Hidden pitfalls - car trade-in

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Hidden pitfalls - car trade-in

Postby admin » Tue Jul 20, 2010 7:18 am

Trade-ins may seem convenient but there can be problems that may not be immediately apparent.

A PERSON who wants to buy a car would often need to dispose of his existing vehicle. One option is to find a buyer for it. But this can be troublesome. So it is common to arrange with the dealer to take over the current car.

This is done at an agreed value to be set off against the purchase price for the new car. The procedure is referred to as a trade-in.

But trade-ins are not always without problems. A reader describes his predicament arising out of such a transaction through an authorised sales outlet.

He writes: “The salesman arranged for a used car dealer to inspect and purchase my car. Thereafter, I went to the JPJ office to sign the JPJ K3 vehicle ownership transfer form. My IC was duly verified by the JPJ officer.

“However, the transferee’s details were left blank. The used car dealer has taken possession of my vehicle and signed a written confirmation of possession and purchase of the car with details of his name and identity card. However, it appears that the used car dealer has sold the car to another used car dealer and to date, the car is still in my name”.

Cause for concern

Our reader’s concern is that since the car still stands registered in his name, what consequences could this have for him? What if an offence is committed by another person using the car or there is an accident by someone driving the car?

It can be presumed that the second-hand dealer bought the car for re-sale. Of course, the dealer could have registered the car in his own name and then transfer the car to a buyer when available.

For the reader, this would be more comforting but it would mean extra costs for the dealer.

So as far as the dealer is concerned, he has prepared an open-ended document in which the reader has signed on his part as seller and left the part of the intended buyer empty. When the dealer finds a buyer, he just inserts the buyer’s name.

It is like giving a cheque to someone with the “payee” left empty but the amount filled up and the cheque duly dated and signed. The recipient of such a cheque could pass it on to another person.

Some consider this a convenience as they can make a payment without having to bank in a cheque which they received, and issue another cheque to pay the required amount.

Not wrong

What has happened therefore is not a wrong; it is not a breach of contract or an offence.

The reader should have made it very clear in the transaction document that the car has been sold to the dealer, the price has been paid for, and the dealer has taken possession of it.

Even though the dealer has passed the ownership registration card together with the partially blank transfer document to another, it is unlikely that any real difficulties will arise for our reader so long as the car is kept in the showroom.

However, problems will arise if the car is taken out of the dealer’s premises and used in the commission of an offence. Or it could be the subject of a minor offence like beating a traffic light or being involved in an accident which caused damage to property or personal injury.

If this happens, difficulties will arise for our reader. A check with the register kept under the Road Transport Act 1987 will show up his name. As such he will be the target for any summons, whether for an offence or a civil claim.

However, our reader should not be liable as there is no basis for him to be dragged into the picture as he is no longer the owner of the car or in possession of it. Nor does the register evidence this fact.

This is because unlike registration provided for in relation to land dealings and share transactions which are intended to establish ownership, the Road Transport Act 1987 merely requires registration to indicate possession or use.

No liability

Thus if the car has been sold, the price received, and the car handed over to the dealer, the ownership and possession has passed to the dealer.

If the first dealer handed over the car to another dealer, it is a matter to be resolved between them as to who is to be regarded as the person answerable for any liability arising out of any wrongdoing that takes place.

If during this time the car is being driven, it must be by the dealer or someone authorised by him. If this is so, the responsibility for the offence would rest on the shoulders of the driver and if such person is an agent, it can give rise to vicarious liability attaching to the dealer in civil cases.


Thus in the eyes of the law, our reader is completely out of the picture. If and when approached, he must come forward with the documentary evidence showing that he has parted with the ownership and possession of the car.

It is not his obligation to find the person involved in the actual wrongdoing and to produce him to the authorities.

After all, when offences are committed, the liability whether civil or criminal would fall on the person driving the car and in some civil cases also on the owner with whose approval or consent the car has been driven.

The above explanation should provide a measure of comfort to our reader. However, the ease of trading in his car could at a later stage lead to the inconvenience of having to explain his position.

Read the full article:
http://thestar.com.my/news/story.asp?fi ... iclesoflaw
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