Pub. 7 2017 Issue 4

8 AUTOMOBILE DEALER NEWS ILLINOIS www.illinoisdealers.com COUNSELOR’SCORNER Dealer’s Use of Non-OEM Parts and Accessories – Important Factors BY JULIE CARDOSI , LAW OFFICE OF JULIE A. CARDOSI, P.C. I n the wake of recent bulletins issued by at least one automotive manufac- turer concerning the use of non-OEM parts and accessories in the repair of that manufacturer’s vehicle brands, dealers should review their internal prac- tices and policies, and underlying issues, associated with the use of non-OEM parts and accessories in vehicle repairs and/or vehicle modifications. Several of these is- sues are discussed below. Non-OEM Parts & Accessories – Warranty Considerations With respect to any modification of a new vehicle using non-OEM parts or ac- cessories (i.e., lift kits, tires, wheels, etc.) the issues a dealer must contend with can be complex. Whether the dealer should modify vehicles requires thorough evalu- ation about the effect of the modification, the requirements of the dealer franchise agreement and manufacturer’s service manuals and policies, warranty informa- tion, dealership insurance coverage, and related information. As a general rule, manufacturers war- rant their genuine parts and accessories. However, non-OEM parts and accessories are not warranted by the manufacturer. By way of example, the pertinent provisions of one such manufacturer’s sales and service agreement state: “The Company shall from time to time establish, by notice to the Dealer, the warranty applicable to each GENUINE PART. There shall be NO OTHERWAR- RANTY, express or implied, including any warranty of MERCHANTABILITY OR FITNESS, or any other obligation of the Company to the Dealer or the customer with respect to any GENUINE PART or any part thereof except the warranty estab- lished pursuant to this subparagraph. The Dealer shall expressly incorporate such warranty as a part of each sale of a GENU- INE PART, in accordance with instruc- tions set forth in the Warranty Manual.” Assuming a vehicle modification using non-OEMparts did not void the warranty, an important question remains as to who will warrant the modification. The dealer could be responsible for any problems that arise, and any related liability. Assum- ing further that the supplier of the non- OEM part offered a warranty, questions concerning the scope of the supplier’s coverage and the supplier’s financial wherewithal to make good on such cover- age must be addressed. A related question the dealer must de- termine is whether the modification using non-OEM items voids the manufacturer’s warranty. While there may be parts that do not necessarily invalidate the manu- facturer’s warranty, other modifications, especially if they involve safety or perfor- mance, may impact or void, the manufac- turer’s warranty. A dealer must verify the modification’s impact on the vehicle war- ranty and determine whether the vehicle warranty would be invalidated, leaving the dealer legally exposed. Additionally, the extent of a dealership’s duty to disclose warranty information in connection with the sale of a vehicle to which after-market modifications have been made using non-OEM parts has been the subject of increased judicial scrutiny. Implications Under the Dealer Franchise Agreement Dealers should review their specific franchise sales and service agreements to determine whether a vehicle modification using non-OEM parts or accessories vio- lates the franchise agreement. Below is per- tinent language from one manufacturer’s sales and service agreement which states: “Dealer agrees that it will not make any modifications to [Manufacturer] Products that may impair or adversely affect a vehicle’s safety, emissions, or structural integrity.” Certain provisions of other manu- facturers’ franchise agreements regulate the use of non-OEM parts or accessories affecting the mechanical operation of the vehicle. Dealers must consult the pertinent provisions of their franchise agreements to determine whether and the extent to which a specific vehicle modi- fication using non-OEM parts or acces- sories would be construed as a violation of the franchise agreement.