Legal Updates

‎‎‎‎‎‎‎‎ A car trader need disclose to a purchaser also issues in the engine and any other material issue and not only physical damages

August 22, 2017

A person purchased a used car from a company that deals in used vehicles without first taking the car for inspection and later discovered that the engine was damaged. The purchaser sued both the company and its shareholders.

The Court held that the seller of an asset must disclose any known defect, and certainly this is the case with car dealers, who are subject to increased obligations under the Sale of Used Vehicles (Eligibility for Information and Proper Disclosure) Law, 2008. Although the law provides for the disclosure of "injuries caused to the vehicle", this should be construed as a broad disclosure requirement to include any material defect in the vehicle that may affect the purchase, including irregular procedures such as renovation of the motor.  The principle of "beware the purchaser" (caveat emptor) seldom applies in Israel and certainly does not apply in the relationship between a professional seller and a purchaser.  The fact that the purchaser waived taking the car for external inspection, even though he had the opportunity to do so, does not exempt the seller from due disclosure and the company should have disclosed the engine issues to the purchaser specifically in the due diligence disclosure form.  The Court found the company liable but rejected the claim against the company's managers because the sale of the vehicle was made by a salesperson of the company and the law does not create personal responsibility for managers in case of sale of used car by a company.