Failure To Sign

Part of a dealer’s compliance effort should bea complete review of every document in the deal jacket. You  h  ave to make sure all documents that are supposed to be signed by the dealer have, in fact, been signed. After all, if a document designates a place for the dealer’s signature and the dealer fails to sign the document, bad things can happen.

That’s true — bad things can happen. Sometimes, though, the lack of a signature isn’t fatal. Take this recent situation involving Arkansas residents Robert and Tafta McCain, in which the dealer dodged the “failure-to- sign” bullet.

The McCains entered into an agreement to buy a 2008 GMC Acadia from Asbury Atlanta Jaguar in Roswell, Ga., via the Internet. According to the couple, Asbury Atlanta Jaguar does business as Nalley Jaguar-Roswell and Asbury Automotive Group is its parent company.

The contract provided that the McCains bought the Acadia “as is,” along with the remaining balance of the limited factory warranty, that Georgia law would govern all actions arising from the agreement, that the venue would lie in the county of the seller’s domicile, and that it was not binding unless signed by the seller’s officer or manager. The McCains signed the contract but the seller did not. The contract also contained an arbitration agreement.

The McCains experienced significant problems with the vehicle and were unsuccessful in getting it repaired. They sued Asbury, Holt Auto Group LP (a local dealer that performed repair work on the vehicle) and General Motors Corp.

Asbury moved to dismiss because it had not sold the vehicle. The company’s attorneys also moved to compel arbitration. The McCains filed an amended complaint adding Nalley Jaguar as a defendant. The defendants again moved to dismiss and to compel arbitration under the Federal Arbitration Act and Georgia law.

The McCains filed a second amended complaint against Holt Auto Group, General Mo- tors Corp., General Motors Co. and General Motors LLC. They asserted claims for breach of implied and express warranties, negligence, misrepresentation, and violations of the Magnuson-Moss Warranty Act and Arkansas’ lemon law and product-liability statutes.

The defendants yet again moved to compel arbitration and to dismiss. Asbury argued that, as Nalley Jaguar’s parent com- pany, it was not liable for its sub- sidiary’s actions.

At the hearing on the motions, the McCains argued that the arbitration agreement was not enforceable because the contract had not been signed by the seller’s officer or manager. The trial court denied the request for arbitration on the grounds that the contract lacked mutuality as a result of Nalley Jaguar’s failure to sign it and the fact that there was no contract between Asbury and the McCains. The defendants appealed.

The appellate court reversed and remanded, finding that the arbitration agreement was broad enough to encompass the McCains’ claims. It also found that the seller’s signature was not needed to establish mutuality if assent was otherwise established, such as by the acceptance of benefits under the contract or partial performance of the contract.

The appellate court noted that the McCains paid the vehicle’s purchase price, that the dealership accepted the purchase price, and the dealership delivered the car to the McCains. The court also noted that the buyers, who did sign the contract, sued appellants on the contract, asserting that both had sold the vehicle. The court also observed that the McCains included claims for breach of express and implied warranties created by the contract in their complaint and obviously viewed the contract as valid and binding upon the defendants.

So, at least in this case, the dealership didn’t end up paying for its failure to sign a deal document — that is, unless you count the time and cost in management time and attorneys fees to defend the matter. The threat of incurring those costs should be enough to have you review your closing processes and training materials to make sure every document that has a dealer signature line actually gets signed.