Legal Article - Business Law

Taking Precautions and Exercising Due Diligence 

When an offence has been committed then the Trading Standards Officer will consider everyone in the accountability pyramid to decide which, if any, of the people involved have a statutory legal defence.

Anyone that has not got such a defence will be liable and open to prosecution.

It is worth remembering that it is the Trading Standards Department who determine who proceedings will be taken against.

However, anyone who has taken all reasonable precautions and exercised all due diligence to avoid the offence, even though despite those endeavours, it has still occurred, will be able to rely on the statutory defence.

In addition to taking all reasonable precautions the business must show that it has exercised all due diligence to make those precautions work.

The problem within a lot of businesses is that sales people are good at selling but tend to neglect the paperwork and management.

When a problem occurs and the Trading Standards Officer carries out his investigation the Directors, Partners or Proprietors will have to 'prove' the precautions that they intended to take have in fact been taken.

The only way to do this is by very clear and accurate records for EVERY precaution taken. This may be seen as a chore but it may save a prosecution and your reputation.

When considering who is liable, the Trading Standards Department will have in the frame, as a matter of course, the following:

- The Company
- The Directors and Company Secretary
- Senior Manager
- Sales persons
- Other employees

Each and every person involved in the offence will be in that frame and proceedings may be taken against each and everyone of them or any individual as the Trading Standards Department thinks appropriate.

Where the offence is committed by a Partnership then each partner is liable and liable for the actions of themselves, their partners and their staff.

Where the offence is committed by a Limited Company then any one to whom the management of the Company has been delegated is liable for their own acts and those acts will also be deemed to be the acts of the Company thereby rendering the Company liable.

Whether or not the Directors are individually liable is dependant on their own personal involvement in the matters giving rise to the offence.

This will be a matter of fact.

Employees who make either written or oral statements that misdescribe the vehicles or goods leave both themselves and the Company liable. Whether or not they are prosecuted in their own right depends primarily upon their involvement and variance from Company Policy.

What is the Sale or Return Agreement?

What is the Sale or Return Agreement?

Often forecourts are stocked on a 'sale or return' basis either with customers or fellow motor dealers. In such circumstances the person on whose forecourt the vehicle appears is jointly and severally liable for any misdescription.

In the event that the vehicle is a customer's vehicle and the customer misdecribes the vehicle the dealer may be in the unfortunate position whereby he becomes liable while the customer, not being in a trade or business, is not.

Any SOR should be strictly controlled and any agreement put in writing.

The Importance of Employing Suitable People

The Importance of Employing Suitable People

It is essential, at the onset, to appoint the right people into the right jobs. All applicants should provide details of their qualifications and experience which should be compared to a job description and your expectations of the person required.

On selection of the suitable candidate their ability and skills should be assessed and Training Programmes devised to ensure that they are fully equipped to meet their responsibilities and duties. All assessments should be documented.

The Contracts of Employment and any associated staff handbook must incorporate  disciplinary procedures to be adopted in the case of failure to adhere to specific duties required by the system and documented in the Job Descriptions.

The Relevance of Employee Training

The Relevance of Employee Training

All staff should receive training in order to understand their duties, responsibilities and obligations in relation to Trading Standards matters, customer interface, vehicle descriptions, advertising and promotions, test drives, after sales and other consumer related issues.

Refresher and/or update courses should be provided annually as a minimum frequency to reinforce the importance of compliance as well as any new/proposed development in law or best practice.

Staff records should reflect the training received by each individual.

Quality Systems Procedures for Staff

Quality Systems Procedures for Staff

It is essential, not only to train staff, but to give them clear and concise instructions as to Company Policy and how they should conduct themselves.

The instructions need to cover all aspects of the job, specify processes and procedures that are to be adopted, records that are to be kept, checks that should be made.

This goes together with guidance and instructions on the descriptions that may be applied to vehicles and statements that may or may not be used during the customer interface.


Verhicle Purchase Display and Sale

Vehicle Purchase – Display and Sale

Clear instructions and procedures should be adopted in respect of the purchase of vehicles to ensure that the vehicle description corresponds to the V5 and other documentation.

