Understanding Lemon Law Basics for Small Business Owners

Most of the lemon law basics in the state of California are applicable to sole proprietors and small business owners. However, there are several subtle differences between the two – of which not many people know about.

Here are some of the details of California Lemon Law that are applicable to small businesses:

  • The California’s Song-Beverly Act, or the lemon law, was amended in order to protect small business owners.
  • The California Civil Code defines how the lemon law is applicable to business vehicles:
  1. It applies mostly to vehicles “bought or used primarily for personal, family, or household purposes.”
  2. California’s lemon law also covers business vehicles so long as: (1) the business that owns the lemon car or truck has no more than five vehicles registered in its name, and (2) the “gross vehicle weight” is less than 10,000 pounds.
  • The law is applicable to several vehicles including luxury sedans, pickup trucks, and SUVs. This lemon law applies when a company owns less than 5 vehicles, which are under the weight limit.
  • The weight limit mentioned in the California Lemon Law depends on the vehicle’s actual weight, not the weight rating. The Gross Vehicle Weight (GVW) refers to the weight of the vehicle alone, while the Gross Vehicle Weight Rating (GVWR) refers to the fully-loaded (cargo/passenger) weight capacity of the vehicle. That makes the GVWR greater than the GVW.
  • When the manufacturer informs the owner that the business vehicle wasn’t covered by lemon law in California, they might be subjected to a Civil Penalty.

Here are a couple of cases in which the courts ruled in the favor of the small business owners who ended up with lemon vehicles.

Ferraro Limousine Service

A few years back, a Riverside jury rendered the biggest verdict in the history of California. It was in the favor of small business owners who had purchased a defective limousine from automakers Ford Motor Co.

By a vote of 12-0, the jury decided that Ford Motor Co. “had willfully violated the lemon law and was responsible for all the damages against Ferraro Limousine Service.”

Owned and operated by husband and wife duo Tim and Teresa Ferraro, the vehicle in question was a limousine. It required repairs at least 25 times when it was covered under the warranty period. Some of the other highlights of the problems that highlights the seriousness of the case were:

  • Repeated overheating of the engine with the air conditioner blowing hot air and the relay switch for cooling fan would fuse together and disable it.
  • Repeated problems with the rear suspension as well as the electrical system.
  • The repairs were done by Ford dealership but every time the vehicle was undergoing repairs, the Ferraros lost business.
  • On November 2000, Ferraro gave Ford notice of repurchase and restitution under California’s Lemon Law, to which the carmaker didn’t respond.
  • When the warranty expired in January 2001, the vehicle continued needing repairs quite frequently. For this, Ferraro had to make all the payments.
  • On September 2002, a young man hired the vehicle to make a marriage proposal. Amidst it all, flames started coming out of the car’s hood.

The small business owner in Park City benefited from the jury’s decision, which took into consideration the serious nature of the problem and tripled the damage amount by adding the attorney’s fees. The jury awarded $489,380.13 and an additional of $198,198.48 in the costs.

Daniel Joyce from Petaluma

In another instance, Daniel Joyce, who was a licensed contractor from Petaluma was denied coverage under the lemon law. He was dealing with problems with his vehicle Ford F-250 just after buying it new. He was denied the refund/re-purchase on account of his vehicle exceeding the gross weight vehicle rating, which was 10,000 pounds. He went on to fight the case for 4 long years and led the courts to rule justice in his favor. The reason? His vehicle’s actual weight ended up being around 7,000 pounds, which was well within the limit.

Sounds like a situation you don’t ever want to be in, right? Consider the following pointers:

1. Record All the Actions: It’s absolutely necessary to keep detailed records of when and how your vehicle breaks down. Along with this, it is also important to record the actions you took to resolve it. Refer to all the problems covered by the law and prove the damage done to your business. You need to especially note the specific days, times, and of course, all the issues faced by the vehicle.

2. Keep the Documents as Proof: Don’t throw away any document that you have related to the vehicle. This includes all the dealership repair records, the original manufacturer’s warranty, and so on. These documents will be the proof required in the lemon law case. You can take help from your attorney to know which documents you need, in addition to the records and receipts of repair you already have with you.

3. Don’t Delay Legal Advice: Don’t hesitate to take legal counsel from lemon attorneys in California. You need to take this step when the manufacturers are unable to fix the vehicle problems or denied to fix it. With their guidance, you’ll be able to take the required action.

These are the points that sum up the California lemon law basics for small business owners. If you’ve ended up with a lemon, don’t lose heart and take the steps one at a time.

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