Auto Repair Shop Agreements Explained
A common question that gets asked is, "What is an auto repair shop agreement?" The answer is simple; it’s a legal contract between a customer and a car repair dealer. It is created for one primary purpose: to govern the relationship between the auto repair dealer and the customer. Depending on how you dive deeper into the auto repair shop agreement form, it can function as a blank check for a car repair dealer or a binding legal protection for you and your car. For example, if you sign an auto repair shop agreement that has blank spaces asking for information about repairs to be done, it’s a blank check given to an auto repair dealer. In this case, it’s much better to leave the document as unsigned than to sign it with blank spaces. When you agree to parts that aren’t written in your auto repair space, the repair shop will expect payment. Most auto repair shop agreements contain legal language similar to this: "The undersigned relinquishes all property rights to the above-described vehicle to the above-describe service latest upon the making of retail and/or specialty sales of the above upon any article identified herein. The undersigned further warrants that the information set forth in this agreement is true and correct. Signs here." If you don’t agree with that , don’t sign the auto repair agreement.
It is important to note that an auto repair shop agreement is not a loan or credit agreement. It is a document you sign to make the repairs to your car binding on both the customer and the car repair dealer. But it doesn’t protect you when a car repair dealer loans you money or gives you 30, 60, or 90 days of credit to pay for repairs.
Our auto repair shop form is not a loan or credit agreement. We used the word "loan" instead of "credit" because a credit agreement includes the right to finance, while a loan obligates the customer to repay the money. A loan is usually paid in monthly installments, like say the monthly payment for a credit card, personal loan, or home mortgage, while a credit agreement lets you borrow your purchase price only. Unless you are borrowing money, you don’t need a signed agreement to make the transaction legal, especially when purchasing smaller items. However the same isn’t true for car repairs.
Main Elements of a Repair Agreement
An auto repair shop agreement is a contract between you and your shop of choice. Like all contracts, an auto repair shop contract should have the following terms:
The Description of the Service to be Provided
Every auto repair shop agreement should have a section that describes the service or services the shop will provide. The description should include the parts that are included in the service and the brand of those parts. For example, your brakes may need to be replaced. Thus, the agreement should specify that the brake pads will be replaced with [specific brand] brake pads. They should also specify that the rotor is to be resurfaced with either a specific brand or a minimum level of thickness before it is replaced. Your agreement should also describe the potential for additional services. For example, your brakes may need to have the rotor replaced. Since you didn’t request the rotor be replaced, either the shop will attempt to resurface your existing rotor and let you know if it isn’t possible, or the agreement should specify that the shop is authorized to replace the rotor if it is already too thin.
Additionally, since you may be getting multiple services at once, such as getting four new tires, the agreement should include a description of the service you are requesting, how it ties into other requested services, and a description of any increase in labor costs to combine the various services. For example, you may be getting new tires. Once the service department replaces your tires, they realize that your suspension needs to be replaced. That’s a separate service, but since it is caused by road use, the shop may lump that additional service into the original arrangement.
If you get a detailed estimate of the repair, this part will be easy to read. However, after the work is done, if the estimate did not have a work description, you may have a very hard time determining whether or not you received all of the included services.
Cost Estimate
Your agreement should include a cost estimate for the work. Usually, the repair shop will provide an estimate before you approve the work. However, if repairs take longer than expected or if there is some other reason for an increase in the cost, the agreement should have a section that provides for adjustment. The original agreement may state that the shop will contact you before proceeding with the additional work. Alternatively, the agreement may state that the increased cost is included in the agreement and that you authorize the shop to proceed without communication with you.
The Warranties
The agreement should list all of the warranties you are getting. It should describe both the parts used in the repairs and the work that was done. It is common for a shop to provide a 1- or 2-year parts and labor warranty. However, some parts do not have those warranties. Additionally, some shops will not provide any warranty on a service that they can’t guarantee. For example, many shops won’t provide a warranty on body work because they cannot guarantee it isn’t damaged by the road due to expansion and contraction of metals. Alternatively, any warranty you receive should be in writing and signed by the essential parties. Without a written warranty, it may be hard to prove that one was provided, particularly if you have a dispute later.
