Buyers Unaware – Pitfalls of Sales to Elderly Customers
By W. Kirby Bissell
As the US population ages and modern medicine continues to increase life expectancies (save for a slight downturn this year due to a once in a millennia pandemic), dealers can expect to encounter older car-buyers more frequently. And, while these consumers generally represent ideal customers, usually with strong credit scores and ample funds for a down payment, catering to these individuals requires being mindful of specific pitfalls that may arise with this population.
The basis for any commercial transaction, whether the sale of a new motor vehicle or anything else for that matter, is a meeting of the minds to reach an agreement or contract to memorialize the transaction. But, in order for a meeting of the minds to occur, a lesser-known but vitally important aspect must be present, and that is the capacity of the individual to enter into the contract in the first place. The capacity to enter into a contract requires that the individuals understand and appreciate the implications and scope of the agreement that they intend to make. Complicating matters, there are no set “rules” that determine whether an individual has or lacks the requisite capacity to contract. And, many states have now enacted laws that attempt to protect elderly-individuals from allegedly predatory behavior by aggressive businesses, providing additional ammunition to attorneys considering lawsuits. In some states, these statutes include treble damages (i.e., actual damages multiplied by 3) and an award of attorney’s fees and costs to prevailing parties.
Generally, adults are presumed to have the capacity to enter into contracts. Common-law exceptions to this rule apply to people who are intoxicated at the time of contracting or otherwise have a mental illness or disability that prevents them from comprehending the consequences of their decision. The law also now recognizes that elderly individuals suffering from cognitive decline can also lack the capacity to contract. The trouble is there are no bright-line rules to determine whether an individual has or lacks capacity to contract (absent a court order declaring he or she incompetent). Thus, dealerships need to make staff aware of this issue and provide employees with directions on handing transactions with elderly consumers. In addition to risking a lawsuit for exploitation of the elderly in the states that have passed such laws, if it is later determined that an individual lacked the capacity to contract at the time of the agreement, the entire transaction is void ab initio. This creates quite the headache when you have sold someone a new vehicle, already placed the financing, paid off their trade-in, and resold the trade-in, only to have to unwind the transaction entirely. So, avoiding these issues before finalizing the sale can save substantial headache and costs down the line.
First, note that the normal strictures for avoiding age-related discrimination in the employment context do not apply to engaging in an arms-length commercial transaction. Thus, there is no legal issue with scrutinizing elderly purchasers more closely or requiring additional information to prove their capacity to contract. But, doing so without offending the potential consumer requires a delicate balance. Second, instruct employees to pay attention for signs of cognitive decline throughout their dealings with elderly individuals. These might include elderly consumers repeating themselves, losing their train of thought during conversations, being forgetful, being overwhelmed in making other routine decisions, or being accompanied by a caregiver when visiting the dealership. Third, if there are signs of a potential problem, bring up the subject delicately and ask for specific proof to contract, such as an additional written document evidencing the capacity to contract, a family-member co-signor vouching for capacity or a power of attorney authorizing contracting on the individual’s behalf. Dealerships should consider training new employees on these potential issues and/or adding policies to their employee handbooks addressing transactions involving elderly individuals. While taking these steps may make the sale a bit more difficult, avoiding the expense of having to unwind a transaction with a person who lacked mental capacity after the fact is likely worth it.