Protecting Both Business Finances And Futures

What terms can you not put in your auto sale contracts?

On Behalf of | Mar 23, 2023 | Auto Dealership Law |

Irvine and Orange County auto dealership owners know that there are many terms that go into automobile sales contracts, and that the contracts are often long and complicated.

The laws regarding what can and cannot be included in your contracts can be complex, so it is important that you understand them, particularly when it comes to what you cannot include.

California Automobile Finance Act

The California Automobile Sales Finance Act (“AFSA”) states what terms cannot be included in your conditional sales contracts. ASFA has six specific prohibited provisions.

Most of these prohibited provisions involve requiring the buyer to sign away their right to bring a legal claim against you in various types of situations.

For example, you cannot sell a vehicle to a buyer and make them sign a contract stating that they agree to not sue you if they have a legitimate legal claim arising out of the sale or if you fail to perform your duties under the contract.

Additionally, you cannot include a term requiring the buyer to waive their right to sue you if you use illegal tactics to try to collect payments under the automobile contract.

There are other prohibited terms involving jurisdiction and power of attorney when it comes to collecting payments or repossessing the vehicle.

Protecting yourself

Being accused of fraudulent conduct when it comes to your contracts can cause you major problems. Your auto dealership business will likely suffer financial harm and your business reputation could be damaged if people get the idea that you are unfair or unethical.

Having prohibited terms in your contracts could also give buyers a reason to cancel or rescind the sale.

It is important to have professional help when drafting your sales contracts. There are attorneys with experience in auto dealership law who can advise you on the applicable law and make sure your contracts do not contain any illegal language.



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