Introduction to the Car Purchase Agreement
A Car Purchase Agreement is a specific form of Vehicle Purchase Agreement. This is an agreement for the purchase and sale of the car. It can be either for the purchase and sale of a new car or an old car. An agreement also binds both the parties when both the parties to the agreement signed the agreement. It is governed by the Sale of Goods Act, 1930 in India.
It provides clarity with respect to the car being sold or purchased.
Parties Involved in the Car Purchase Agreement
Following parties are involved in the agreement:
Seller is the person who desires to sell the Acquired Vehicle to the purchaser upon receipt of consideration. The seller is the one having ownership over the vehicle. He has to transfer ownership of the vehicle to buyer upon the fulfillment of terms of Car Purchase Agreement.
Buyer is the person who desires to purchase the Acquired Vehicle from the seller upon payment of consideration. The Buyer is the person who is being granted ownership rights to the seller.
Purpose of Car Purchase Agreement
Following is the Purpose of the agreement:
- The agreement makes the deal between the parties binding upon signing of the contract between parties.
- The agreement helps to seek specific performance of the contract by the parties.
- The agreement clearly defines the rights and responsibilities of parties.
Contents of the Car Purchase Agreement
Following is to be included in the Car Purchase Agreement:
- Details of Parties: The agreement should provide details of both the parties to the agreement. It should inform about who is the buyer and seller and their residential details also.
- Description of Vehicle: The Agreement should also provide all the details about the vehicle. The colour, model, and all relevant features with respect to agreement should be disclosed.
- Consideration: The Agreement should also provide details of consideration to be paid with respect to the vehicle purchase. It should clearly specify the mode, time, and place of delivery of consideration.
- Delivery of Acquired Vehicle: The Agreement should also specify the mode, time, and place in which the Acquired Vehicle should be delivered to the buyer by the seller.
- Conveyance of Title: The Agreement should also disclose as to when is the titles of the Agreement is passed to the Buyer.
- Disclosures, representations and Warranties: The Agreement should clearly provide that seller need to disclose all the relevant information with respect to agreement. All relevant representations, and warranty given should be provided in the Agreement.
- Severability: The Agreement should also provide that inoperable part of Agreement should be severed from the operable part.
- Modifications: The Agreement should also provide for modifications to be made to Agreement if required.
- State Laws Applicable: The Agreement should clearly describe the State Laws, which will be applicable to the Car Purchase Agreement.
- Dispute Resolution: The Agreement should also specify the mode, place, and period of dispute resolution.
How to Draft a Car Purchase Agreement- Points to Consider
Following points are to be considered in a well drafted agreement:
- Parties Identified Properly: The Car Purchase Agreement should be so formed so that the parties to the Agreement are clearly identified. The proper and necessary details of the parties should be provided in the agreement.
- Vehicle Described Properly: The car to be the subject matter of sale or purchase, also known as Acquired Vehicle, should be appropriately described. It should provide all details and specifications with respect to the car so that it is properly identified and distinguished from others. If the car has been used, then a used car purchase agreement should also be entered into.
- Disclosures to be made: The parties to the Agreement shall make all the disclosures which might affect the interest of the parties to the Agreement. Any failure to be bind by this might lead to a recession of contract by the other and will give rise to suit for damages.
- Details regarding payment of consideration: The Car Purchase Agreement should clearly provide details of mode, time, and place where payment is to be received. The Agreement should also provide as to when is the title is being transferred from seller to buyer under Car Purchase Agreement.
- Laws to be Applicable: The Car Purchase Agreement should also provide for the laws which will be applicable to the parties to the agreement. The governing laws to the Agreement should be clearly laid down by the parties.
- Dispute Resolution: The Car Purchase Agreement should also specify the mode, time and venue of dispute resolution. This helps in clarifying doubts about dispute resolution in case any dispute arises in the future with respect to Agreement.
- Signature of Parties and Witnesses: The Car Purchase Agreement should contain the signature of the parties who had understood the terms of Agreement in order to make the contract binding on the parties. The Agreement should also contain the signature of the witnesses.
Following Negotiating Strategies should be kept in mind while negotiating Car Purchase Agreement:
- Collect Information about the Vehicle: The buyer, before entering into any agreement, should collect information about the Vehicle. This helps him to be on better footing while negotiating the deal.
- Stick to relevant features of Vehicle: The buyer should not get diverted with the additional benefit that comes with the deal. The buyer should stick to the relevant features of the vehicle while considering the deal.
- Check For Rival Dealers: The buyer should also collect information about the rival offering the same vehicle. Being informed about the deal of the rival dealers will be beneficial in the interest of buyer.
- Don’t Straight Away Disclose the Price you want to pay: While negotiating the deal, one should not straightaway disclose the price at which they will settle down rather they should start with a lesser amount at which they will settle.
- Offer to Close the Deal: One should always be ready to close the deal when the suitable offer is agreed upon by the parties. One should not try to Rob the other party of any benefit while negotiating.
- Be Polite: While negotiating, the key to success is to be polite. One should always be polite and humble while negotiating a deal.
Benefits and Drawbacks of Car Purchase Agreement
Following are the advantages:
- Binding: While entering into a purchase agreement provides a binding effect upon it is signed by the parties, and any party who breaches or backs off has to pay the damages sustained because of such breach by the other party.
- Clarity: The Car Purchase Agreement provides clarity on the vehicle being sold, consideration being paid, and any other rights and responsibilities that the parties had towards the agreement.
- Certainty: The Agreement provides certainty about the sale and the rights and responsibility that the parties have towards each other.
Following are the Disadvantages:
- Time Consuming: The agreement sometimes becomes a time consuming affairs for the parties as negotiation takes a lot of time to be finalized.
- Expensive: The Car Purchase Agreement is also very expensive as one needs to hire a professional to prepare agreement or to negotiate terms of the Agreement.
What Happens in Case of Violation of Car Purchase Agreement
Following Remedies are available in case of Car Purchase Agreement:
- Damages: When the terms of an agreement are breached, parties may sue the party who is breaching the terms of agreement for damages.
- Reformation: In case of breach of terms of agreement, the Party may ask for the reformation of the contract to redefine the rights and liabilities of the parties.
- Recession: In case of breach of terms of Agreement, the party may rescind the Contract. If the action of one party leads to loss to other party, it may rescind the contract.
- Specific Performance: In case of any irreparable loss is being suffered by the party because of breach of terms of contract, the party may demand specific performance from the other party.
The Car Purchase Agreement is the agreement which is a specific form of the vehicle purchase agreement. It binds the parties to the agreement. The entire description of the vehicle is provided in the agreement in order to prevent any confusion in the future. The agreement ensures that the party to the agreement fulfills their rights and responsibilities. In case of Breach of Agreement, the party suffering loss may claim damages or specific performance from the other party. The Agreement helps both the parties to get the other party to fulfill their rights and responsibilities towards each in terms of delivery of vehicle or payment to be made in consideration for vehicle.
The Car Purchase Agreement is an effective way to provide certainty and clarity with respect to the rights of each party to the Agreement. The effective negotiation strategy may help the parties to the Car Purchase Agreement to land up with an effective deal.