QUOTE(akdiver @ May 20 2008, 06:09 PM)

So, guy takes his 2007 Jeep Wrangler Unlimited Rubicon to the dealer - title in hand, no lien. Shows Jeep and title to the dealer - says, "what'll give me for it?" Dealer spends some time looking at the Jeep - which is in spectacular condition - like showroom - plays around on the computer a bit - and gives a figure the seller finds acceptable. Deal is done - let's suppose dealer hands over cash on the spot - seller signs title over to dealer. The deal is done.
Unbeknownst to dealer - the seller has swapped out the axles on the Rubicon. Instead of the D44 with electric lockers, they're just plain jane axles off an X - nothing interesting or special about them - they even have the lame 3.21 (or whatever) gear ratio. Further, the transfer case has also been switched out - now it is just a plain X transfer case. Finally, just for fun, let's suppose the YES essential seats that come with the Rubicon have been swapped out with the plain ones from an X as well (although this is not critical to the question and should not affect the answer).
Dealer sells the vehicle as a Jeep Rubicon - complete with remaining factory warranty (suppose vehicle has only 10,000 miles on it). This new buyer discovers the ruse, goes back to the dealer to complain, stating dealer has ripped him off - threatens to sue, but will settle for a 100% refund of price, all taxes, fees, etc.
So - who has a case here?
First of all the applicable law here would be the Uniform Commercial Code rather than common law contracts, because we are talking about the sale of movable goods, i.e. a car.
Then we break the case into two:
Dealer v. Original Seller:
Under the UCC the dealer will be termed a merchant and will have difficulty proving mutual mistake because he did inspect the jeep with his inside knowledge. If he can show that his extra knowledge was insufficient to spot the cover up, and the original seller knew of the mistake then we have a unilateral mistake.
A unilateral mistake is where only one party to a contract is mistaken as to the terms or subject-matter. The courts will uphold such a contract unless it was determined that the non-mistaken party was aware of the mistake and tried to take advantage of the mistake.
Buyer v. Dealer:
Or if the dealer can honestly say he did not know of the cover up then he can rescind the contract due to mutual mistake.
A mutual mistake occurs when the parties to a contract are both mistaken but about the same material fact within their contract. They are at cross-purposes. As such, there is no consensus ad idem, and this overlaps with the objective theory of contract, and there is no offer and acceptance. Hence the contract is void. The changed parts in the Jeep must be of material importance.
QUOTE(akdiver @ May 20 2008, 06:09 PM)

Can buyer #2 successfully claim damages against the dealer for fraud? vehicle was advertised and sold as a Jeep Rubicon - which has a standard and implicitly understood definition involving the axles, t-case, and seats. Dealer did not know the equipment had been swapped out and didn't intentionally try to rip off the buyer. Due to lack of intent, does buyer have any case at all? Does buyer bear any responsibility for a conducting detailed check of components - just not verifying the vehicle is mechanically sound?
Can dealer successfully claim damages against the seller for fraud? Seller didn't make any particular claims about the vehicle - just presented ownership documents and agreed on a price. Are claims about the vehicle's components implied by the obvious fact he was selling a Rubicon? Does seller have a legal (not moral) obligation to point out such substantial modifications to the dealer (knowing full will they affect value), or is dealer obligated to confirm all components for himself? Must dealer prove buyer knew about the component swap? What if the seller bought the vehicle from someone else this way and didn't know about the swapped out components? Does this let the seller off the hook since there was no intent to defraud?
Fraud or caveat emptor - lawyers in the house, please speak up (:
Buyer v. Dealer:
A lot of the caveat emptor problems have been fixed by local state statute such as in California "Buyer's Bill of Rights". So the ease of undoing the contract and get any kind of general or punitive damages in tort will vary in each jurisdiction.
First the contract claim - remedies:
As mentioned above, mutual or unilateral mistake (implied because dealer is a merchant) can void the sale to begin with.
Next there are warranty issues:
1. Express Warranty - none was given here.
2. Implied Warranty - an implied warranty is a contract law term for certain assurances that are presumed to be made in the sale of products or real property, due to the circumstances of the sale. These assurances are characterized as warranties irrespective of whether the seller has expressly promised them verbally or in writing. They include an implied warranty of fitness for a particular purpose, an implied warranty of merchantability for products, and an implied warranty of habitability for a home. Therefore, a car dealership selling a particular jeep will carry an implied warranty it is that kind of jeep.
For implied warranty of merchantability:
This warranty will apply to a merchant (that is, a person who makes an occupation of selling things) who regularly deals in the type of merchandise sold.
Under US law, goods are 'merchantable' if they meet the following conditions:
1. The goods must conform to the standards of the trade as applicable to the contract for sale.
2. They must fit for the purposes such goods are ordinarily used, even if the buyer ordered them for use otherwise.
3. They must be uniform as to quality and quantity, within tolerances of the contract for sale.
4. They must be packed and labeled per the contract for sale.
5. They must meet the specifications on the package labels, even if not so specified by the contract for sale.
Our dealer will have issues with the last three items.
We also need more facts on any disclaimers if they were made. If a personal injury was involved as a result of the "downgraded" jeep then no disclaimer will save the dealer.
Fraud - Criminal:
In criminal law, fraud is the crime or offense of deliberately deceiving another in order to damage them – usually, to obtain property or services unjustly. [1] Fraud can be accomplished through the aid of forged objects. In the criminal law of common law jurisdictions it may be called "theft by deception," "larceny by trick," "larceny by fraud and deception" or something similar. Lack of intent by the dealer will avoid a fraud charge.
Fraud - Civil: Similar standard, the burden usually rests with the defrauded person, who must prove intent to defraud. Hard to do when ignorance is involved.
If seller bought the vehicle from someone else, the warranties mentioned above go out the window, because a non-merchant is held to a much lower standard and intent to defraud or actual knowledge of the switched parts are needed. Mutual mistake will still apply however.
Dealer v. Original Seller:
Since the original seller knew, and if the dealer can prove this he can be successful under contract, civil tort, and even criminal tort.