Ford Motor Co Credit Co. v. Russell

Minnesota Court of Appeals · Contracts

ContractsAdvertisements as offersConsumer credit disclosuresRepossession and commercially reasonable saleadvertisementofferinvitation to bargainLefkowitz test

Facts

Monticello Ford advertised a 1988 Ford Escort Pony for $7,826 with monthly payments based on a 60-month loan at 11% APR. When Dawn Russell sought to buy the car, two finance companies declined to extend credit because of her limited credit history, and Ford Credit offered financing only at 13.75% APR under a special plan and required a cosigner. Russell signed a written contract stating the cash price, financed optional insurance and an extended service contract, and agreed to 60 monthly payments at 13.75% APR; later, she cancelled the optional items and the unused premiums were applied to reduce the loan balance and monthly payments. After she defaulted in 1990, Ford Credit repossessed the car, gave notice, and sold it for $2,200 at the Minneapolis Auto Auction to a used car dealer.

Issue

Whether genuine issues of material fact precluded summary judgment on the Russells' claims that the advertisement created a binding offer at 11% APR, that Ford Credit violated ECOA, TILA, and the Minnesota Motor Vehicle Retail Installment Sales Act, and that the repossessed automobile was sold in a commercially unreasonable manner.

Rule

An advertisement to the general public is ordinarily only an invitation to bargain, not an offer, unless it promises performance in positive terms and is clear, definite, explicit, and leaves nothing open for negotiation. Under ECOA, a creditor may require a cosigner if the applicant does not qualify under the creditor's standards of creditworthiness for the amount and terms requested. Under TILA, new disclosures are not required unless there is a refinancing, assumption, or variable-rate adjustment, and a refinancing occurs only when an existing obligation is satisfied and replaced by a new obligation. A reduction of principal from cancellation of financed items does not create a new contract under the Minnesota Motor Vehicle Retail Installment Sales Act. A sale is commercially reasonable when collateral is sold in a recognized market or otherwise in conformity with reasonable commercial practices, and once the secured creditor makes that prima facie showing, the debtor must present specific facts showing unreasonableness.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

A dealership in Duluth runs a newspaper ad stating: "2024 compact SUV, $24,900, payments as low as $389/month at 4.9% APR." Nina Flores goes to the dealership, but the lender approves her only at 8.1% because of her thin credit file. She signs a retail installment contract that clearly states 8.1% APR and later sues, arguing the ad itself created a binding contract at 4.9%.

Which is the strongest argument for the dealership and lender?

Explanation. A general advertisement to the public is not an offer unless it is clear, definite, explicit, and leaves nothing open for negotiation. Where financing qualification remains unresolved and inventory is not unlimited, the ad is ordinarily only an invitation to bargain. The majority opinion also emphasized that a clear written contract stating the actual APR controls absent evidence of a promise of the advertised rate. (Derived from Ford Motor Co Credit Co. v. Russell (n.d.).)