Lemon Law Applies to New Cars – What About Used Cars?

Lemon laws differ among states, but do have elements in common. Usually “lemon” is defined, there is a limitation period during which the car will qualify as a lemon, and there is a form of arbitration required. Lemon laws apply to new cars. The Michigan Lemon Law is codified at MCL 257.1401 to MCL 257.1410.

If the buyer reports the defect or condition within the requisite time period to the manufacturer, the manufacturer or dealer must repair the defect or condition. If it continues after a reasonable number of repairs as defined in the law, then the vehicle must be replaced or the price refunded.

The Lemon Law is a recourse for consumers of new cars, but what do used car purchasers do when they buy a used car that turns out to be a lemon? The Michigan Consumer Protection Act, MCL 445.901 et seq., applies in those cases, as does basic contract law.

MCL 445.903 prohibits unfair, unconscionable, or deceptive methods, acts, or practices in the conduct of trade or commerce. These are defined as:

  • Causing a probability of confusion or misunderstanding as to the source, sponsorship, approval, or certification of goods or services.
  • Using deceptive representations or deceptive designations of geographic origin in connection with goods or services.
  • Representing that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities that they do not have or that a person has sponsorship, approval, status, affiliation, or connection that he or she does not have.
  • Representing that goods are new if they are deteriorated, altered, reconditioned, used, or secondhand.
  • Representing that goods or services are of a particular standard, quality, or grade, or that goods are of a particular style or model, if they are of another.
  • Disparaging the goods, services, business, or reputation of another by false or misleading representation of fact.
  • Advertising or representing goods or services with intent not to dispose of those goods or services as advertised or represented.
  • Advertising goods or services with intent not to supply reasonably expectable public demand, unless the advertisement discloses a limitation of quantity in immediate conjunction with the advertised goods or services.
  • Making false or misleading statements of fact concerning the reasons for, existence of, or amounts of price reductions.
  • Representing that a part, replacement, or repair service is needed when it is not.
  • Representing to a party to whom goods or services are supplied that the goods or services are being supplied in response to a request made by or on behalf of the party, when they are not.
  • Misrepresenting that because of some defect in a consumer’s home the health, safety, or lives of the consumer or his or her family are in danger if the product or services are not purchased, when in fact the defect does not exist or the product or services would not remove the danger.
  • Causing a probability of confusion or of misunderstanding with respect to the authority of a salesperson, representative, or agent to negotiate the final terms of a transaction.
  • Causing a probability of confusion or of misunderstanding as to the legal rights, obligations, or remedies of a party to a transaction.
  • Causing a probability of confusion or of misunderstanding as to the terms or conditions of credit if credit is extended in a transaction.
  • Disclaiming or limiting the implied warranty of merchantability and fitness for use, unless a disclaimer is clearly and conspicuously disclosed.
  • Representing or implying that the subject of a consumer transaction will be provided promptly, or at a specified time, or within a reasonable time, if the merchant knows or has reason to know it will not be so provided.
  • Representing that a consumer will receive goods or services “free” or “without charge”, or using words of similar import in the representation, without clearly and conspicuously disclosing with equal prominence in immediate conjunction with the use of those words the conditions, terms, or prerequisites to the use or retention of the goods or services advertised.
  • Failing to reveal a material fact, the omission of which tends to mislead or deceive the consumer, and which fact could not reasonably be known by the consumer.
  • Entering into a consumer transaction in which the consumer waives or purports to waive a right, benefit, or immunity provided by law, unless the waiver is clearly stated and the consumer has specifically consented to it.
  • Failing, in a consumer transaction that is rescinded, canceled, or otherwise terminated in accordance with the terms of an agreement, advertisement, representation, or provision of law, to promptly restore to the person or persons entitled to it a deposit, down payment, or other payment, or in the case of property traded in but not available, the greater of the agreed value or the fair market value of the property, or to cancel within a specified time or an otherwise reasonable time an acquired security interest.
  • Taking or arranging for the consumer to sign an acknowledgment, certificate, or other writing affirming acceptance, delivery, compliance with a requirement of law, or other performance, if the merchant knows or has reason to know that the statement is not true.
  • Representing that a consumer will receive a rebate, discount, or other benefit as an inducement for entering into a transaction, if the benefit is contingent on an event to occur subsequent to the consummation of the transaction.
  • Taking advantage of the consumer’s inability reasonably to protect his or her interests by reason of disability, illiteracy, or inability to understand the language of an agreement presented by the other party to the transaction who knows or reasonably should know of the consumer’s inability.
  • Gross discrepancies between the oral representations of the seller and the written agreement covering the same transaction or failure of the other party to the transaction to provide the promised benefits.
  • Charging the consumer a price that is grossly in excess of the price at which similar property or services are sold.
  • Causing coercion and duress as the result of the time and nature of a sales presentation.
  • Making a representation of fact or statement of fact material to the transaction such that a person reasonably believes the represented or suggested state of affairs to be other than it actually is.
  • Failing to reveal facts that are material to the transaction in light of representations of fact made in a positive manner.
  • Offering a consumer a prize if in order to claim the prize the consumer is required to submit to a sales presentation, unless a written disclosure is given to the consumer at the time the consumer is notified of the prize and the written disclosure meets certain requirements.
  • Except as provided in subsection (3), requiring a consumer to disclose his or her social security number as a condition to selling or leasing goods or providing a service to the consumer, unless (i) the selling, leasing, providing, terms of payment, or transaction includes an application for or an extension of credit to the consumer, or (ii) the disclosure is required or authorized by applicable state or federal statute, rule, or regulation, or (iii) the disclosure is requested by a person to obtain a consumer report for a permissible purpose described in section 604 of the fair credit reporting act, 15 USC 1681b, or (iv) the disclosure is requested by a landlord, lessor, or property manager to obtain a background check of the individual in conjunction with the rent or leasing of real property, or (v) the disclosure is requested from an individual to effect, administer or enforce a specific telephonic or other electronic consumer transaction that is not made in person but is requested or authorized by the individual if it is to be used solely to confirm the identity of the individual through a fraud prevention service database. The consumer good or service shall still be provided to the consumer upon verification of his or her identity if he or she refuses to provide his or her social security number but provides other information or documentation that can be used by the person to verify his or her identity. The person may inform the consumer that verification through other means than use of the social security number may cause a delay in providing the service or good to the consumer.
  • If a credit card or debit card is used for payment in a consumer transaction, issuing or delivering a receipt to the consumer that displays any part of the expiration date of the card or more than the last 4 digits of the consumer’s account number. This subdivision does not apply if the only receipt issued in a consumer transaction is a credit card or debit card receipt on which the account number or expiration date is handwritten, mechanically imprinted, or photocopied. This subdivision applies to any consumer transaction that occurs on or after March 1, 2005, except that if a credit or debit card receipt is printed in a consumer transaction by an electronic device, this subdivision applies to any consumer transaction that occurs using that device only after 1 of certain  dates, as applicable.
  • Violating section 11 of the identity theft protection act, 2004 PA 452, MCL 445.71.

