How to Protect Yourself When Buying or Selling a Mustang
Mustangs and the Law
The joy of buying a vintage Mustang is not something you’d think you want to bring a lawyer into, but as with any significant purchase it’s better to be safe than sorry. Bryan Shook prosecutes cases on collector cars from his office in Camp Hill, Pennsylvania, 15 miles from Carlisle, site of the Carlisle Ford Nationals, and tells us that as prices of classic Mustangs have soared, lawsuits have escalated. Shook told us that probably 90 percent of those problems could be nipped in the bud with a good contract—a bill of sale—between the two parties.
He gave us a typical scenario in the hobby and we’ve heard similar conversations on deals going down. For example, Mr. A buys Mr. B’s Boss 429 for $250,000. Mr. A agrees to wire the money. Mr. B says he will overnight the title. They both agree on a time for a transporter to arrive to pick up the car. A quarter of a million dollar deal has gone down from a phone conversation. What if one of the parties does not follow through? What if the seller does not hold full title to the vehicle? Do hobbyists actually make big deals in such a cavalier manner? “Oh, without a doubt; that’s actually the normal practice,” Shook said.
In contrast, what if Mr. A and Mr. B in the above example were making a deal on a commercial building? Let’s say the building is $250,000, the same price as the Boss 429. The building sale would never happen without a written contract between Mr. A and Mr. B. More than likely, the buyer and seller would also schedule a due diligence period and hire an inspector to look over the property. The sale would close in a certain time span, perhaps 90 days.
Why do buyers and sellers handle transactions differently in the car hobby than in business? Shook said, “I think the common thread here is with our business man’s hat on we’re going to pay attention to details. But, with our hobbyist’s hat on, for some reason, we dispense with all details and all formalities and we just go at it like we’re buying apples at a farmer’s market.” In other words, buying property is a business decision, whereas buying a car is all about emotion and excitement, and sometimes that can come back to bite you.
But, isn’t a formal contract on a simple car sale a little far-fetched? What’s wrong with a buyer handing over money and the seller delivering the car and a signed title? Shook said, “What if a seller advertises a ’69 Mustang for $50,000. He makes no representations about the car. He doesn’t say the engine is a 428 Cobra Jet. He doesn’t even say the Mustang is a Mach 1. The buyer hands the seller $50,000 and drives away. Then, down the road the buyer discovers that the Mustang did not come from the factory with a 428 Cobra Jet. The car came new with a 351. He might even figure out the Mach 1 package was added and is not original. The buyer should have insisted on a contract. A simple contract would have helped the buyer to make a claim.”
In other words, how else is a buyer going to make a claim against the purchase of a car without showing that the CJ engine or the Mach 1 package, or any other feature of the car was special to the sale? But, how can a buyer today not know the original engine in a ’69 Mustang? After all, the engine is coded into the VIN, unlike General Motor’s products (pre 1972). The fifth digit of a ’64½-’73 Mustang VIN codes the engine and cuts down on the number of lawsuits with Mustangs, where “matching numbers” is not nearly so important. Therefore, with Mustangs, lawsuits center more on validity of the VIN.
Your author remembers photographing a ’69 Mustang 428 Cobra Jet convertible 25 years ago. About 10 years after that shoot, I heard through the Mustang grapevine the fifth digit of the VIN on this very valuable car had been altered from an F-code (302) to an R-code (428 Cobra Jet). Apparently, a crafty person had added a “leg” to the F to appear as an R.
Today, no smart person would add a leg to an F to create an R in a VIN on a ’67 and later Mustang because the hobby has access to the Ford database of VINs through Kevin Marti. When this database did become available, a computer check revealed there was no such VIN with an R in the fifth digit of the above car. Therefore, this 428 CJ convertible was never built, or is what collectors refer to today as an “air car.” However, inserting an F in place of the R in the fifth digit did pull up a ’69 Mustang that Ford built as a 302-powered convertible.
We can see a difference in building a fraudulent air car and a restorer faced with the nightmare of buying a Mustang rusted beyond repair. It makes dollars and cents to substitute another rust-free body. A reader emailed, “I have seen many cars that could not be repaired so a donor car was used. The VIN of the original car is then placed on the donor body. Some people feel that replacing the body is no different than replacing a fender. What does the law say about this?”
