March 18, 2025
By Barrie Charapp Beaty
Charapp & Weiss, LLP
bbeaty@cwattorneys.com
For the last few months, we have written about customer complaints and the processes that the dealership should have in place to handle them. Dealers often request a form release so they can protect themselves from litigation when compensating a customer and resolving some of those customer complaints. But a release is protection only if it is effective. If a court finds it to be unenforceable, what good is it?
A release is a contract. It requires (1) an offer – the terms on which one party will settle a claim; (2) acceptance – the terms to which the other party agrees; and (3) consideration – some value.
Depending on the circumstances, compensation to a customer may not necessarily equal consideration. If there is no consideration, a release is not effective.
Below are sample situations that dealers may face with consumers. Test your knowledge as to whether the release will be effective or ineffective. Check your knowledge with the Answers.
Situation #1:
To make the deal and purchase the car, customer negotiated all-weather floormats into the price of the car, for which the dealer gave the customer a "we owe." After dealer installs them in the vehicle, dealer asks customer for a release of any claims that may arise from the deal since the customer has been satisfied. Is the release effective? Yes or No?
Situation #2:
Under the spot delivery agreement, if the dealership cannot arrange financing with a third-party finance source it may terminate the deal and require that the vehicle be returned. Because the dealer could not get a potential assignee finance source to approve the deal, it requested return of the vehicle. The customer returned it in the same condition as it was delivered with normal mileage and requested return of the deposit. The dealer wants a release. Is it effective? Yes or No?
Situation #3:
A customer has a 30-day, 1,000 mile warranty. The customer returns with 1,200 miles on the odometer claiming a problem arose at 900 miles. Customer requests that the dealer do the repair, which Dealers agrees to do, but the dealer wants a release. Is it effective? Yes or No?
Situation #4:
The customer visits the dealer for a manufacturer's recall repair. The repair is time consuming, and the dealer has had problems with other customers over the time to complete the repair. The dealership wants the customer to sign a release. Is it effective? Yes or No?
Situation #5:
The dealership terminates an employee. The employee demands their final paycheck. The dealership pays according to the pay plan, but the dealership is worried about a lawsuit because of the employee's threats. The dealership wants a release. Is it effective? Yes or No?
Situation #6:
The dealership terminates an employee. The dealership cuts a final paycheck under the pay plan. the employee disputes the paycheck contending that they should be paid on two other deals. To avoid further trouble, the dealer complies and cuts a supplemental paycheck. The dealership wants a release. Is it effective? Yes or No?
Situation #7:
The dealership terminates an employee. She is a 47-year-old salesperson. She contends she was terminated because of her age. The dealership agrees to provide one month's severance so she can find new employment. The dealership wants a release. Is it effective? Yes or No?
As we discussed, a release is a contract. It requires offer, acceptance, and consideration.
Form releases are designed to be used in a situation where your provide something of value to a customer to resolve a dispute. If you are going to give something of value that you do not already owe, make sure it resolves the matter. Get a release so that the customer cannot take what you have offered and continue anyway with a lawsuit or some other complaint.
Here are some critical issues to consider when preparing a release:
- Keep it simple. Settling sometimes involves salesmanship to convince a customer to save the expenses and time of a lawsuit or a governmental complaint. The consumer may reject a settlement if it involves a multi-page document filled with boilerplate and legal jargon.
- Any dispute between a car dealership and a customer will probably involve a vehicle. The vehicle should be described so that there is no misunderstanding about the subject of the dispute.
- It is important that you fully describe the basis for the dispute. You want a release of any claims that could arise from that incident, so make sure it is accurately described.
- Describe clearly what value the dealership will be providing to the customer. Make sure it is not something the dealership already indisputably owes. That extra value is the consideration, key to making the release effective. If the customer is to provide anything, that should also be listed.
- Make sure there is specific language in the document noting what is being provided is in full satisfaction of the customer's claims and that the customer is releasing any claims against the dealership. Be clear about what the customer is giving up: (i) the right to file a lawsuit, (ii) the right. to file with a complaint-handling agency, and (iii) the opportunity to disparge the dealership.
- If the customer's vehicle is co-owned, make sure both owners sign the release.