Used car purchase under German law: apparent representation and the buyer's right to protection

In its judgment of December 27, 2024 (Ref. 8 U 175/22), the Higher Regional Court (OLG) of Zweibrücken dealt with the question of under what conditions a buyer in the used car trade can invoke the protection of legitimate expectations against an apparent representative. In the underlying case, a buyer had purchased a used vehicle and negotiated on site with a person who claimed to be an employee of the dealer.

This person signed purchase and warranty documents that provided for a comprehensive two-year full warranty for a vehicle that had already been registered for the first time in 2006. It later transpired that the signatory was neither an employee nor an authorized representative of the dealer.

In its ruling, the Higher Regional Court clarified that the principle of protection of legitimate expectations also applies in principle to buyers in the used car trade. However, this protection ends where it becomes apparent to the buyer, or should become apparent, that the person acting does not have sufficient power of representation. The decisive factor is whether the content of the contract is still customary or obviously unusual. In the present case, the court found that the agreement of an unrestricted two-year warranty for a 14-year-old vehicle was so far-fetched that the buyer could no longer rely in good faith on an existing power of representation. A reasonable buyer should have recognized that such a warranty could only be given after consultation with a company owner or managing director who was actually authorized to represent the company.

The decision makes it clear that buyers in the used car trade cannot blindly trust the information and appearance of a supposed representative, especially if the content of the contract clearly deviates from the usual commercial framework. Reliance on an existing power of representation is then no longer worthy of protection. Since neither the purchase agreement nor the warranty agreement was validly concluded, the appeal was dismissed and the dealer was not obliged to perform the contract.

From a legal perspective, the ruling underscores the importance of carefully reviewing contractual partners and contract terms in business transactions. The protection of legitimate expectations in the case of apparent authority or implied authority is not a carte blanche for accepting any promises, but is subject to clear limits. As soon as it becomes apparent to the recipient of the declaration that the declarations made are unusual or not customary in business, the protection ceases to apply—with the result that the person allegedly represented is not bound.

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