are happy with the goods and stated that the goods conform to the contract.

13 12 As mentioned previously the customer may also be entitled to compensation for any financial losses that have been incurred. A customer is not considered to have accepted the goods if they have allowed you to attempt a repair that has proved unsuccessful, or if they have signed an acceptance note without having had a reasonable opportunity to examine the goods. Alternatively the customer may ask for any of the following: A repair or replacement A price reduction to an appropriate amount taking the defect into account Rescission of the contract (similar to rejection, but where the goods have already been partly used the amount repaid to the customer reflects the usage enjoyed) If the defect occurs within 6 months of the customer taking delivery of the goods, it is automatically assumed that the fault was there at the time of delivery unless you can prove otherwise. If it occurs after 6 months, the customer has to prove the defect was there at the time of delivery. Supply of Goods and Services Act 1982 (as amended) Any goods supplied with a service are governed by the above legislation - e.g. repair of an exhaust or fitting and replacement of tyres. They must conform to the implied terms mentioned under the Sale of Goods Act 1979 (as amended). Any service provided must be carried out: With reasonable skill and care For a reasonable price Within a reasonable time - unless time is made of the essence, i.e. when a date has been agreed at the time the contract was made. If you do not meet with the above obligations then you may be considered in breach of contract and the customer may be entitled to a remedy such as a refund and/or compensation. When considering what would be a reasonable remedy for the customer you must take into account the extent of the breach and the consequences of the breach i.e. how serious was the breach of contract? It may be reasonable for a customer to allow you to try and rectify any mistakes or areas of dispute. However, if a customer has lost faith in your work or feels that you are not able to put the work right to a satisfactory standard then they may be able to obtain quotes from third parties and ask them to complete the work. If necessary you may need to pay for this to be done. For further guidance on both the above Acts, go to and search for URN 05/1044

14 13 Misrepresentation Act 1967 A misrepresentation is a false statement of fact made by one party or their agent to the other party to the contract, which induces the other party into entering into a contract. Dependent upon whether the misrepresentation was made falsely, negligently or innocently, the party who has relied on the misrepresentation will be entitled to a remedy ranging from the contract being rescinded to the payment of damages, i.e. restoring both parties back to their original position. Sale and Supply of Goods to Consumers Regulations 2002 Guarantees and warranties are additional to a customer s legal rights. They do not affect a customer s legal rights. You do not have to give a guarantee or warranty however the above Regulations state that if you do then, any guarantee should: Set out in plain intelligible language the contents of the guarantee and the essential particulars necessary for making claims under the guarantee, notably the duration and territorial scope of the guarantee as well as the name and address of the guarantor. and Where consumer goods are offered with a consumer guarantee, and where those goods are offered within the territory of the United Kingdom, then the guarantor shall ensure that the consumer guarantee is written in English. A guarantee is a formal promise or assurance that an obligation will be fulfilled or that something is of a specified quality or durability, it can be given in writing or made verbally. (The Concise Oxford Dictionary, 1995, 9th Ed, edited by Della Thompson) A warranty is an undertaking as to the quality of a thing sold, hired etc, often accepting responsibility for defects or liability for repairs needed over a specified period. (The Concise Oxford Dictionary, 1995, 9th Ed, edited by Della Thompson) The Unfair Terms in Consumer Contracts Regulations 1999 These regulations say that a consumer is not bound by a standard term in a contract with a trader if that term is unfair. An example of a term considered unfair under these Regulations is where you ask a consumer to meet with their obligations and you do not intend to meet with your obligations. A standards term is defined as one that is devised by a trader in advance to apply to all their contracts and not a term negotiated with individual consumers. These Regulations also state that terms and conditions should be written in plain and intelligible language.

