As with many of the legal and business issues that arise in the motor vehicle industry, reviewing contracts can seem like an overwhelming task.  Granted, they often can be long and complex documents written in legalese, which means they tend to put the average reader to sleep.  They can, however, be quite simple to review if you understand a few basic principles. By the time you receive the contract, you have hopefully already spoken to other dealers who have a relationship with the company, evaluated the financial aspects of the relationship and conducted other steps in a proper due diligence examination.  At this point, you may even be sold on the opportunity.  Keep in mind, however, that it’s the written contract that governs the relationship.  So lets get started.  Go ahead and pull out one of your contracts and I will walk you through it.

Most standard contracts begin with the “preamble”. The preamble identifies the parties, their respective addresses and principal places of business, and usually defines how they will be referenced in the main body of the document.   The preamble may also briefly state the desired objectives for both parties. Once the basic objectives of the parties is defined, most contracts will move into the sections that define the parties’ relationship and their responsibilities and obligations to one another, including any applicable representations and warranties being made. Payment terms may also be included.

It is important to define whether the relationship with the other party is that of a supplier, agent, independent contractor or employee because this usually determines the scope of liability and responsibility for the relationship between the parties.  Make sure that your responsibilities and the other side’s obligations, as well as the products and services to be provided, are clearly and accurately described. Ambiguous language in a contract can lead to misunderstandings, delays, frustration and even litigation. If you are relying on something important when entering into a contract, such as a promise or guarantee, take the time to verify that this information is actually written in the contract.  If the verbal promises aren’t reduced to writing, you shouldn’t count on them. The payment terms should also describe in detail the amount to be paid, when and how it will be paid and whether offsets against other amounts owed will be permitted.  If offsets are permitted, you should request that notice of the amount and reason for the offset be provided.

Consistency between the terms of the contract and any terms set forth in attachments and the other documents provided to you, including any brochures and/or documents that will be provided to your customers, is a must. Usually this isn’t a problem, but sometimes you’ll find inconsistencies between the terms in the contract and these documents.  For instance, we have on occasion found discrepancies between a service contract document that indicates a service contract program is “dealer obligor” and a dealer agreement that indicates the program is “administrator obligor”.

With the parties’ expectations and obligations defined, the next set of provisions often address the duration of the relationship and what will happen if and when it ends.  Duration and renewal provisions define whether the contract will remain in effect for a fixed period, until otherwise terminated by one of the parties, or until a specified event occurs.  The parties may also agree on a method of renewing the contract.  For instance, the contract may automatically renew unless otherwise terminated upon prior notice, or it may expire unless renewed within a set time period.  Keep in mind that automatic renewal or termination provisions will require some type of action on your part, usually on an annual or semi-annual basis, in order to continue the relationship. That means calendaring and staying on top of providing notices within the appropriate time frames.

Speaking of termination, most of us know from the beginning of any business relationship that it will probably end some day; yet dealers often sign contracts that do not clearly state what will happen upon termination.  Ownership interests in data and customer lists, responsibility for returning or destroying documents provided by one party to another and which, if any, obligations and responsibilities continue to exist even after termination, are just a few of the issues that must be addressed.  You should also make sure that you have the same right to terminate as the other party.  Too often we see clauses that permit only one of the parties to terminate the contract, with or without cause or notice, and one-sided default provisions.  Both parties should have the right to end the relationship under similar conditions and terms.  If termination is permitted based upon a breach, you should also request a reasonable notification of the alleged breach and an opportunity to cure it prior to the termination becoming effective.

Indemnification, limits of liability and damages clauses often go hand-in-hand with termination provisions.  They are also typically one-sided in favor of the drafting party.  There is an old saying, “when it comes to business contracts, you don’t get what’s fair, you get what you negotiate.”  So negotiate!  Indemnity provisions should provide that if something goes wrong due to an error on the part of one of the parties, that party will hold harmless and indemnify the other party from all damages, costs and expenses, including attorney’s fees, it incurs as a result of that error.  If the other party retains the ability to assess damages, make sure you do too.  Damages can be limited to actual damages (lost revenue and expenses actually incurred) or may include consequential damages (such as loss of potential revenue) and liquidated and punitive damages that are assessed primarily as a punishment or penalty.

