Is the car dealership liable for damages if a car handed over for sale was involved in an accident — the Supreme Court explained

The Supreme Court clarified the limits of the service provider's liability under a contract for car sale services. If the vehicle was damaged in a road traffic accident caused by a third party, this fact alone is not grounds for imposing an obligation on the dealership to compensate the owner for damages. The decisive factor is whether such damages are causally linked to the breach of contractual obligations by the service provider.

The Civil Cassation Court concluded that the contract between the parties is a service contract, not a commission contract. Moreover, its terms did not impose on the service provider an obligation to preserve the vehicle handed over. Under these circumstances, there are no legal grounds to hold the entrepreneur liable for damage caused by the actions of a third party.

Case circumstances

In 2013, the owner of a Bentley Continental Flying Spur entered into a power of attorney agreement with an individual entrepreneur for the sale of the car through a dealership and handed over the vehicle for sale.

While the car was at the dealership, it was driven by PERSON_4, who was involved in a road traffic accident resulting in the death of a pedestrian. Subsequently, a criminal case was opened, and the car was seized for over one and a half years. Later, the seizure was lifted, and the owner regained the ability to dispose of the vehicle, which had already been damaged in the accident.

The plaintiff argued that due to the entrepreneur's improper performance of the contract, the car's value significantly decreased, and the prolonged seizure deprived her of the opportunity to sell the vehicle. She also cited moral distress related to the high-profile accident and its consequences. Accordingly, she sought to recover about 1.73 million UAH in property damage and 500,000 UAH in moral damages.

What the courts decided

The court of first instance partially satisfied the claim, ordering the entrepreneur to pay over 1.19 million UAH in property damages and 150,000 UAH in moral damages. The court found that improper performance of the contract led to the loss of the car's value.

The appellate court overturned this decision and fully dismissed the claim. It noted that the car's damage, the opening of the criminal case, and the seizure resulted from a road traffic accident caused by a third party, not from the entrepreneur's improper performance of the service contract.

Supreme Court's position

The Civil Cassation Court agreed with the appellate court's conclusions and left its ruling unchanged.

First, the Supreme Court rejected the cassation appeal's argument that the parties actually had a commission contract relationship. The court explained that a commission contract involves the commission agent acting in their own name but on behalf of the principal. In contrast, the contract between the parties only included obligations to organize the car's demonstration, inform potential buyers, and provide organizational and advisory assistance during the sale agreement. Therefore, by its nature, it is a service contract, not a commission contract.

At the same time, the Supreme Court noted that the plaintiff herself based her claims on Article 906 of the Civil Code of Ukraine, which regulates the liability of a service provider under a service contract. Only at the cassation stage did the claimant begin to assert that the parties had a commission contract relationship. The court found these arguments unfounded.

Supreme Court: the decisive factor is causation

The Civil Cassation Court emphasized that to recover damages, all elements of a civil offense must be proven, including unlawful conduct, existence of damages, fault, and a causal link between the breach and the harm caused.

In case 523/6389/16-c, the car was damaged due to a road traffic accident caused by a third party. This accident, along with the opening of the criminal case and the seizure of the vehicle, caused the damages claimed by the plaintiff. Therefore, the Supreme Court agreed with the appellate court's conclusion that there was no causal link between the entrepreneur's actions and the claimed damages.

Additionally, the court noted that the contract between the parties did not impose on the entrepreneur an obligation to preserve the plaintiff's property. This also refutes the claims of improper performance regarding the safekeeping of the vehicle.

Final decision

The Supreme Court dismissed the cassation appeal and left the ruling of the Odesa Appellate Court unchanged.

Thus, the Civil Cassation Court confirmed that under the circumstances of this case, there are no grounds to hold the service provider liable under the service contract for damages caused by a road traffic accident caused by a third party, as such damages are not causally linked to a breach of contractual obligations, and the contract did not impose on the provider an obligation to preserve the vehicle handed over.

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