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My friend (buyer) tried to purchase a car from a private individual (seller). They agreed on a price, drew up a contract, and signed it. The buyer paid the seller the deposit they agreed on.
The seller is now feeling remorse or perhaps found a better price. Now the seller is refusing to sell the car or even return the deposit.
Can the buyer take any legal action against the seller? In case it matters: both agents are in the United States with international student visas.
Nope, the seller can't refuse "to sell". They have sold it.
They sold it right at the moment the contract was created (which, depending on where they were, would not necessarily even need to be in writing).
The deposit is irrelevant. What is relevant is that now your friend must pay the full balance, and the seller must hand over the car. If the seller does not do that, that is a breach of contract which can be fixed by going to the court and obtaining an order to hand the car over.
The seller has breached the contract, and may be sued accordingly. The court has a few options for how they may settle the dispute. They may enforce specific performance, which would force the car seller to uphold the contract and sell the car as specified in the contract. Specific performance is usually not a first choice for the courts, however, who tend to use other recourses like monetary damages instead. Specific performance is not often enforced in contracts involving services, employment, or personal property, unless the property is unique and cannot be obtained elsewhere. If a real estate seller or a rare art dealer reneges on a contract, for example, the courts may enforce it via specific performance, since the buyer has no other option for getting their end of the bargain. But if someone offers a common car for sale and reneges, the courts may not force the car to be sold - the buyer can simply buy a near-identical car for a similar price from someone else, and be no worse off.
If the court does not enforce the contract by specific performance, the aggrieved party can seek damages. In this case, it's not clear that there are any damages, however. So long as both parties wind up where they started, neither is any worse off and no one has suffered monetary damages. The car seller cannot keep the deposit, as they did not fulfill their end of the bargain. If there were specific provisions in the contract about timely delivery of the car and damages that would be suffered if not, the car buyer may be entitled to more than the return of their deposit, but that would be unusual for a common car sale.
See this page which provides the exact example of a car seller reneging on a contract as an example in which monetary damages is a more likely outcome than specific performance, and here is a specific case in which specific performance was initially granted but then reversed after a car sale fell through.
As other folks have mentioned, breaching the contract and returning the deposit might create a situation where there is no real recourse (both parties are whole), or recourse isn't particularly worthwhile (suing you over not selling me a car). Keeping the deposit and refusing to provide the item (the car) which you agreed to provide would likely make the issue criminal. Here's the relevant Colorado Revised Statutes:
18-4-401 Theft: A person commits theft when he or she knowingly obtains, retains, or exercises control over anything of value of another without authorization or by threat or deception... and A) intends to deprive the other person permanently of the use or benefit of the thing of value, or B) knowingly uses, conceals, or abandons the thing of value in such manner as to deprive the other person permanently of its use or benefit. [This would be specifically dealing with the theft of the deposit. In this case, the amount stolen would dictate the severity of the Theft charge. In Colorado, this could be anywhere from a class 1 petty offense (under $50) to a class 2 felony (over $1,000,000.]
18-4-409 Aggravated Motor Vehicle Theft: A person commits aggravated motor vehicle theft in the first degree if he or she knowingly obtains or exercises control over the motor vehicle of another without authorization or by threat or deception, and: A) Retains possession or control of the motor vehicle for more than twenty-four hours. [This would specifically be in reference to the theft of the vehicle that your friend has purchases. Your situation isn't clear on if your friend has title for the car and such, but if they could be determined to be the owner of the vehicle, then this could apply. Both MV Theft and Theft of the deposit cannot be simultaneously true, though. MV Theft starts as a class 5 felony.]
Your friend needs to call the police. Police involvement may potentially incline the other party to do the right thing here and either return the deposit, or provide the car. Obviously, I'd be concerned about taking on the car at this point for concern about it being tampered with as a form of retribution, so I would lean towards just taking back my deposit. The police may declare that the situation is civil in nature, but some knowledge of the statutes may be useful in discussing that issue with the police. If the situation is not able to be resolved at that level, your friend is going to want to go talk to a lawyer. A sternly worded letter from a lawyer threatening legal action might be more of a disincentive than the police. One could potentially do the lawyer first and then the police, if so inclined.
The buyer can bring a lawsuit against the seller to force the sale or to get money damages, with the remedies you would intuitively think are fair.
Criminal charges would probably not be possible, and the buyer can't get the car back from an innocent third-party purchaser.
