How Signing An Auto Sales Contract May Allow an Auto Dealer to Get Away with Fraud

A man in suit and tie with his arms crossed.

By: Robert J. Nahoum


You’ve decided to take buy a new car.  Like most people, you don’t have enough cash on hand to buy the car outright so you are planning to finance the purchase of your new car.  You get to the dealership, find the car you want and negotiate a price.  You step into the finance office and, one-after-one, you sign a pile of papers. You get handed an envelope full of the documents you signed and drive home in your shiny new car.  A month later you are stunned when you get a bill from the bank and see that your monthly payment is way more than you agreed.  You take a closer look at the papers you signed and realize that the deal is dramatically different than to what you agreed.

What now? Can you sue the dealer?


Auto fraud refers to deceptive and fraudulent practices in the auto industry that can result in financial harm to consumers. Auto fraud lawsuits are legal actions taken by consumers against auto dealerships, lenders, or other parties involved in the sale or financing of a vehicle, alleging that they engaged in fraudulent or deceptive practices.

There are several types of auto fraud lawsuits, including:

Odometer Fraud: This occurs when the odometer reading on a vehicle is rolled back to make it appear that the vehicle has fewer miles than it actually does. This can result in the consumer paying more for a vehicle than it is worth.

Hidden Damage: This occurs when a seller fails to disclose prior damage to a vehicle, which can include anything from minor cosmetic damage to major structural damage that could affect safety or performance.

Financing Fraud: This occurs when a consumer is misled or deceived regarding the terms of a vehicle loan or lease, including false advertising, bait-and-switch tactics, unwanted addons and failure to disclose all fees and charges resulting in the consumer paying more than they were led to believe.

Auto sales agreements are legally binding contracts between parties that outline the terms and conditions of their agreement. The law expects that the parties to a contract read and understand the contract before signing it. This is known as the doctrine of “caveat emptor†or “buyer beware,†which places the responsibility on the parties to understand the terms of the contract they are entering into.

When a person signs a contract, they are assumed to have read and understood its contents. This means that they are bound by the terms of the contract, even if they did not fully comprehend the terms at the time of signing. Therefore, it is essential to read and understand the contract before signing it to avoid any future misunderstandings or legal issues.

In some cases, a party may claim that they did not understand the terms of the contract they signed. However, this claim is generally not accepted as a defense unless there is evidence that the other party intentionally misled or deceived them into signing the document.

The term “parol evidence†refers to any extrinsic evidence (outside the written contract) that is introduced in a court of law to help explain or interpret the terms of a written contract. In other words, parol evidence refers to any oral or written communication that occurs before or during the formation of a written contract.

The general rule of evidence law is that parol evidence is not admissible to vary, add to, or contradict the terms of a written contract. This rule is known as the Parol Evidence Rule, and it is based on the principle that the written contract represents the final agreement between the parties.

However, there are certain exceptions to the Parol Evidence Rule including fraud.  When a contract is induced by fraud, parol evidence can be used to prove the existence of the fraud, mistake, or duress.  What is crucial to understand is that in order to get around the parol evidence rule, the fraud cannot be that the contract differed from the oral agreements, but that the fraud was in getting the buyer to sign the contract in the first place.  This is commonly referred to as “fraud in the inducementâ€.

The most common examples of fraudulent inducement in the context of auto sales are during the use of an electronic signature.  The finance manager hands the buyer a tablet or a signature pad and the buyer is instructed to sign, the electronic signature should then be affixed to the contract.  However, if the finance manager does not show the buyer the documents he or she is supposedly signing, or of the screen on the finance manager’s computer is hidden or obscured, the buyer may have been fraudulently induced into signing an agreement that contradicts the oral promises made.  This fraudulent inducement opens the door the use of parol evidence.


First off, you should never, not ever, sign a contract without reading it to make sure it is in line with what was promised.  If you think a car dealer has fraudulently; induced you into signing an agreement that differs from the oral promises made, call an experienced consumer protection attorney familiar with auto fraud to discuss your options.

The Law Offices of Robert J. Nahoum, P.C
(845) 232-0202

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