Vehicle sales contracts
Changes to pre-estimated liquidated damages
From 1 January 2022, the maximum amount of pre-estimated liquidated damages that a dealer may charge is five per cent.
Contracts for the sale of motor vehicles by licensed dealers (other than sales to other dealers or sales by auction) are regulated under the Motor Vehicle Dealers Act.
These regulated contracts must be in writing, and must contain certain prescribed terms and conditions.
The vehicle sale prescribed terms and conditions (below) explain the rights and responsibilities of both the purchaser and the dealer under the contract and importantly determine how contractual matters are dealt with. The terms and conditions include:
- A copy of the contract must be given to the buyer at the time they sign the contract;
- The contract does not become enforceable until it is signed by the dealer and the dealer tells the buyer that it has been accepted. This can be done by telephone, email, SMS, fax or in writing;
- What happens if the purchase is subject to finance (Please note: any finance clause should use the words "subject to finance of $xxxxx from ABC Bank by dd/mm/yyyy");
- Terms describing when the contract may be terminated by either the consumer or the dealer; and
- What happens if the price of a new car goes up before it is delivered to the buyer (any price increase of more than five per cent cannot be passed on to the buyer).
The standard contract requires a dealer to deliver a new car within three months and a used car within one month of the contract becoming binding on all parties, if no delivery date was written into the contract, otherwise the contract can be cancelled.
Other terms and conditions may be written into a contract only if both parties agree. Such additional terms must not contradict or diminish the requirements of the prescribed terms and conditions.
Prescribed terms and conditions in contracts
Every sale of a vehicle (other than by auction), between a dealer and a person who is not a dealer, is to be in writing and contain the following prescribed terms and conditions:
The signing of the contract by the purchaser means an offer has been made to purchase the vehicle on the terms and conditions stated in the contract. No offer is made unless the purchaser is provided with a copy of the contract at the time it is signed by the purchaser.
The offer of the purchaser is accepted by the dealer when:
(a) the contract is signed by the dealer or a person authorized by the dealer; and
(b) notice of the acceptance is given to the purchaser. The contract will then be binding on both parties.
The offer of the purchaser may be withdrawn by the purchaser any time before it is accepted by the dealer. It will automatically lapse at the close of business on the next normal business day for motor vehicle dealers.
Where the contract is subject to the purchaser obtaining finance, the contract is conditional upon the purchaser obtaining approval for the granting of a loan:
(a) before the latest time stated in the contract;
(b) for the amount stated in the contract;
(c) from the lender named in the contract (or a lender acceptable to the purchaser); and
(d) upon reasonable terms and conditions in the circumstances.
The purchaser agrees to take all reasonable steps toward obtaining loan approval.
If the purchaser has taken all reasonable steps towards obtaining loan approval, but does not obtain loan approval, then either the purchaser or the dealer may terminate the contract by giving notice to the other party. The dealer must immediately refund any deposit paid and return any trade-in vehicle to the purchaser.
The purchase price
Upon delivery of the vehicle, the purchaser will pay to the dealer all of the total purchase price, less any deposit paid and any value given to the trade-in vehicle.
In the case of a new vehicle, if at any time after the contract becomes binding on both parties but before delivery of the vehicle to the purchaser, the cost of the vehicle to the dealer changes because the manufacturer changes its price, or there is a change in statutory charges which apply to the vehicle, the total purchase price will be adjusted by the corresponding amount.
If the manufacturer increases the cost of a new vehicle to the dealer, the dealer is only entitled to pass on to the purchaser, an increase of up to and including 5% of the total factory price of the vehicle.
Payment by cheque for all or part of the total purchase price will not be considered to have been received by the dealer until the cheque has been honoured.
Delivery of the vehicle
The dealer will deliver the vehicle to the purchaser on or before the delivery date stated in the contract.
In the case of a new vehicle, if a delivery date is not stated in the contract, the dealer will deliver the vehicle within three (3) months of the contract becoming binding on the parties.
In the case of a used vehicle, if a delivery date is not stated in the contract, the dealer will deliver the vehicle within one (1) month of the contract becoming binding on the parties.
Delivery of the vehicle to the purchaser will take place at the dealer’s premises, unless other arrangements are agreed to between the purchaser and the dealer.
The purchaser will deliver any trade-in vehicle to the dealer, and take delivery of the vehicle, within seven (7) days of being notified by the dealer that the vehicle is ready for collection.
Passing of property and risk in the vehicle
The dealer remains the owner of the vehicle until the total purchase price has been received in full by the dealer.
Risk in the vehicle and the responsibility to insure the vehicle will pass from the dealer to the purchaser when the Vehicle is delivered by the dealer to the purchaser, unless the purchaser and the dealer agree to some other arrangement and include it as a special condition of the contract. The applies whether delivery occurs at the dealer’s premises or any other location.
The purchaser will deliver the trade-in vehicle with accessories to the dealer in the same condition the trade-in vehicle was in at the time it was valued by the dealer for the purpose of the contract, except for normal wear and tear.
Cancelling / terminating a contract
Purchaser's right to terminate the contract
The purchaser may terminate the contract if the dealer has breached any of the obligations imposed on the dealer by the contract. If the contract is validly terminated by the purchaser, the dealer must immediately refund any deposit paid and return any trade-in vehicle to the purchaser. If, in the event the trade-in vehicle has been sold, the cash equivalent of the trade-in vehicle value determined at the commencement of the dontract shall be refunded to the purchaser.
Dealer's right to terminate the contract
The dealer may terminate the contract if the purchaser has breached any of the obligations imposed on the purchaser by the contract. If the contract is validly terminated by the dealer, the dealer may seek an amount up to, but not exceeding, five (5) percent of the total purchase price of the vehicle as pre-estimated liquidated damages. Any deposit paid by the purchaser may be used by the dealer to meet the pre-estimated liquidated damages payable by the purchaser. Any surplus will be refunded to the purchaser.
See more information about cancelling a contract and pre-estimate liquidated damages on Cancelling a contract to buy a vehicle with a dealer page.
All notices required by the contract may be given by direct communication, telephone, electronically, fax or post to the addresses and numbers included in the contract.
If sent by post, a notice will be considered to have been received, unless the contrary is shown, at the time when the notice would have been delivered in the ordinary course of the post.
Pre-estimated liquidated damages (PELD) Flyer
Download the PELD flyer for a quick reminder of your rights and responsibilities when a purchaser cancels a contract.
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