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Automobile Fraud: 9.2.9.2 Punitive Damages

The UCC provides that punitive damages may be recovered only “as specifically provided in this Act or by other rule of law.”216 The general rule of contract law and the UCC is that punitive damages are unavailable.217 The purpose of punitive damages is to punish the wrongdoer and deter similar acts.218 Contract damages are designed to make the aggrieved party whole,219 not to punish another fo

Automobile Fraud: 9.2.9.3 Statute of Limitations

The UCC Article 2 statute of limitations for the consumer’s warranty claim is four years from tender of delivery.236 This limitations period has both positive and negative aspects. Four years is often longer than provided for other causes of action. But, unlike federal odometer statute, fraud, and most UDAP claims, the four years run from delivery, not from the consumer’s discovery of the fraud.

Automobile Fraud: 9.2.9.4 Limitations on Remedies Clauses

Dealers may insert in the sales agreement a provision limiting the consumer’s remedies for breach of warranty, such as restricting consequential damages or even limiting the consumer to a repair remedy. These contractual limitations on remedies can be challenged, particularly in the automobile fraud context.

Automobile Fraud: 9.2.10 Attorney Fees

UCC Article 2 does not provide for the recovery of attorney fees. However, attorney fees are available for prevailing consumers under the Magnuson-Moss Warranty Act for breaches of written and implied warranties.247 Remember, though, that “written warranty” is a term of art under the Magnuson-Moss Act that does not include all express warranties.248

Automobile Fraud: 9.2.11.1 Introduction

As discussed in the following subsections, the Magnuson-Moss Warranty Act creates a private cause of action for a consumer who is damaged by the failure to comply with a “written warranty” (as defined by the Act), an implied warranty, or a service contract. The sale must also involve a “consumer product” as defined by the Act260 and the seller must be a “supplier,”261 but those requirements will be met in almost all consumer vehicle sales.

Automobile Fraud: 9.2.11.3 Implied Warranty Claims Under the Magnuson-Moss Warranty Act

The Magnuson-Moss Act provides a remedy for any consumer who is damaged by the failure of a supplier or warrantor to comply with any obligation under an implied warranty.268 The Act adopts state standards as to when an implied warranty is breached.269 Because it provides for attorney fees, it is often useful to join a Magnuson-Moss implied warranty claim with a state law implied warranty claim.

Automobile Fraud: 9.2.11.5 Magnuson-Moss Remedies

The Magnuson-Moss Act allows a consumer to recover “damages and other legal and equitable relief.”276 Personal injury damages are explicitly excluded for most claims, however.277 Most courts have held that the Act’s remedy provision is broad enough to encompass revocation of acceptance.278 If the consumer prevails, the Act authorizes an award of “costs and expenses (including attorney’s fees based on actual time expended) . . .

Automobile Fraud: 9.3.1 Benefits of a Claim of Mistake

Rescission on grounds of mistake may be available as a remedy when other remedies are foreclosed. For example, a fraud claim may be precluded because the buyer cannot prove that the seller knew or should have known of the vehicle’s adverse history. There may be no relevant express warranties and the seller may have successfully disclaimed implied warranties. Rescission on grounds of mistake is a useful approach in this situation.

Automobile Fraud: 9.3.2 Elements of a Claim of Mistake

As expressed by the Restatement (Second) of Contracts, a mistake is a belief that is not in accord with the facts.287 It can be either a mistake of fact or law.288 If both parties are mistaken at the time of contracting as to a basic assumption on which the contract was made, and the mistake has a material effect on the agreed exchange of performance, then the contract is voidable by the adversely affected party.289 The mistake must

Automobile Fraud: 9.4.1.1 Strengths and Benefits of UDAP Claims

A UDAP (unfair and deceptive acts and practices) statute is a state statute of general applicability that prohibits deceptive practices, unfair and deceptive practices, or unconscionable and deceptive practices. A few states add abusive practices to the list of prohibited actions.308 Every state has a UDAP statute that authorizes a private cause of action.309

Automobile Fraud: 9.4.1.2 Comparison to Warranty Claims

In some ways, a UDAP claim is very similar to a breach of warranty claim. In most states, the consumer need not prove the seller’s intent or knowledge. The seller’s good faith is no defense. If the consumer did not receive what was promised, then the consumer should be made whole.

Automobile Fraud: 9.4.2 Scope Issues

UDAP statutes are statutes of general applicability. Depending on the state, certain entities or practices may be outside the statute’s scope, but these rarely will have an impact on the automobile fraud cases analyzed in this treatise.

A state’s UDAP statute will almost always apply to motor vehicle sales for consumer purposes. The most significant limitation on UDAP applicability in this area is that some UDAP statutes do not apply to vehicles purchased for commercial purposes.328

Automobile Fraud: 9.4.4 Failure to Disclose As Deceptive

One of the most important uses of a UDAP statute is to attack the failure to disclose material facts. A car dealer will rarely volunteer that “this car has never been declared salvage,” or “this car was never used as a rental.” More often, the deception is the dealer’s silence instead of disclosing the car’s prior history.

Automobile Fraud: 9.4.5.1 Unfairness

Many state UDAP statutes, patterning themselves after the FTC Act, prohibit not only deceptive but also “unfair” acts or practices.365 This unfairness standard reaches various abusive business practices that are not deceptive. While deception is a broad standard, particularly when the failure to disclose is aggressively challenged as a deceptive practice, certain practices do not mislead, but only take advantage of consumers.

Automobile Fraud: 9.4.5.2 Unconscionability

In about a third of the states, the UDAP statute prohibits unconscionable practices.369 Unconscionability as a UDAP concept appears to be an alternative to unfairness, but a few UDAP statutes proscribe both unconscionable and unfair practices.

Automobile Fraud: 9.4.6.1 Introduction

One of the more important uses of a UDAP statute is to challenge practices violating other state or federal laws or regulations, when those other laws have inadequate private remedies or when there is some other reason that a direct claim under that other law is restricted. For example, consider if a state automobile dealer licensing statute or regulation requires disclosure of a car’s wreck history.