The sale of the used vehicle’s market is one of the markets in which the seller, especially one who is a car merchant, has a great advantage on the purchaser who is unable to easily discover what is “under the hood.” Moreover, a person purchasing a vehicle from a merchant (such as a car dealer or a leasing company) usually does not take the vehicle for a professional inspection. Therefore, the legislator imposed strict restrictions applicable to car dealers and set sanctions in case such rules are not implemented at sale transactions of used vehicles.
As part of the legal requirements, a sale of a used car must be executed (a) by a written contract, where (b) the seller attaches a "due diligence form" to include accurate details on the identity of the seller, the identity of the vehicle owner, number of previous owners, damage, accidents, mileage and more. Finally, (c) the purchaser must sign the form and confirm that the details were brought to his attention. Failure to comply with the rules may lead to a fine of up to ILS 204,000 imposed on the seller and the Courts made it clear that failure to comply with the law may also entitle the purchaser to compensation.
In one case brought before the Court, a company that deals in vehicle "trade-in" transactions argued that the vehicle was not its and it merely acted for the seller and therefore it was unaware of the defects in the car and not only that the due diligence form was signed by the purchaser (although it turned out that the details were incorrect), the purchaser also signed a release declaring that the seller is not responsible for the condition of the vehicle and serves only as a middleman in the transaction between the seller of the vehicle and the purchaser. The Court ordered the company to compensate the purchaser and clarified that even having the customer sign a release does not exempt the merchant from liability.
It is important to note that not only the information on the due diligence form required by law is required for disclosure. The law creates a minimum threshold for proper disclosure to a vehicle purchaser but there may be other material details that require disclosure, especially when such affect the price of the vehicle. For example, the fact that a vehicle was previously owned by a company (as opposed to ownership by an individual) will have a material effect on its price, although this detail is not specifically required to be disclosed in the due diligence disclosure form required by law. Nevertheless, good faith and the ordinary disclosure obligations under contract laws will apply and require the disclosure of such details. Moreover, caselaw (even if not caselaw regarding the vehicle industry) teaches that unintentional disclosure of material information (including information that the seller himself was unaware of) may be considered fraud. It is reasonable to assume that when the selling party is a merchant, the Court will tend to determine that it had to research such details before providing misleading information to the purchaser. In any case, it is certainly advisable to consult with an attorney specializing in the vehicles industry in order to prevent criminal or civil liability.