"Ebay Car Buyer Sues Dealership Seller for Fraudulent Inducement in 'As Is' Sale"
By Thomas B. Hudson
Tim Kane sued Nxcess Motorcars, Inc. in connection with his purchase of a 1998 Mercedes-Benz CL500 from Nxcess over the Internet website "eBay." Kane alleged fraud and violations of the Texas Deceptive Trade Practices Act. The trial court granted summary judgment for Nxcess, and Kane appealed. The Texas Court of Appeals reversed the trial court's decision in favor of the dealer and reinstated the DTPA and fraud claims.
According to the appellate court, Nxcess is a Houston-based car dealer that sells 150-200 cars a month over the Internet. Nxcess advertised the Mercedes on eBay and Kane bid on the car, but the bidding closed without meeting the reserve. Nxcess then contacted Kane to find out if he was still interested in buying the car and the parties negotiated the sale over the phone.
Kane was experienced in purchasing luxury automobiles, though he had never before purchased a car over the Internet. Kane was adamant about establishing that the car was in original condition and had not sustained prior damage or had any paint work. The salesman inquired of his manager who told him the car's right front quarter panel had been repainted, but "not to worry about it." The salesman communicated to Kane that the car had not been repainted.
Kane agreed to pay $42,000 for the car and Nxcess faxed him a contract with boilerplate "as is" sale provisions. Without inspecting the car, Kane signed the contract and Nxcess shipped the automobile. Kane took the car to an appraiser for inspection and the appraiser found evidence of repaired damage and repainting. Kane contacted the car's prior owner, as listed on the title, and found out that the car had been in an accident. Kane asked Nxcess to rescind the contract and refund the purchase price and his additional expenses. When Nxcess refused, he sued.
Nxcess relied on the "as is" contract provisions and the car's eBay advertisement, arguing that Kane had no evidence of any misrepresentation by Nxcess. Kane countered that the "as is" contract provision did not negate his claims because he was fraudulently induced to enter into the contract. He also argued that "his inclination to inspect was thwarted by fraudulent misrepresentations."
After reviewing the evidence, particularly the salesman's deposition testimony, the appellate court said that while "mere puffing or opinion is not actionable, stating that a vehicle is in perfect condition goes beyond mere puffing and opinion." Kane repeatedly asked the salesman about the car's paint. The appellate court included excerpts from the salesman's deposition in its opinion. The salesman testified that he thought he would lose his job if he didn't sell the car. He also said that he knew if he told Kane the car had been repainted at all, he would not have bought it.
The appellate court also noted that the "as is" provision in the contract for the car was faxed to Kane three days after he paid for the car over the eBay website. The eBay advertisement as presented in the court's opinion did not appear to indicate that the terms of the sale were "as is." The appellate court was most convinced, however, by the evidence that "a known fact – that the car was repainted – was concealed."
Ultimately, the appellate court concluded that the "as is" contract did not preclude Kane's claims where Nxcess made "knowing misrepresentations." Nor did Kane's failure to inspect preclude his claims. The appellate court sent the case back to the trial court for further proceedings.
For all you Internet sellers out there, heed this lesson – no matter how thorough and careful you are with your contract language and your advertising, if your people engage in knowing misrepresentations, you're risking a lawsuit that may succeed. Even the "as is" language will not help in a situation involving a clear case of fraudulent inducement. Kane v. Nxess Motorcars, Inc. , 2005 WL 497484 (Tex. App. March 3, 2005).
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For more information about Thomas Hudson and Spot Delivery® go to www.spotdelivery.com or contact: tbhudson@hudco.com
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