Realizing these rights in practice would be hard to justify as a practical matter, however. The process would take a long time for the time horizon of an international student, the buyer couldn't recover attorney fees or damages for their own time lost to the litigation which would be substantial, and the other party is likely to be judgment proof.
A credible threat (basically playing chicken on a case that doesn't make economic sense in its own right) might produce action since it isn't economically worth it for either side to fight. But it is dicey.
The Substantive Law
This transaction is governed by Article 2 of the Uniform Commercial Code as enacted in Colorado (which is substantially similar in every U.S. jurisdiction) that applies to sales of tangible personal property (a category that includes motor vehicles, subject to special rules related to certificates of title).
The general rule in Colorado if the buyer wants to force the sale is Colorado Revised Statutes § 4-2-716 (Buyer's right to specific performance or replevin). It says:
(1) Specific performance may be decreed where the goods are unique or in other proper circumstances.
(2) The decree for specific performance may include such terms and conditions as to payment of the price, damages, or other relief as the court may deem just.
(3) The buyer has a right of replevin for goods identified to the contract if after reasonable effort he or she is unable to effect “cover” for such goods or the circumstances reasonably indicate that such effort will be unavailing or if the goods have been shipped under reservation and satisfaction of the security interest in them has been made or tendered. In the case of goods bought for personal, family, or household purposes, the buyer's right of replevin vests upon acquisition of a special property, even if the seller had not then repudiated or failed to deliver.
The official comment to this statute states:
The present section continues in general prior policy as to specific performance and injunction against breach. However, without intending to impair in any way the exercise of the court's sound discretion in the matter, this Article seeks to further a more liberal attitude than some courts have shown in connection with the specific performance of contracts of sale.
In view of this Article's emphasis on the commercial feasibility of replacement, a new concept of what are “unique” goods is introduced under this section. Specific performance is no longer limited to goods which are already specific or ascertained at the time of contracting. The test of uniqueness under this section must be made in terms of the total situation which characterizes the contract. Output and requirements contracts involving a particular or peculiarly available source or market present today the typical commercial specific performance situation, as contrasted with contracts for the sale of heirlooms or priceless works of art which were usually involved in the older cases. However, uniqueness is not the sole basis of the remedy under this section for the relief may also be granted “in other proper circumstances” and inability to cover is strong evidence of “other proper circumstances”.
The legal remedy of replevin is given to the buyer in cases in which cover is reasonably unavailable and goods have been identified to the contract. This is in addition to the buyer's right to recover identified goods under Section 2-502. For consumer goods, the buyer's right to replevin vests upon the buyer's acquisition of a special property, which occurs upon identification of the goods to the contract. See Section 2-501. Inasmuch as a secured party normally acquires no greater rights in its collateral that its debtor had or had power to convey, see Section 2-403(1) (first sentence), a buyer who acquires a right of replevin under subsection (3) will take free of a security interest created by the seller if it attaches to the goods after the goods have been identified to the contract. The buyer will take free, even if the buyer does not buy in ordinary course and even if the security interest is perfected. Of course, to the extent that the buyer pays the price after the security interest attaches, the payments will constitute proceeds of the security interest.
This section is intended to give the buyer rights to the goods comparable to the seller's rights to the price.
If a negotiable document of title is outstanding, the buyer's right of replevin relates of course to the document not directly to the goods. See Article 7, especially Section 7-602.
Specific performance, means ordering someone to go through with the sale of the car to the buyer. A "right of replevin" means a right to have a particular physical good turned over to the buyer pursuant to court order with supervision from the sheriff.
In this case, involving a particular used car which is the only car that the seller has would very likely be one that is "unique" or involves "other proper circumstances."
If the buyer were buying from a deal with seven identical new cars and the contract was to buy car #1 and not car #2, but there were no material differences between the two, the court would probably order that some identical car be sold to the buyer, but not necessarily the originally contracted car #1.
This assumes, however, that the car is still around an in the same condition. If the car is simply kept or given to someone else as a gift, this isn't a problem. The court can still award you the car. But if the car is sold to a "bona fide purchaser for value" who has no notice of the dispute between the buyer and the seller before the buyer gets a court order, the car can't be delivered to the buyer and buyer is limited to money damages.
Can the buyer take any legal action against the seller? In case it matters: both agents are in the United States with international student visas.
Yes, the buyer can take legal action against the seller. The citizenship status of the parties to the sale is irrelevant for this purpose
This isn't the only available remedy, however.
