District Court (Fla.) Finds that Car Dealer Properly Invoked Right to Cancel Transaction When Financing Could Not Be Obtained

Defendant’s Right to Cancel the Sale. Defendant’s right to cancel appears in the sales contract, which is attached as an exhibit to Plaintiff’s Complaint. DE 1-1 at 4. Plaintiff admits in her Complaint that the right to cancel clause existed in the agreements she signed¹ and that Defendant invoked that clause after she took possession of one of Defendant’s vehicles. DE 1 at 1-4. Plaintiff argues that Defendant has violated TILA because its agreement with Plaintiff included a unilateral right to cancel the sale. Thus, Plaintiff’s dispute with Defendant under TILA is a legal dispute—Plaintiff argues that the existence of the right to cancel clause itself violates TILA. Id.  A seller’s unilateral right to cancel a sales contract or a contract conditioned upon seller-located financing, does not, by itself, violate TILA. See, e.g., Bragg v. Bill Heard Chevrolet, Inc., 374 F.3d 1060, 1068 (11th Cir. 2004). Numerous cases support this proposition because, importantly, a sales contract conditioned upon financing does not relieve the seller of TILA disclosure obligations. Id. Thus, a unilateral right to cancel a sale or a sales contract conditioned upon seller-located financing does not, in and of itself, violate TILA because TILA applies to the entire transaction from the moment the buyer executes the sales contracts:

[Plaintiff’s] signature on [the sales agreements] rendered him contractually obligated to the purchase of credit and thus constituted consummation for purposes of TILA disclosures. To give full effect to TILA’s goal of providing meaningful and timely disclosure of important credit terms, we hold that in a financing agreement containing a condition precedent where the condition of obtaining financing is within the exclusive control of the seller and third-party lender, consummation occurs when the consumer signs the contract.

Id. Therefore, to the extent Plaintiff’s Count I is premised upon the mere existence of the right to cancel in Plaintiff’s sales agreements, Plaintiff fails to state a claim.