15 Motor Trade Sales 15 Voluntary Registration Scheme The Voluntary Registration Scheme for the Retail Motor Trade (VRS) was introduced in 1994 by Lincolnshire County Council Trading Standards Service to establish high standards of trade in Lincolnshire's retail motor industry. The scheme allows member businesses to demonstrate their commitment to fair and honest trade. The scheme is based on a series of promises by the dealer and Trading Standards. Scheme members promise to... Inform and train sales staff on the law Advertise credit terms honestly Describe all its products and services correctly Deal with customer complaints promptly and courteously Ensure cars are safe and roadworthy Provide a written explanation if a complaint is unresolved Not mislead over price Display prominent notices in sales and reception areas advertising their membership of any trade association and the services available, such as conciliation and arbitration and give customers easy access to those services Comply with their trade association's code of practice Trading Standards promise to... Assist with training Nominate a contact officer Update dealers on changes in the law Administer a complaints resolution scheme Respond to requests from dealers for advice and information on all laws enforced by the service

16 16 The Trading Standards Service is committed to providing a fair and impartial service to both consumers and dealers. Where customer complaints have been dealt with by the dealer in accordance with the requirements of the scheme, and the customer is not satisfied with the written explanation given by the dealer, the Trading Standards Service will give assistance in an attempt to resolve the matter. If the Trading Standards Service receives a complaint about a dealership which is a member of this scheme and the complaint is of a purely contractual nature, the complaint will be referred back to the dealership, having been given information regarding the scheme. To find out more about this please visit

17 Motor Trade Sales 17 Useful Contacts The following organisations can provide you with more detailed advice on the issues covered in this pack: Lincolnshire County Council Trading Standards Service County Offices, Lincoln LN1 1YL tel: fax: or website: The Business Support Service You may be interested to know that Lincolnshire County Council Trading Standards have a Business Support Service. We are able to offer you a first point of contact within the department and can send out leaflets and information. We are happy to assist any business, whether you are a brand new or a long established business, to get it right first time. Please do not hesitate to contact us as above - the advice and guidance we provide is free of charge. Business Link East Midlands Innovation House, Riverside Park, Raynesway Derby DE21 7BF tel: info@businesslinkem.co.uk web: Office of Fair Trading Fleetbank House, 2-6 Salisbury Square London EC4Y 8JX tel: enquiries@oft.gsi.gov.uk web: Trading Standards Central This website provides information for businesses and consumers relating to the field of Trading Standards legislation. web: Department of Business, Enterprise & Regulatory Reform (BERR) Ministerial Correspondence Unit Department for Business, Enterprise & Regulatory Reform 1 Victoria Street, London SW1H 0ET tel: fax: minicom: enquiries@berr.gsi.gov.uk web: Retail Motor Industry Federation 201 Great Portland Street London W1W 5AB tel: fax: web:

18 18 The Society of Motor Manufacturers and Traders Ltd Forbes House, Halkin Street London SW1X 7DS tel: fax: web: The Vehicle Builders and Repairers Association Ltd Belmont House, Finkle Lane,Gildersome Leeds LS27 7TW tel: web: Motor Vehicle Repairers Association MVRA Limited, Glenfield Business Park Philips Road, Blackburn Lancashire BB1 5QH tel: fax: Companies House Crown Way, Maindy Cardiff CF 14 3UZ tel: web: Produced by Lincolnshire County Council Trading Standards County Offices, Lincoln LN1 1YL

19 Basic Vehicle Safety Checksheet Please note that this check list is not exhaustive and you may wish to include other areas of your work. Garage Details Name: Address: Postcode: Check carried out by: on: Make: Reg No: Model: VIN No: Check Brakes - front and rear (Wheels-off check, including pipes and hoses) or Work carried out Structural Bodywork (Sills, jacking points, suspension, brake and seatbelt mountings, sub frame etc.) Tyres Fuel lines and tank Steering Mechanism Lighting Other (specify) Produced by Lincolnshire County Council Trading Standards PLEASE FEEL FREE TO PHOTOCOPY THIS SHEET AS NECESSARY