Attorney fees are provided for under MCL 445.911(2).  Furthermore, the enormous breadth of the types of conduct prohibited arguably makes almost any breach of contract a violation of the act. In Mikos v Chrysler Corp, 158 Mich App 781 (1987), the Court held that a breach of an implied warranty of merchantability was a failure to “provide the promised benefits” within the meaning of MCL 445.903(1)(y) and this entitled the plaintiff to attorney fees.

Typically, used car dealers sell the cars “AS IS” in an attempt to disclaim implied warranties that the car will run or it will be fixed.  If the car is sold “AS IS” this is a red flag to the consumer that they are buying at their own risk.  This disclaimer must conform to the requirements of MCL 440.2316(2),(3) (the Uniform Commercial Code / Sales) which requires that it include the term merchantability and that it must be conspicuous. If the buyer fully examines the vehicle or refuses to examine it, then there are no implied warranties. MCL 440.2316.

The “AS IS” disclaimer must be considered in the context of the Consumer Protection Act which prohibits fraud, false representations, unconscionable acts, and etc.  The used car buyer can argue violations of the Michigan Consumer Protection Act when the car does not run.  The buyer can negotiate with the dealer requesting that the problem be corrected.  If it is not corrected, then the buyer can, within a reasonable time, notify the dealer that they are revoking acceptance of the sales contract because the goods do not conform to the purpose of the contract.  Furthermore, they should inform the dealer that they will be contacting an attorney who will pursue their case and the dealer will ultimately be forced to pay attorney and other fees on top of the sale price.

Add a Comment

Your email address will not be published. Required fields are marked *