Finally, under this part, you should also be provided an explanation of any disclaimers in the warranty that limit your rights. For example, some warranties may have a provision in there that says "this is a warranty and not a guarantee." Generally, if you have a warranty, it is a guarantee, whereas if your agreement states "this is a disclaimer" rather than "this is a warranty," it is a disclaimer, not a warranty.
The Rights of the Customer
An agreement should include the rights of the customer. You should have a right to waive certain warranties, to receive some form of warranty of the services, and a right to custom or prescribed services. Your agreement should also expressly disclaim any obligations not covered by the agreement. Finally, the agreement should provide you the right to receive a copy of the agreement and the shop’s policies.
The shop should claim no right to be made whole if you do not pay your bill. In other words, the shop should not be able to say that if too many cars come in for service, causing your service to take longer or cost more, you cannot do anything to resolve the issue. On the other hand, you may not have the right to force a service if it costs more than the price you were given in the repair agreement.
Repair Agreements: Legal Considerations
When it comes to auto repair shop agreements, compliance with a range of laws is essential to avoid significant fines and penalties. These laws are often enforced by state attorneys general who investigate and prosecute unfair and deceptive trade practices; state departments of consumer affairs, which regulate candor in advertising; and local prosecutors who enforce local truth in lending and truth in lending laws.
Auto repair shop agreements must comply with the law of the state in which the consumer agrees to the terms of repair.
The following are illustrations of such requirements: The FTC’s Automotive Repair Rule and the Uniform Commercial Code (UCC) require certain disclosures that are particularly important when drafting auto repair shop agreements. For example, the UCC requires that when "service," such as the restoration, tuning, or refinishing of a vehicle, is part of the installment sale, the necessary items and services must be itemized in the sales agreement. As a general principal, the total cost of the auto repair and maintenance must not be deceptive. That means that the total price must be clearly set forth in the consumer’s contractual agreement with the repair shop. In addition, literally any new repair or maintenance work on a vehicle must be covered by the agreement.
The FTC’s Automotive Repair and Maintenance Rule requires auto repair shops to have their price for specific parts or services ready and available for any prospective customer. Because free estimates often link directly into the price for specific parts and services, they too must be available to consumers.
The Advantages of a Repair Agreement
The most significant benefit to the consumer with regard to using a contract with the repair shop is simple: knowing there’s a written agreement that outlines the conditions and details of the work to be performed on their vehicle. It eliminates guesswork and creates an opportunity for a discussion with the repair shop if a complication arises after a repair is performed that the consumer doesn’t anticipate, and it can often assist in the event a legal dispute ever arises.
For the repair shop, entering an agreement with the consumer: A comprehensive motor vehicle repair agreement outlines the expectations for both the customer and the repair shop, which helps everyone involved. A total repair agreement for the customer also serves to protect the repair shop from liability later on in cases where faulty parts or workmanship are not the cause of subsequent balanced issues or periodic maintenance that logically follows a repair.
Common Repair Agreement Problems
Despite the best of intentions, auto repair shop disputes are numerous and diverse. Although many of these disputes are handled without resort to litigation, parties are often faced with the need to sort out their differences. As frequently as insurance is a part of the resolution of such disputes, coverage issues can often precipitate further litigation. Frequently, litigated issues arise in the areas of coverage (or lack thereof) and whether loss or damage occurred during the applicable policy period. Many times, loss is attributable to vandalism, malicious mischief, theft and related matters, but insurers often argue that no coverage exists for "theft", since the thief was known to the insured, and was, in effect, a customer, i.e. , an "insured" in accordance with Coverage A. Matters of interpretation such as these often find their way into court before the parties finally settle or finalize their positions. Other matters are more susceptible to settlement or arbitration prior to litigation. These often involve issues of billing, subcontracted work, extra charges, parts availability, failure to notify the customer, statutory liens and related issues. Many of these problems are, in fact, susceptible to resolution if the service provider directly communicates with the customer and properly documents the facts and circumstances of the transaction. The best (and most cost-effective) approach to avoiding litigation is to have a properly drafted and comprehensive agreement that covers all possible issues.
