Enforcing Purchase Of Goods To Resell For Profit – High Performance Vehicles

For years collectors have been paying a premium for collectable goods. The value of collectable goods will be determined by how limited that item is and the demand amongst consumers.

Collectable goods can be any tangible object providing there is a demand among consumers and a common example would be classic or high-performance vehicles where there are limited numbers. Classic cars now obtain a premium due to the limited numbers remaining and the older generations may be surprised to see what their first car may now be worth if they had kept it. It was not as common for modern vehicles to fetch a premium, save for a few vehicles that are made in very limited numbers and are highly sought after, however, the new world chip shortage has halted the production of new vehicles and more new high-end vehicles now fetch a premium.

As with collectable items, vendors and investors have realised a premium on vehicles can be obtained so are purchasing these vehicles for the sole purpose of selling on at a profit. Manufacturers are alive to this issue and we are now seeing certain manufacturers incorporate clauses into purchase contracts which prevent or limit any purchaser from re-selling that vehicle within a specified time.

A recent example widely covered in the media was when famous wrestler John Cena sold his Ford GT only a month after its purchase. The contract prevented Mr Cena from selling the vehicle for 24 months. Mr Cena argued that the specific clause was not on the final purchase order but eventually settled out of Court so we will never know whether a failure to include a clause in the final purchase order in such circumstances would render that clause invalid.

Not all manufacturers and dealerships have decided to prevent vehicles from being re-sold through their contracts but it is not unknown for dealerships to take other measures to prevent a customer from purchasing a vehicle solely to make a profit. But what are the options available to that customer when a dealership refuses to provide a vehicle they were contracted to purchase?

Hughes v Pendragon Sabre Ltd t/a Porsche Centre Bolton

Case background

The case of Hughes v Pendragon Sabre Ltd t/a Porsche Centre Bolton was an example of a dealership preventing the sale of a vehicle where they believed the purchaser intended to re-sell it for a profit. In this case, Mr Hughes entered into a contract with Pendragon Sabre Ltd to purchase a Porsche 911 GT3 RS4.

The number of those Porsches would be very limited and in order to secure its purchase, Mr Hughes paid a deposit of £10,000 even before it was confirmed that Pendragon would be receiving one. Mr Hughes was the first customer to place a deposit and was later told he would receive the first Porsche 911 GT3 RS4 they were allocated. Due to the timing of the deposit, Pendragon was unable to confirm the specifications of the vehicle and its final sale price.

Seven months after placing the deposit Mr Hughes had not received the Porsche and issued a claim for specific performance of the contract or in the alternative, an award of damages. It transpired that Pendragon had received the Porsche but had sold this to another customer as they did not believe Mr Hughes was a real enthusiast and instead he intended to sell the vehicle for a profit.

Pendragon defended they were able to do this on the basis the deposit payment did not represent a binding contract and it could not have as it related to a vehicle that had not yet been built and the specifications, including price, were unknown, and regardless, the agreement signed at the time of the deposit did not refer to Mr Hughes receiving the first Porsche they were allocated.

The Court’s decision

On appeal, the Judge found the deposit represented a binding contract on the basis that parties are able to contract for future goods. Pendragon themselves then overruled the deposit agreement, which allowed them to fulfil orders at their discretion as they later told Mr Hughes he would receive the first Porsche 911 GT3 RS4 allocated to them, forming a collateral contract in line with their previous promise that he would be first in the queue.

Due to the availability of the vehicle, Pendragon would not be able to comply with an order of specific performance. The Judge then turned his attention to damages and noted the level of damages was to be assessed as the loss directly and naturally resulting. In this case, damages would be the difference between the expected purchase price and the current market value. Based on the evidence before him, the Judge held Pendragon should pay Mr Hughes £35,000, which represented his loss as a result of Pendragon’s breach of contract.

Comment

This case confirms where a dealership’s contract does not properly provide their discretion as to the fulfilment of orders, or where promises are made, a purchaser is able to enforce the sale of a vehicle. If this is no longer possible the purchaser is able to seek damages representing his direct loss. The Court’s approach, therefore, supports the investors and vendors looking to make a profit as the damages awarded would reflect the attainable profit at market value.

If you believe you are being wrongfully refused the purchase of high-end goods please do contact a member of our private litigation team who is able to advise.