Virtually every contract includes “boilerplate” or “standard” provisions at the end of the contract. This language may seem trivial, but it is often not “standard” at all and can end up being tremendously important in the event of a dispute. For example, attorney fee provisions often state that the non-prevailing party will pay the legal fees and costs of the prevailing party.  You may wish to suggest that both parties be responsible for their own costs and fees unless a court of law rules otherwise.  Choice of law and forum (location) selection clauses identify the laws that govern the contract and the state, county and even courts where lawsuits or arbitration proceedings must be commenced.  Again, the drafter of the contract often seeks to apply the law in its home state, which may be disadvantageous and costly for your dealership.  Finally, pay attention to the provisions governing modification of the contract. Revisions may be necessary for routine things, such as a change of address, as well as to materially alter the terms of the contract. Too frequently the proposed modifications become effective by a dealer continuing business as usual.  Changes to material terms should always be in writing and signed by both parties.

One last piece of advice: Never sign a contract you don’t understand. A well-drafted contract spells out the rights, responsibilities and obligations of each party and protects you and your business. Clarify the issues you don’t understand, try to negotiate those that don’t fit your needs and, when necessary, get help from a knowledgeable and experienced advisor to assist you in making your decision. Remember, no contract can save a bad business relationship, but a bad contract can destroy a good one!

On vehicles equipped with the 1ZZ-FE engine and two-wheel drive, there is a possibility that a crack may develop at certain solder points or on the electronic component used to protect circuits against excessive voltage (varistor), on the ECM’s circuit board. In most cases, if a crack occurs at certain solder points or on certain varistors, the check engine may illuminate, harsh shifting could result, or the engine may not start. In limited instances, if cracking occurs on particular solder points or varistors, the engine could stop while the vehicle is being driven.

There are three unconfirmed accidents alleged to be related to this condition, one of which reported a minor injury.

Steve St. Angelo, Toyota chief quality officer for North America, said, “This recall is an example of our commitment to standing by our products and being responsive to our customers. Our goal is to help ensure that Toyota drivers are completely confident in the safety and reliability of their vehicles.”

As part of the recall, the ECM on involved vehicles will be replaced at no charge to the owner. Beginning in mid-September 2010, Toyota will mail an interim notification to advise owners of this recall and the fact that they will receive a future notice when parts become available to complete the repairs. Owners who have previously paid for replacement of the ECM to address this specific condition should refer to the owner letter for reimbursement consideration instructions.

Detailed information and answers to questions are available to customers at www.toyota.com/recall and at the Toyota Customer Experience Center at 1-800-331-4331, Monday through Friday, 5 a.m. to 6 p.m., or Saturday 7 a.m. through 4 p.m. PDT.

Sure thing.  Putting this into practice on your website, consider try the following:

Place disclosures near, and wherever possible, on the same screen as the claim.

Use text or visual cues to prompt disclosure review.

With hyperlink use, make the link obvious.

Include complete disclosures on click thru pages.

Make disclosures on banner ads or the page to which the banner ad links.

Repeat disclosures on lengthy ads.

The final details, including creation of an agency to protect consumers in the financial marketplace and new regulations to reduce risk-taking by large banks and limit their trading of complex derivatives, were hashed out in a marathon 20-hour session that began Thursday morning.

This far-reaching legislation is about 2,000 pages long and I have not yet had the opportunity to see the Bill as agreed.  It is my understanding from talking with our lobbyist, Sante Esposito with Federal Advocates, that our auto financing exemption remained in the Bill.  I will confirm this after I have seen the actual Bill language.

The House and Senate are expected to approve the bill next week, meeting President Obama’s July 4 deadline for passage of his top legislative priority heading into November’s midterm elections.  Lawmakers named the Bill the Dodd-Frank Act after the two main architects, Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.) and House Financial Services Committee Chairman Barney Frank (D-Mass.).