Policies should be agreed and adopted as to the use of Disclaimers, Mileage Checks, Advertising, Documentation, Test Drives, Hand Over procedures, Point of Sale Material and Descriptions.

Procedures should also be adopted to ensure that the vehicle descriptions are consistent with age, mileage and condition.

Company Documentation and the Legal Requirements

Company Documentation and the Legal Requirements

All documentation including Invoices, Order Forms, Hand Over Checklists, Mileage Checks, Disclaimer Registers and other documentation should be kept for Trading Standards purposes. There are legal requirements which state that documents must be kept for a period of no less than 3 years.

All documentation must comply with the provisions of the Unfair Terms in Consumer Contract Regulations, which deal with “small print”. All terms must be clear, intelligible and in plain language. They must be incorporated into the contract in a way that is fair and does not give the dealer any unfair contractual clauses.

Contact Lawgistics and we will be pleased to advise you or you may wish to use the Lawgistics Stationery range.

The Importance of using Mileage Disclaimers

The Importance of using Mileage Disclaimers

Over a number of years the practice of using mileage disclaimer stickers has evolved and found favour with the Courts.

There is some disagreement as to whether the disclaimer system negates the original description and therefore there is no offence or whether the disclaimer is merely one of a number of precautions that should be taken.

Whilst this is of some academic interest practically, the courts have been in agreement.

“A system of mileage disclaimer stickers should be used”.

If they are not, although not invalidating a defence system, it does seriously impair it. In several leading cases the High Court have said that the use of mileage disclaimers and vehicle mileage checks are essential precautions.

Mileage Disclaimers MUST be used in all circumstances where the mileage has not been confirmed in writing by all previous owners of a car, registered keepers or the vehicles drivers or where there is other evidence of the mileage being incorrect.

A satisfactory mileage disclaimer is one that negates any description on each and every occasion the mileage may be seen or is entered into the documentation. The right words must be put in the right place at the right time.
Please Note If someone clocks a vehicle or has it clocked for them then subsequently disclaiming it will offer NO protection.

• The Right Words
To be effective the words used in a mileage disclaimer must be as bold, precise and as compelling as the original description.

If you use a phrase such as “ we cannot guarantee the accuracy of the odometer reading” then this will not negate the description.
Whilst it is common knowledge that you cannot guarantee the accuracy of the odometer the original odometer reading remains there and is a trade description. If incorrect it is a false trade description.

To be effective a positive statement such as “and must be disregarded” or “ and must be considered incorrect” must be added to negate the original description.
Suggested wording which has been accepted as being effective is:

i. We have been unable to confirm the mileage recorded on this odometer and therefore it must be considered incorrect.
ii. We have been unable to confirm this mileage reading. Please disregard it.

• The Right Place
To be effective any disclaimer must be as bold, precise and as compelling as the original description.

This means that wherever the mileage reading can be seen – (on the vehicle, on the warranty, on the Sales Invoice, on the Order Form or on any other documentation) there MUST be accompanying that description a suitably worded disclaimer in close proximity to the original description.

On a vehicle this means that the disclaimer should be placed over or adjacent to the odometer reading so that it is either obscured or that both may be read together.
On any documentation the disclaimer MUST be in close proximity to the mileage reading and marked by means of an asterisk.

In addition to the above it is also a sensible policy to have the same wording placed on the wall of the office where the sales transaction is to be completed and/or throughout the showroom. The purpose of such a notice is to remind customers and staff alike of the Company Policy and to ensure that the customer is clear that mileage is not an express term of the contract.

• The Right Time
A mileage reading becomes a trade description as soon as it is made available to a member of the public to view it.
To protect yourself the mileage disclaimer must be placed over or in close proximity to that reading BEFORE it is placed on view.

Remember even if you have a vehicle that has not yet been prepared for sale but show it to a prospective customer you are exposing the mileage reading and therefore making a trade description.
It is equivalent to a vehicle being supplied to a customer where a mileage reading displayed. That is a trade description and if wrong then you have supplied a vehicle with a false trade description.

All vehicles should be supplied with the disclaimer still inset. If you wish to remove the disclaimer then ask the customer if they wish it to be removed at the time of supply.

Author: David Combes

Published: 16 Mar 2011


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