Wheeling and dealing the legal way

Tichawana Nyahuma
Once upon a time you sold your vehicle through a dealer and you were paid in full as per the agreement less the dealer’s commission of course.

Congratulations! But did you ever get to know the person who bought your car or the real price he paid? If you did not get to meet the purchaser, do you know why the car dealer went to town making sure you never got into contact with that person?

Or is it that you did not give a hoot as to whom the purchaser was since after all, the money was now safely in your bank account and you, therefore, did not care less?

These questions although they apply to one who would have sold his motor vehicle through a car dealer, they are also relevant, with the necessary adjustments, to the one who would have purchased the same motor vehicle.

What follows are answers to some of these queries.

The commandment that governs the relationship between the parties to the above scenario is the law of agency.

It is a branch of and has its roots in the law of contract. Just like any other contract, the law of agency has its essential elements that validates it.

This discussion is centred on the law of agency in so far as car dealers in Zimbabwe are concerned.

However, before I lay bare the bones that constitute the law of agency, I will say something about the law of contract in general.

By and large, a contract is a written or oral agreement that is made freely and voluntarily between persons who have the legal capacity to enter into that type of contract.

In addition, there has to be a thing or a cause and lastly there must be a price, technically called the consideration.

When all these ingredients are present and lawful, the contract is complete and legally enforceable.

However, if one of the elements is absent or illegal, then the whole is incurably bad and consequently unenforceable.

An illustration may be helpful.

If person “A”, being of full legal capacity, offers to sell a pangolin, cocaine or some other contraband to another, also of full legal capacity, person “B”, who accepts the offer and takes delivery of the goods, that transaction is illegal at all times and for all purposes.

If “B” later breaches the “contract” by failing or refusing to pay the price, “A” is unlikely to succeed if he sues “B” for payment of the purchase price because “B” can by law argue that the transaction was illegal and therefore unenforceable.

Another example is that of a person who pays money in pursuit of an illegal act such for obtaining a driver’s licence corruptly.

If the person to whom the funds are paid fails to deliver, although he can be successfully prosecuted for criminal conduct, he cannot be ordered to restitute the person who lost out in the deal because the whole transaction was illegal from beginning to end.

If a contract is unenforceable for illegality, no party to that deal can get redress for loss in court.

Courts are not there to protect or promote illegalities primarily because they are created to guard against exactly that kind of conduct.

It is contrary to law and in conflict with public policy.

So if you suffer prejudice out of any illegal shenanigans, you have to feel the pinch of your shoe quietly.

You made your bed, lie in it.

However, sometimes courts seek justice or equity between the parties in the event one of them is unjustly enriched at the expense of the other by ordering that the person who was disadvantaged be repaid something even though the loss occurred when they were both in pursuit of an illegal enterprise.

That is an exception rather than a rule.

The starting point is always that an unlawful agreement is not capable of enforcement in a court of law.

Coming back to the law of agency; there are several types of agency agreements.

The most common are those that involve real estate companies, insurance brokers, travel agents and so on.

A contract of agency although it is dual in nature, it being between the principal and the agent only, operates as a sort of tripartite arrangement.

The principal, who is the owner of a thing or the provider of a service, enters into a contract with an agent in terms of which the principal gives authority to the agent to facilitate or negotiate contracts between the principal and third parties for the principal’s benefit.

Consequent upon that contract, both the principal and the agent will have duties and obligations towards each other and it is to those that I now turn.

The very first duty that falls on the agent is to perform his side of the contract.

In the case of a car dealer, as he will be acting on behalf of the owner, that is to say his principal, the agent must locate a buyer and conclude a contract of sale.

The contract will be between the principal and the purchaser of the motor vehicle, the 3rd party. When he has done so, he must deliver the purchase price to the principal and his role is at an end.

What is critical is that in all his dealings with the transaction, the agent carries what the law calls a fiduciary duty.

This entails that the agent must be completely candid with his principal and disclose all information associated with the matter including the identity of the purchaser and the actual price that would have been paid.

The agent is obliged to account to his principal of all he would have done.

He is not to make any secret profits out of the deal. If he should do so, then he would have breached the fiduciary duty that is cast upon him and may be dragged to court by his principal for the disgorgement of the undisclosed profits that he would have made.

On his part, the principal has the duty or obligation to pay his agent the agreed commission when he has performed his side of the contract.

With respect to persons who buy motor vehicles through car dealers, there will not be any antecedent contract as such between the purchaser and the car dealer.

The car dealer merely facilitates conclusion of the contract and payment of the price.

But what is the situation on the ground? Are car dealers in Zimbabwe dealing with their principals’ vehicles as dictated by the law of agency?

It is said that what has been defined above is not exactly what happens when a car owner instructs a car dealer to sell his vehicle on his behalf.

It is claimed that the car owner will simply agree with the dealer on the price as well as the commission to be earned by the dealer upon the successful sale of the motor vehicle.

Left alone with the car, the dealer will identify a buyer and clandestinely put a mark-up on the price he would have agreed with his principal.

When the car is sold, the dealer will quietly pocket the profit and thereafter also deduct his commission from the price he would have agreed with the owner.

Call that double dipping

Although the principal goes home happy, he will in fact have been defrauded by his agent and may have recourse in court in the event he has proof that the agent made and concealed a profit.

It is also alleged that some “good” dealers will not insist on any commission from the seller when the car is sold.

They will be content to just live with the mark-up. In such a case, it is doubtful if the principal can be assisted by a court because the dealer can simply argue that he bought the car himself.

In any event, if the dealer makes the declaration that he shall not be paid a commission upon the sale of the motor vehicle, it can be argued that the principal consented to the agent putting up a mark-up.

Accordingly, therefore, the question of a “secret” profit will not arise.

If the assertions that I have brought forth in this discussion are something or anything to go by, then it is submitted that this is a serious indictment on the whole car sales industry in this country.

What then is the way forward?

I am of the view that perhaps the responsible authorities might want to ignite debate on a possible piece of legislation that is designed to regulate the whole car sales business in our country.

Is this a feasible route? I don;t have the answer.

 

Tichawana Nyahuma is a researcher and a lawyer who writes in his personal capacity. Feedback: [email protected]

 

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