It’s Business, And It’s Personal

Volkswagen claims breach of contract in dispute with dealership

On Behalf of | Sep 12, 2014 | Business Litigation |

For many people in North Carolina, the process of purchasing a car is somewhat straightforward. Generally people go to a dealership with an idea of what they want. After a test drive, some haggling and securing financing, an interested buyer drives away with a vehicle. However, the behind-the-scenes of car dealerships can be much more complicated as evidenced by a recent lawsuit, claiming a breach of contract, filed by Volkswagen against a dealership.

The dealership was acquired by a company in May 2011. At that time, Chapman Volkswagen entered into an agreement with Volkswagen that specified several things. Volkswagen would pay Chapman $500,000 with the understanding that Chapman would build a 19,000 square foot showroom, costing $4.3 million, that met Volkswagen’s standards. The project was to be started by November 2011 and completed by Dec. 2012.

Almost a year after the Nov. 2011 date, construction had not begun. Chapman asked to reduce the size of the showroom to 16,000 square foot and extend the deadline for project completion. Although Volkswagen agreed on the size reduction, it did not grant the extension. Regardless, it claims construction still had not begun in May 2013 after a second request to reduce the size of the showroom was denied.

In May, Volkswagen notified Chapman that it would seek recovery of their money as it said was outlined in the original contract — by utilizing an open parts account. Although Volkswagen was only required to give 15 days notice before offsetting the debt, the company claims it did not take further action until Sept. 2013 when it notified Chapman that a payment of $450,000 was expected. Before Volkswagen could take any additional action, Chapman submitted an administrative protest with Pennsylvania State Board of Motor Vehicle Manufacturers, Dealers and Salespersons.

Although both parties went through mediation, no agreement could be made, resulting in the recent breach of contract lawsuit. While the dispute occurred out-of-state, many business owners in North Carolina can relate. Those who have been a victim of breach of contract also have the option of seeking legal recourse in a civil court. By doing so, businesses can protect their business interests and employees.

Source: The Pennsylvania Record, “Volkswagen sues Philly dealership for alleged breach of contract“, Jim Boyle, Sept. 8, 2014