It’s not unusual for a consumer to agree to certain financing terms with a dealer, leave the dealership with the spot-delivered car, and later have to return to the dealership to sign new paperwork because the dealer could not locate a finance source willing to take the deal as written. When the old deal is scrapped, everything the consumer signed as part of the old deal may be deemed to have been scrapped as well. Therefore, when you draw up new paperwork, make sure you prepare and the consumer signs every single piece of paper again, even the documents whose terms remain the same. Otherwise, you risk the possibility that those carryover documents from the initial deal will be declared unenforceable in the event of a dispute. Let’s see how a recent case dealing with this issue went down.
David and Krystina Mooneyham bought a truck from BRSI, LLC d/b/a Big Red Kia on February 9, 2013. The Mooneyhams signed a bill of sale, a spot delivery agreement, an agreement to arbitrate, and a retail installment sale contract. Two days later, Big Red informed the Mooneyhams that their original financing had fallen through, but it found alternate financing, so the Mooneyhams had to return to Big Red and re-sign paperwork. They signed a new bill of sale, spot delivery agreement, and retail installment sale contract, dated February 11, 2013, but did not sign a new arbitration agreement. The Mooneyhams sued Big Red two years later, and Big Red moved to compel arbitration pursuant to the February 9, 2013, agreement to arbitrate.
The U.S. District Court for the Western District of Oklahoma denied Big Red’s motion to compel arbitration. The Mooneyhams argued that the agreement to arbitrate was no longer in force because the original transaction had been rescinded and they did not sign a new agreement to arbitrate in connection with the second transaction. Big Red, on the other hand, argued that there was a single transaction because the Mooneyhams only had to re-sign certain documents due to a change in financing. The court found that there were two separate transactions — not only had the financing changed, but there was a different total sale price, and the Mooneyhams bought different insurance and warranty products. Because there were two separate transactions, the arbitration agreement the Mooneyhams initially signed did not remain in force, and they were not required to arbitrate their claims against Big Red.
I suspect that not all courts would agree that the arbitration agreement did not cover disputes that arose in connection with the sale and finance transaction that took place between the same parties for the same car two days after the arbitration agreement was signed. Nevertheless, the lesson of this case is easy enough to implement, so make sure you take the time, and the extra pieces of paper, necessary to have all transaction documents re- signed.
Mooneyham v. BRSI, LLC, 2015 U.S. Dist. LEXIS 154906 (W.D. Okla. November 17, 2015).