I recently sold a 14-year-old SUV with 110,000 miles.  It passed vehicle inspection and licensing within 30 days of the sale.  I sold it “as is.”  I had no knowledge of any defects or mechanical problems.  I sold it well below Kelley blue book value because I knew the tires would need to be replaced for winter driving, which I made the buyers aware of at the time of the sale.

Two weeks after I sold the vehicle, it started having problems.   The new owners told me that they changed the oil on their own and drove it for two weeks before the problems appeared.  They parked the vehicle and have not taken it to a mechanic.  They don’t know what is wrong with the car but now want me to refund the purchase price and take the car back.

I offered to pay the cost of towing the car to a mechanic, but they refused that offer.  Should I refund the money or fight for my rights?  I feel I should fight for my rights .

Submitted by CK

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About John Hooker

T. Jerome Holleran Professor of Business Ethics and Social Responsibility Tepper School of Business Carnegie Mellon University

One response »

  1. John Hooker says:

    Breaking an agreement, merely for personal benefit, is normally unethical because it fails the generalization test. So it’s important to know what you promised when you made a sales agreement with the buyer.

    Because much of our society revolves around commercial transactions, the law makes it very clear to everyone what is promised in a sales agreement. A key principle is warranty of merchantability. This means that the car must be fit for the purpose for which it was sold. Because the purpose of a car is to provide transportation, it must provide transportation at the time you sold it. However, there is no warranty that the car will keep running for any length of time, unless you explicitly provide such a warranty, which you didn’t.

    Naturally, you must not mislead the buyer about the car, because this is fraud. If you knew the car was about to break down when you sold it, and said nothing about this, you could be guilty of fraud, which voids the deal. However, I gather you had no idea the car was about to break down. So your sales agreement doesn’t obligate you to take the car back, refund the money, or pay for repairs. The price you charged for the car, low or high, is irrelevant. It matters only what you promised as part of the sales agreement.

    You mentioned that you sold the car “as is.” This is widely misunderstood. You can’t just say, after the fact, that you sold the car “as is.” You must clearly and explicitly state at the time of sale that you are selling the car “as is” or “with all faults,” normally by writing these words on the bill of sale. A car sold “as is” should be viewed as scrap metal, because there is no warranty of any kind (see §2-316 of the Uniform Commercial Code). However, if you mislead the buyer, you could be guilty of fraud even when you sell the car “as is.”

    Even if you didn’t sell the car “as is,” you have met all the ethical (and legal) obligations imposed by your sales agreement. It remains only to consider the utilitarian principle, which requires you to make a decision that maximizes overall net utility, subject to generalizability. If the buyer is financially worse off than you, then perhaps cancelling the sale and refunding the money would benefit the buyer more than it would hurt you. However, using this money for some other worthy purpose might create at least as much utility as refunding it. So there is no specific obligation to the buyer.

    In fact, refunding the money could be ungeneralizable, if it is done solely to increase utility. If buyers could return merchandise anytime they want, they might become too careless in their purchasing decisions, resulting in less overall utility. Refunding money in a hardship case, however, is probably generalizable, in which case it’s your call whether to do so. The only ethical requirement is that you put the money to what you can rationally believe is its best use.

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