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I am frequently asked by dealerships whether they are obliged to release a car back to a customer who has not paid for the costs of repair or service.
Customers regularly take their cars into their local franchised dealership or repair shop (which I shall refer to generically as a "garage" in this article) for servicing or other maintenance. Prior to accepting any vehicle into its custody, a garage should provide a copy of its contractual terms and conditions to its customers setting out the terms upon which they are prepared to undertake the works required. Wherever possible, the garage should ensure the customer signs the terms and conditions.
The garage’s terms and conditions should include, as a minimum, clauses that state:
If the customer is not given a copy of the garage’s terms and conditions before the garage agrees to repair the vehicle, those terms and conditions are highly unlikely to apply. (A lack of a signature is not fatal to the garage’s claim if it can show that the customer was given the terms and conditions and agreed to them beforehand.)
What if there is no contract between the garage and the customer?
If there are no terms and conditions (or they were not otherwise agreed), the garage cannot rely on those terms. However, the garage can still rely on the law of “bailment”.
A bailment comes about when the garage voluntarily accepts possession of a customer’s car (or van or bike or any other type of vehicle) such as when a customer brings his car in for repair. English law does not require a contract between the garage and its customer for a bailment to arise.
If the garage carries out repairs and this results in an improvement to the car (as opposed to its current condition merely being maintained), the garage is entitled to retain possession of the car until the customer has paid for the repairs (this entitlement being known as a “lien”). Once the customer has paid, the lien is lost and the garage must return the car.
Therefore, all things being equal, if a customer brings a car to a garage for repair, demands its return after it has been repaired but refuses to pay for the works, then, even if the garage’s terms and conditions don’t apply (for whatever reason), the garage still has the right to retain possession of the vehicle until the customer pays for the repairs by reason of the law of bailment.
What if the customer doesn't pay?
Unless the garage’s terms and conditions state that it may charge to store a customer’s vehicle and the customer has agreed to those, the garage is unlikely to be able to charge for storage (save for in certain exceptional circumstances – see below).
However, even if there are no terms and conditions, the garage’s “lien” (see above) means that, if there is no dispute about the cost of the repairs, the garage can sell the car to recover the money owed provided the garage has first:
If the garage sells the car and the proceeds of sale exceed the sums owed, those excess proceeds must be returned to the customer.
If the garage sends a notice and the customer replies indicating that he wants the vehicle back but is not prepared to pay for the repairs, the garage can only sell the car if they first obtain a court order (at which point you should seek legal advice).
Can a garage recover storage charges?
Generally speaking, storage charges aren’t recoverable unless they were agreed in the terms and conditions. However, there is one main exception to this. If the garage incurs costs which go beyond mere storage, for example if it incurs costs preserving the condition of the car while it is in the garage’s possession, then storage charges may be recoverable because the customer benefits from the preservation of the car. In these circumstances, the garage is likely to be entitled to recover its reasonable expenses. If the garage is unable to agree the level of those storage charges with its customer, one of the parties may have to issue legal proceedings to determine what, if anything, is owed for storage.
Tom Maple is Head of FSP’s Automotive Team and regularly advises vehicle manufacturers and dealerships alike.
This document is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.