Photo by Julian Hochgesang on Unsplash
In the 1980s, Volkswagen UK ran a very successful marketing campaign using the slogan “If only everything in life was as reliable as a Volkswagen.”
A link to one of the VW adverts regularly shown on UK television can be seen below:
Fast forward more than 30 years later and, globally, VW is still dealing with the fallout from a major scandal which was exposed in September 2015. The American Federal Government Agency, the Environmental Protection Agency (EPA) discovered that VW had installed software in many of its models which had the purpose of giving much lower emissions readings. This was an attempt by VW to beat strict environmental pollution controls by giving the impression that its cars and vehicles were “greener”. Consumers are much more aware of their carbon footprint nowadays (think of concerns, for example, about single use plastic) and car manufacturers are not immune to these types of demand for environmentally, sustainable products and services.
Essentially, it is alleged that VW deliberately misrepresented data about the environmental impact of its vehicles (principally in relation to its diesel models) in a cynical attempt to increase sales. Environmentally minded consumers may well have been heavily influenced by the favourable presentation of emissions data when considering whether to purchase a new diesel vehicle.
In Chapter 2 of Introductory Scots Law, I discuss the issue of misrepresentation as a factor which can invalidate a contractual agreement. In particular, I relate the VW scandal to this area of contract law.
If one party (e.g. a seller of goods) makes exaggerated or false claims (the misrepresentation) about a product in order to encourage or induce a buyer to enter the contract, the buyer may be decide to treat the agreement as voidable. This will mean that the buyer may have the right to the following remedies:
- Rescission (or cancellation) of the contract; and/or
- An award of damages
Critically, the innocent parties must be able to demonstrate to the courts that the misrepresentation actively encouraged them to enter contracts. It is not enough to say that a false statement has been made therefore the contract should be cancelled. The false statement must have influenced the decision of the innocent parties to enter into a legally enforceable agreement.
In Scotland, three types of misrepresentation have been recognised by the courts since the decision of the House of Lords in Hedley Byrne & Co Ltd v Heller and Partners Ltd [1964] AC 365:
- Innocent (no intention to deceive/an honest mistake)
- Negligent (a statement carelessly made)
- Fraudulent (a deliberate intention to deceive)
In the United States of America, the latest twist to the scandal has emerged with the Securities and Exchange Commission taking VW to court in relation to allegations that the company defrauded investors. This is a bitter blow for VW which has already settled many of the claims brought by US consumers.
Across the UK, however, British customers of VW are also being encouraged to sign up for a class action against the company by some leading UK law firms.
It would seem that the advertising slogan from the 1980s is now a very hollow one in 2019.
As the VW scandal demonstrates, a misrepresentation (whatever its nature) can be very costly.
A link to an article about the US legal action against VW can be found below:
US sues VW for “diesel scandal fraud”
https://edition.independent.co.uk/editions/uk.co.independent.issue.160319/data/8825131/index.html
Related blog article:
Dieselgate (or truth through engineering or vorsprung durch tecknik)
Copyright Seán J Crossan, 16 March 2019
Seán Crossan's Scots Law 