When lawyers draft contracts to be used in deals between dealers and consumers, they often include a so-called “integration clause.” The clause says something like, “this document constitutes the entire agreement between the parties. Any change must be in writing and the dealer must sign it.” The purpose of an integration clause is to preclude the buyer from later claiming the dealer orally promised to include in the deal the sun, the moon and the stars.

Consumer lawyers have used these clauses in recent cases in Florida and Texas to argue successfully that other documents signed by the consumer in connection with the deal, such as a buyer’s order or arbitration agreement, are unenforceable. Courts in most states have rejected these claims, employing the common-sense rationale that all documents signed contemporaneously, or nearly so, in connection with the transaction are intended by the parties to constitute the entire agreement. Common sense. Go figure.

Evidently, common sense isn’t in great supply in Texas and Florida courtrooms, but there seems to be plenty available in Pennsylvania. Take a look at how a Pennsylvania federal district court dealt with this sort of claim.

Jacobia Dunn visited B&B Automotive and bought a 2000 Mitsubishi Mirage. B&B certified the vehicle's mileage to be 97,300. At the time of sale, however, the vehicle's mileage was allegedly more than 7,000 miles greater than the mileage shown. In addition, before the sale, B&B failed to inform Dunn that the subcompact had been a prior rental vehicle and had been involved in a collision.

In reliance upon B&B’s representations, Dunn agreed to buy the vehicle, signing a retail installment sales contract. Helm Associates, Inc. bought the retail installment sales contract (RISC) from B&B. Later, Helm repossessed the vehicle.

Dunn contended that the odometer roll-back and past fleet and accident history severely reduced or eliminated the vehicle’s retail value at the time she bought it. She sued B&B and Helm, alleging violations of federal odometer law, fraud, violation of Pennsylvania’s Unfair Trade Practices and Consumer Protection Law and breaches of express and implied warranties.

B&B and Helm moved to compel arbitration. They contended the RISC executed by the parties incorporated, by reference, an arbitration agreement signed by both parties. B&B and Helm’s counsel notified Dunn’s legal representative of their election to proceed to arbitration. Dunn’s counsel declined to do so based on his belief that the arbitration agreement was invalid.

Dunn claimed the arbitration agreement was invalid under two theories. First, she asserted the Pennsylvania Motor Vehicle Sales Finance Act (MVSFA) requires "[e]very installment sale contract shall be in writing and shall contain all of the agreements between the buyer and the seller relating to the installment sale of the motor vehicle sold and shall be signed by both the buyer and the seller.” Because the arbitration agreement appeared only in a separate document and was not within the four corners of the RISC, Dunn contended that the MVSFA rendered it unenforceable. Second, she argued that even if the MVSFA did not invalidate the arbitration agreement, an integration clause in the RISC precluded consideration of any outside documents.

The U.S. District Court for the Eastern District of Pennsylvania found that Dunn’s arguments disregarded the most basic principles of contract law because the RISC and the arbitration agreement referred to each other, were executed together and related to the same subject matter. Under those circumstances, the court reasoned, the parties intended all of the documents to be enforceable. Therefore, the court granted B&B and Helm’s motion to compel arbitration and dismissed Dunn’s complaint with prejudice.

We haven’t heard the last of this theory from the consumers' lawyers. There no doubt will be other such cases brought against dealers before other judges who evidence a common-sense deficiency.

Meanwhile, stick this article in your lawsuit defense folder. It just might come in handy.

Vol. 9, Issue 8

About the author
Tom Hudson

Tom Hudson


Thomas B. Hudson Esq. was a founding partner of Hudson Cook LLP and is now of counsel in the firm’s Maryland office. He is the CEO of CounselorLibrary.com LLC and a frequent speaker and writer on a variety of consumer credit topics.

View Bio