A fender does not contain the VIN stamped in various indestructible locations on a Mustang. A restorer might replace the body, which on Mustangs is unitized with the frame, but he will have to cut out the VIN, stamped in metal, from that old Mustang, to insert into the donor body.
Another issue is the hidden VIN locations the manufacturer places on a Mustang for law enforcement use. Can the re-body artist successfully find and transplant all of these hidden VINs? Tracing a title back to past owners to substantiate a car’s provenance can flush out re-bodied cars. Since the re-bodied car uses the VIN from the severely damaged vehicle, a title search can lead to a past owner who tells the truth, “Oh, that thing was rusted beyond repair,” or “that fastback was hit so bad we had to put on a front clip.” But, the current owner can see no evidence of body damage or bodywork done? He can see no evidence of rust repair? Then, he probably has purchased a re-bodied car.
I recall tire-kicking a Mustang G.T. 350 at SAAC-13 in Santa Rosa, California, in 1988. The price was right and I almost pulled the trigger. Then, the owner told me that the car has been re-bodied, like it was no big deal. I was not interested in a re-body. I realize some enthusiasts re-body to save an old Mustang. Still, the buyer has to beware. He has to wonder if the original body was destroyed. Could there be two Mustangs, now, with the same Ford VIN? What happened to the title of the destroyed car? Did the local police supervise the re-body and make the process legal?
Other people commit out and out fraud when they alter a VIN on a Mustang. Tracing titles of these cars often leads to states such as Alabama or Georgia, where the DMV registers cars without formal evidence of ownership, i.e. a title. Maine is another state with loose title restrictions, along with other states in New England.
“You can just say you own the car and your proof to the DMV can be a bill of sale,” Shook said. Of course, anybody can write up a bill of sale. With Mustangs, provenance becomes ultra important. That’s because with rare and valuable collector Mustangs the upside is so high. A hobbyist can build a $100,000 Mustang for $35,000.
“We always talk about the buyer protecting himself with a contract. I think the other side is that sellers ought to want contracts, too, on their side.” This contract protects the seller and the buyer. A contract doesn’t have to be a 30-page document filled with legalese. A contract in the car hobby can be as simple as a bill of sale.
Incredibly, car hobbyists exchange hundreds of thousands of dollars with no written contract. Therefore, their agreements are open to many questions that can lead to problems and lawsuits. Rick Parker of Signature Auto Classics in Columbus, Ohio, weighed in on one big reason why. “These people get overly excited. They think they’ve found the ‘Holy Grail.’ They can’t wait to run to the bank and wire money.” A well-written bill of sale (contract) will help buyers get answers to questions they might otherwise not ask. What is the number one problem that causes lawsuits in the hobby? Number one, Shook says, is “unsubstantiated claims.”
“So if you are a seller and you’ve got a car that doesn’t have documentation, but it was sold to you as a CJ, or whatever the case may be. It doesn’t have any documentation and you then turn around and re-sell the same way you bought it, and make the same claims. You don’t have any documentation saying that the claim is or is not true. What you run into there is you got a buyer who discovers your claim is false. That’s how those lawsuits start.” In other words, mistakes perpetuate themselves from one owner to the next. Sooner or later, somebody figures out that Shelby is a re-body. They figure out that F-code has been doctored to an R-code. They figure out the sins of the car’s fathers.
Unrevealed Ownership Interest
Shook attributes 10 percent or less of lawsuits on Mustangs to “unrevealed ownership interest.” What is this? “Like a business partner that’s not on the title. You buy the car from who you think is the owner, except the partner comes in and claims you owe him money for his interest in the car.” A bill of sale rescues with language such as “full legal and lawful title” to the vehicle. This contract protects the buyer from claims.
“Your defense is that the seller guaranteed he was the owner,” Shook said.
Note: If you have a specific story to share about a lawsuit involving a Mustang, please email Jerry Heasley at email@example.com. I believe these example stories will help buyer and sellers.