ACME Car Rental
Facts
ACME Car Rental purchased a total of 1,000 Volkswagen model cars at a total purchase price of $17,000,000 from the Volkswagen Company. It then sold some of the cars to individual consumers and other smaller rental fleet companies. However, unknown to the purchaser, Volkswagen Company, the vendor, had fitted the cars with an ‘emissions defeat device’ which is software that was meant to cheat on the rate of emissions of the cars. This was in a bid to conform to the relevant laws and regulations in place. Though these vehicles were able to pass the emissions tests done by the respective States, they failed the retest that was conducted by the Department for Motor Vehicles.
Issue
One of the issues that arises for consideration and consequent determination is the damage that has been suffered by the purchaser, ACME Car Rental. In order to determine this issue, regard need to be had to the relevant law governing such a contract.
Rule
It is an elementary rule of contract that bargains arrived at between the buyer and the seller in any contractual agreement need to be adhered to, failure to which the party in default is liable for breach of contract. In our instant case, it appears that the seller, Volkswagen breached the contact or agreement in as far as it misrepresented that the cars it sold were fitted with properly working devices that were meant to cut the emission/pollution to the atmosphere.
Application
Applying this contractual rule to the matter at hand, it would appear that the seller fraudulently misrepresented to the buyer that the vehicles sold were proper and were fitted with correct devices when it clearly knew they were not. The effect of this misrepresentation is that the buyers bought the vehicle at a price that was above the actual value of the vehicle since the misrepresentation led to an enhancement of the value of the vehicles. The buyer bought the vehicles presuming they were what they were not- to wit green cars meant to fight environmental damage. In addition, the seller is liable for breach of a contractual agreement as against the seller, ACME Car Rental.
Conclusion
In the circumstances, it is safe to conclude that the seller, Volkswagen, is civilly liable to the seller, ACME Car Rental in contract for misrepresentation due to the damage suffered. ACME Car Rental has suffered monetary damage for buying cars at a lower quality that it had presumed. It has further suffered damage arising from the loss of goodwill as against its customers against whom it sold the faulty cars, a damage that also ought to be valued and consequently repaid.
Issue
The second issue that comes up for determination is the remedies that ACME can assert as against Volkswagen arising from the above conclusion.
Rule
Again, the general remedy in contract law for breach of a contractual agreement is payment of liquidated damages, which are a function of the valued loss ensuing from the breach. This is because the contractual remedy of damages seeks to place the party at loss to the situation he would have been had the contract as agreed materialized.
Application
The import of the above rule on the aforementioned issue is that ACME has a remedy as against Volkswagen in form of monetary damages representative of the actual loss occasioned that is commensurate to the depressed value as a result of the defective emission device. The loss of value as a result of the reduced value of the vehicle caused by the presence of the emissions defeat device ought to be assessed so as to give an indication of the claim for damages that ACME can assert as against Volkswagen. What is more, ACME may as well lay a claim as against Volkswagen for the resulting loss of goodwill from its customers. In contract law, damages may be claimed against loss of future profits that may be occasioned by an injury that may be irreparable in nature that is caused by the act of another. It is arguable in this case that the faulty cars sold to ACME by Volkswagen which it in turn sold to its customers-both individual customers as well as smaller rental fleet companies, reduced its credibility and goodwill thus reducing its market share. An estimation of this loss of goodwill or market share may as well be assessed and a claim asserted subsequently against Volkswagen. Other remedies include restitution of the monies paid and the recalling of the vehicles, as well as a repair or fixing of the defects in the vehicles at the cost of the seller.
What is more, the ACME may as well as seek an injunctive relief as against Volkswagen restraining the latter from selling anymore of its defective vehicles. An injunction would serve the function of preventing any further distribution of the vehicles. In addition, the ACME could also avail itself of a remedy, although public law in nature, of reporting Volkswagen to the regulatory authorities for flouting the law for relevant disciplinary action. This could also be coupled with a demand that Volkswagen recalls all the faulty vehicles it had sold from the customers and recompense the customers in full.
Conclusion
In view of the above, it can be deduced that ACME may claim for liquidated monetary damages commensurate to the loss suffered in terms of the lost good will and market share as well as the depressed value of the vehicles owing to the misrepresentation. ACME can also claim damages for fraudulent misrepresentation in the matter.
Issue
The final issue for consideration is the remedy that I would recommend to ACME to pursue as against Volkswagen and the reasons thereto.
Rule
As discussed above, contract law and the law governing product liability offers various remedies that are either common law or equitable in nature. Some of the equitable remedies in contract law include: restitution, specific performance, and injunction.
Application
In line with this, I would urge ACME to pursue the remedy of restitution of their money in exchange of the vehicles. This would necessarily entail a recalling of all the faulty vehicles sold by Volkswagen. As such, ACME would thereby recall all the vehicles it had sold to its customers and return them to Volkswagen for proper vehicles for full recompense of the purchase price. This is because such a remedy would serve not only the function of restoring the financial loss suffered, but also serve to repair the loss of goodwill and credibility suffered by the company as against its customers. Only such an option would help restore the much needed confidence to the customers, coupled with an apology for the misfeasance.
Conclusion
In light of the foregoing, ACME is well advised to pursue the equitable claim of restitution that would help put it back in the situation it would have been, and help maintain its image. The monetary damages payable by the seller may not be enough to redeem its goodwill which is key to its future as a going concern.
References
Fruehwald, S. (2009). Reciprocal Altruism as the Basis for Contract. University of Louisville Law Review, 489.
Goff, J. (2002). The Law of Restitution 6th edn. London: Sweet & Maxwell.
McKendrick, E. (2005). Contract Law - Text, Cases and Materials. Cambridge: Oxford University Press.