The buyer could also buy a comparable car, even if it cost more money, and sue for the extra price that the buyer had to pay plus the non-returned deposit, under Colorado Revised Statutes § 4-2-712 ("Cover" - buyer's procurement of substitute goods) which states:
(1) After a breach within section 4-2-711, the buyer may “cover” by making in good faith and without unreasonable delay any reasonable purchase of or contract to purchase goods in substitution for those due from the seller.
(2) The buyer may recover from the seller as damages the difference between the cost of “cover” and the contract price, together with any incidental or consequential damages as hereinafter defined (section 4-2-715), but less expenses saved in consequence of the seller's breach.
(3) Failure of the buyer to effect cover within this section does not bar him from any other remedy.
Or, the buyer could abandon the effort to get the actual car purchased and could instead sue for a return of the deposit paid under Colorado Revised Statutes § 4-2-712 (Buyer's damages for nondelivery or repudiation):
(1) Subject to the provisions of this article with respect to proof of market price (section 4-2-723), the measure of damages for nondelivery or repudiation by the seller is the difference between the market price at the time when the buyer learned of the breach and the contract price together with any incidental and consequential damages provided in this article (section 4-2-715), but less expenses saved in consequence of the seller's breach.
(2) Market price is to be determined as of the place for tender, or, in cases of rejection after arrival or revocation of acceptance, as of the place of arrival.
Conceivably, there could also be an award of damages requiring the seller to disgorge the excess price the seller obtained from selling the car to someone else for a higher price under Colorado Revised Statutes § 4-2-712 with the actual arms length sale price to a third-party providing the proof of the market price of that car without expert testimony.
In any of these cases, if the buyer prevailed in court, in addition to any money damages awarded, the buyer would get their litigation costs (e.g. filing fees, service of process fees, efiling fees, mediation fees, postage for court mailings, cost of printing exhibits for trial), but not their attorney fees.
With an attorney, the buyer would incur something on the order of $3,500 to $15,000 in legal fees and perhaps $100-$5,000 in court costs (the former of which couldn't be awarded in a money judgment, and the later of which could be awarded in a money judgment).
There are also no damages available for the time the buyer spends on the legal process, or for the frustration and emotional harm caused by the failure of the seller to go through with the sale. Only compensatory economic damages are available.
Generally speaking, it is up to the buyer to decide which of the legally available remedies to pursue (something called an "election of remedies").
Some, but not all, of these rights could be modified by the actual language of the contract between the parties.
Proof Required
To get these remedies, at trial, the buyer would have to prove with competent evidence to a judge that it was more likely than not that the contract was entered into between the buyer and the seller with specific terms, that the deposit in a specific dollar amount was paid and not returned, and that the seller breached the contract by not performing on the date set in the contract, or by repudiating the contract. Competent evidence that is more likely than not would also have to prove any money damages claimed. Sworn testimony from someone with personal knowledge of what is testified to, is competent evidence. So are written statements of the seller, or business records. But market value usually has to be proven with either price quotations (e.g. the Blue Book), or testimony from an expert witness on car values who testifies in person at trial and is disclosed prior to the trial.
Usually a writing showing the existence of the contract signed by the seller (or an email from the seller) would be required if the price was more than $500 or the closing date was set more than a year after the contract was entered into by the parties, but the payment of the deposit by the buyer and its acceptance by the seller, would be part performance of the contract which would eliminate the requirement for a written contract.
All evidence has to be presented at the trial. There is no retrial if a party is dissatisfied with the result and no coming back later to provide additional back up evidence. The judge must decide based upon what evidence is presented that day (probably in a trial that is one to four hours long depending upon the court's availability).
The Process
Usually, a claim like this would be brought in county court (Colorado's court of limited jurisdiction for civil claims) which is limited to amounts in controversy up to $25,000, in the county were the seller resided in Colorado, or where the contract was entered into by the parties if it was entered into in person. In county court, either the buyer or the seller could demand a jury trial, but this is almost never actually done because the amount in dispute rarely justifies the extra cost and delay of a jury trial.
A small claims court within county court (limited to $7,500) would be a bit simpler (without full formal rules of evidence and no possibility of a jury trial), and faster if available, but getting an order to deliver to car or fulfill the contract, rather than money damages, would be more challenging in that forum.
If the seller defaults after being served with process, it would take a month or so to get a court order from the date of commencing the lawsuit.
If the seller does not default, it would take an additional three to four months to get to trial in normal times (although the courts are backlogged now due to COVID in many places).
Once one gets a court order it could take one to several months to enforce it (or many more months if there is an appeal and the losing party posts a bond in the meantime). Before the trial was conducted in county court, the parties would be required to attend mediation with each other over the dispute presided over a third-party without the ability to enter a binding order, who tries to get them to reach an agreement (for a small fee).