Ford said no employees will lose their jobs as a result of the decision, which was ratified at a meeting of Ford’s board of directors this morning. It had been expected for some time; the brand has been losing market share in the United States since the 1990s.  ”Our total market share for Mercury is eight-tenths of a percent,” Fields said, noting that Ford’s mass market Blue Oval brand has increased its share of the U.S. market by more than double that amount since the beginning of this year.  In fact, he said, Ford’s success is a big reason for the decision, as it gives the automaker the financial resources it needs to wind-down Mercury without undermining its stated goal of being “solidly profitable” this year. Ford made $2.1 billion in the first quarter.  “It really allows the company to absorb the short-term cost of discontinuing Mercury,” he said.

The decision also is motivated by the need to invest more resources in Lincoln, which has struggled to hold its own in an increasingly crowded and competitive luxury marketplace.  “We’ve made a lot of progress with the Ford brand,” Fields said. “Now’s the time to do that with Lincoln.”  Derrick Kuzak, Ford’s head of global product development, said the automaker will deliver seven all-new or substantially refreshed Lincolns to showrooms over the next four years.

Included in that will be a new compact based on the same platform as the new Ford Focus. Mercury was to get a more upmarket version of the Focus, but those resources will now go to a Lincoln version that Kuzak said would be quite different from the Ford version.  “It will not be a badge-engineered version of another Ford product,” he said.

Lincoln also will get new, brand-exclusive powertrains, including an all-new V-6 engine. And all Lincolns, including the big Navigator sport utility vehicle, will be available with one of Ford’s fuel-saving EcoBoost engines as an option.

Dealers were informed of the decision during a webcast this afternoon. Some said they were “disappointed” in the decision.  “My phone’s been ringing off the hook,” said Bob Tasca, chairman of the Lincoln Mercury DealerCouncil.  He said the reactions he was getting from his members depended on whether they also owned a Ford store. Tasca said those who do “are OK” and believe the decision will make the company stronger.  As for the rest, he said “it’s a different call.”  “Some of them are going to go out of business,” Tasca said.

Fields said Ford will work with those dealers to combine their Lincoln franchises with a Ford franchise where possible. The rest, he said, will be compensated.  Henry Ford’s son, Edsel Ford, started the Mercury brand in 1938 to bridge the gap between Ford and Lincoln. Since then, there has too often been little to differentiate Fords and Lincolns.

But the brand has succeeded in attracting new buyers — particularly women — who would not otherwise have considered a Ford product. Now, Fields said the Blue Oval’s newest products are proving just as attractive to those customers. He noted that Ford’s share of the U.S. car market has increased by more than double Mercury’s total share since the beginning of this year.  George Pipas, head of sales analysis at Ford, said 53 percent of Mercury customers cross-shop Ford or Lincoln.

By:  Bryce G. Hoffman – The Detroit News

2.  Manual transmissions always get better fuel economy than automatics.

3.  It takes more fuel to start a vehicle than it does to let it idle.

4.  Vehicles need to warm up before they can be driven.

5.  As a vehicle ages, its fuel economy decreases significantly.

6.  Replacing your air filter will help your car run more efficiently.

7.  Aftermarket additives and devices can dramatically improve your fuel economy.

8.  Using premium fuel improves fuel economy.

9.  The EPA fuel economy estimates are a government guarantee on what fuel economy each vehicle will deliver.

10. All vehicles are tested for fuel economy.

For additional information and discussion on these items, visit www.fueleconomy.gov.

In a related matter that came out on Tuesday, the National Highway Traffic Safety Administration also discussed a recall involving the same Infiniti models. 

The NHSTA Office of Defect Investigations indicated Nissan plans to recall the same Infiniti units from the previously mentioned model years to correct a wire harness connecting the belt tension sensor and occupant tension sensor. Officials believe the control unit under the front passenger seat can experience relative movement, causing wear and oxidation of the terminals.