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Georgia Courts Excuse Used Car Dealers Who Deliberately Lie to Customers

Is it okay for a used car salesman to lie to a customer about the condition of a vehicle? Yes, according to a recent decision by the Georgia Court of Appeals. On July 9th a three-judge panel unanimously upheld a lower court’s decision to dismiss a lawsuit against a car dealer who pulled a classic bait-and-switch. The court said it was the customer’s fault for believing the dealer’s claims.

The purchase in question took place in September 2011. The customer visited Payless Auto Deals looking for a “durable and reliable” used car. A salesman showed the customer a 2008 Honda Odyssey. The customer asked if there was anything wrong with the vehicle, that is had it been in a prior accident or suffered any damage? The dealer said the car was “clean and undamaged,” and produced a CARAFAX report to that effect.

While CARFAX reports are commonly used in assessing used car purchases, it’s important to understand that these reports are compiled by a private, for-profit company that accesses publicly available information. CARFAX reports are not sanctioned or regulated by the government (unlike, say, credit reports) and oftentimes do not reflect a vehicle’s complete accident history.

That turned out to be the case here. While the CARFAX report was clean, the 2008 Honda Odyssey was not. After relying on the salesman’s representations and purchasing the car, the customer later learned the Odyssey had previously “suffered significant frame damage” that would cost upwards of $12,000 to repair. Payless was aware of this. Payless itself had purchased the Odyssey at an auction where the frame damage was disclosed. There was a delay in reporting the damage to CARFAX, however, allowing the dealer to falsely present a clean report to the customer.

Beware the Fine Print

The dealer refused to buy back the car even after confronted with his false statements. The customer sued under Georgia’s Fair Business Practices Act. A trial court ruled for the dealer. The court cited the written bill of sale, which included numerous fine-print disclaimers stating the car was sold “AS IS-NO WARRANTY” and disclosing the fact there was body damage.

Both the trial court and the court of appeals found the written disclaimers absolved Payless of any liability arising from the salesman’s deliberately false statements to the buyer. The judge writing for the court of appeals said it was the buyer’s responsibility to perform “due diligence” before purchasing a car and that he could not claim fraud after blindly relying on the salesman’s statements–even intentionally false statements. “The disclaimers put [the buyer] on notice of damage to the vehicle,” Judge McMillan said, “and he had the obligation to investigate further before he bought the car.”

It’s not clear from Judge McMillan’s opinion just how prominent the written disclaimers were. It’s not uncommon for unscrupulous (even scrupulous) sellers to bury such statements in small type. Judge McMillan said the frame damage disclaimer was displayed in “slightly smaller type” than the rest of the document, but she still thought it sufficient to put the buyer “on notice” with respect to damage that the salesman denied ever existed.