Also, if the person against whom a money judgement is entered has no assets that are not exempt from creditors and no income, collecting that judgment might be impossible as a practical matter.
This timing could be pertinent to international students.
Also, keep in mind that winning in court doesn't mean that the money or car falls into your hands. The prevailing buyer get a court order that it takes further action to enforce.
A court order is a piece of paper that allows you to take legal means to collect a debt (e.g. garnishment of wages or bank accounts which involve further legal proceedings), an order to execute the title and turn over the car enforceable in contempt of court proceedings (and potentially punishable by imprisonment for non-compliance which involves another mini-trial), or an order of replevin (authorizing the sheriff to supervise the seizure of the car) together with an order directing the clerk of the court to execute the certificate of title or a replacement for it on behalf of the car owner (which also means more work for the buyer), as the case may be.
Of course, often a credible threat to sue, or receipt of papers commencing a lawsuit will cause the seller to negotiate a settlement that the buyer can live with, and the full court process will not be necessary. This often happens when a seller has no legitimate defense. Indeed, the court could award attorney fees against the seller or otherwise sanction the seller if the seller does not present a defense with any legitimate factual or legal basis at trial.
Even if someone takes the case to trial because there is no pre-trial settlement, there is often a voluntary resolution once the court has ruled rather than an insistence on formal enforcement of the judgment.
Theft Compared
The mere existence of a contract does not mean that the car has been sold. It is a contract (i.e. a binding promise) to sell the car in the future. The sale, in the case of a motor vehicle, takes place when the certificate of title is executed or the car is delivered (whichever happens first) See Colorado Revised Statutes § 4-2-401(2). The contract leading up to a sale is an agreement to sell the car in the future, not a transfer of title in a completed sale at that time.
Because failure to deliver the car is a mere breach of a promise to take action in the future, this is not theft. It is merely a breach of contract. The consequences for a breach of contract are much less serious than the consequences of theft, which would apply if the car had actually been sold, which include misdemeanor or felony criminal charges with potential incarceration and fines with the case brought at state expense and restitution and costs award as well and a criminal record, and the civil consequences of theft (an action with statutory treble damages for civil theft plus attorney fees pursuant to Colorado Revised Statutes § 18-4-405, and a right to recover the car even from a bona fide purchaser for value with no notice of the dispute).
But, if the seller took the buyer's deposit without intending to perform the contract at the time that the deposit was received, that would be a theft of the buyer's deposit.
Merely retaining the buyer's deposit without returning it, after initially intending to perform the contract when the deposit was received would only conceivably be theft (and even then it might be a stretch and would probably not cause the DA to bring charges) if the seller had no genuine and sincerely believed legal claim of right to keep the deposit (even if the claim of right to keep it was later found to be legally incorrect by a judge).
For example, if court found that the seller incorrectly but sincerely believed that non-citizen students didn't have a right to a return of a deposit, that would prevent a theft charge for retaining the deposit from succeeding.
Check the contract and see what it says. Specifically - is there a way for the seller to cancel? And is there a specific date for the sale of the car to be completed? Likely if they wrote it up it doesn't say anything about cancelling or breach and may not say specifically that the sale has to be closed by X time. Specific performance is not generally available in a situation like this, so it's just monetary damages. The return of the deposit is most likely, but are there additional damages? If so, what are they? Has the price of similar cars gone up?
They are both international students. I'd check with the school and see if they have any programs that can help. Some have student legal services or a mediation type program that you can use to help mediate a dispute and that would be less expensive and time consuming than court.
Next, have your friend write a clear letter to the seller. Keep it simple - your friend just wants to complete the purchase of the car, or get his $$ back: On X date we signed the contract for me to purchase your car for $X. Per the contract, I paid a deposit of $Y on [Date] by [cash/check/venmo, etc.]. You have so far failed to deliver the car to me pursuant to our contract and are now in breach of our contract. You have seven (7) days to complete the sale of the car to me as agreed. [if there are damages - your failure to complete this sale as agreed will cause damages in excess of $Y as the cost of an equivalent vehicle may exceed the agreed upon price for this car. In the event you do not complete the sale within 7 days, please return my deposit in full plus additional damages of $Y by [describe how to pay you back - cash, check, venmo]. If you do not complete the sale of the car or return my deposit in full and pay the additional damages by [date], I will file a claim against you in small claims court for the full deposit, plus additional damages and costs.