Crafting an Effective Repair Agreement
Drafting a solid auto repair shop agreement requires careful attention to the issues discussed in the "Issues to Include" and "Legal Considerations" sections above. Again, though, repair shop owners should think about what they want the agreement to do, and then identify common situations that a written agreement may prevent, including:
· Binding arbitration for service disputes.
· A guarantee of repair costs up front.
· A limitation on a customer’s liability for repairs requested by someone other than the vehicle’s owner.
· The shop’s ability to sell tangible property if not picked up by a customer within a certain period of time.
· An absolute limitation of the shop’s liability to the customer to a certain dollar amount.
· An option to disclaim liability for consequential or special damages.
As for submitting the vehicle to the shop, the agreement should identify who is responsible for the security and safety of the car, etc. More specifically, when does the risk of loss pass to the customer? It would also help to set as the place for legal jurisdiction and venue the location where the vehicle(s) is/are located (or the county), or even better, the place of business of the repair shop. This not only secures the shop’s choice of law, but also gives it jurisdiction over customers who move to a different state and choose not to defend lawsuits filed in the shop’s home state. The same can be said of waivers of jury trials and binding arbitration.
Repair Agreement Template Examples
There are many places online where auto shop operators can find free repair shop agreement templates. Several trade organizations for auto repair operators provide links to free repair agreement templates on their websites. For example, the Automotive Service Association (ASA) provides several downloadable agreement templates on its website with standard print sizes of these contracts identified as 12 or 8 point, depending on the document. As these agreement templates are located online, they are easily downloaded or printed directly from the document. Websites that offer these templates also direct users to legal resources or guidelines to help operators create customized agreements, and some even provide information on how to write contracts. In addition, these agreement templates often provide suggestions on how the operator can download, print, and fill in the agreement template. For example, the ASA repair shop agreement template recommends using a size 8 font for background information in the agreement, which is generally smaller than the font size in the rest of the contract. The template explains that this font size is harder to read, but desired because it keeps the background information discrete and less disputable. However, despite having some customizable elements, it is important for auto shop operators to understand their situation and business and legal needs before using an agreement template. These needs may differ based on the services and products provided by the company and how they are provided to the customer. Other factors may include how many locations the auto shop has and whether or not there is an affiliate agreement between other locations . In any case, because the templates are generic and used by multiple repair shops, it is highly likely that they will either omit or inadequately handle the operator’s needs. Therefore, the agreement will need to be heavily customized to meet the operator’s needs, which would require a comprehensive review of the entire agreement. The operator should also note that, while a template may recommend downloading a copy of the agreement and filling it in by hand, contract modifications are most effective when they are made electronically. For instance, typing in changes allows the operator to create a unique document that can be easily identified by the customer. When alterations are made by hand, the operator runs the risk of having the modified document created and signed by the customer interpreted as an enforceable agreement. Before completing any download from the internet, the operator should execute the contract as recommended by the template. For example, the ASA repair shop agreement template states that the last signature needed to complete the agreement should be dated, but an auto shop operator selling multiple vehicle service repairs cannot possibly get this last signature until all of the work is completed. The operator may need to have two different repair agreement documents; one that is executed when the customer drops off the car and then another that includes all parties’ signatures after all the work has been completed. A customized agreement that meets the shop owner’s needs is an excellent way to ensure the repair shop is legally protected against common disputes. Having a strong, comprehensive repair agreement in place can mean the difference between an auto shop winning and losing its next lawsuit.