Order holders for the Tesla Cybertruck have put up with a lot. The truck has been delayed time and again, with Tesla only just now preparing for initial deliveries to begin at the end of this month. On top of everything, Tesla has now said it would charge an onerous $50,000 penalty (and then quietly retracted that, apparently) to any customer who attempts to resell their Cybertruck within the first year of ownership. Is this even legal? Let’s find out.
The detail came as part of the legally-binding order agreement Tesla issued to buyers. “You agree that you will not sell or otherwise attempt to sell the vehicle within the first year following your vehicle’s delivery date,” read the document. Consequences of breaching this condition were stated as a ban on future Tesla purchases or legal action seeking liquidated damages of $50,000, or the sale value of the vehicle, whichever is greater.
The clause also noted Tesla may seek “injunctive relief” to block the transfer of title in the courts. Owners wishing to sell before the time limit would be forced to sell back to Tesla at a discount. If Tesla declines to buy the vehicle, it can be sold to a third party if the owner receives written consent to do so from the company.
The harsh resale policy has since been rescinded. Tesla quietly removed the threatening language from its order agreement shortly after the clause hit the news earlier this week.
“People are freaking out because it’s Tesla but these things are pretty common—and legal,” Michigan attorney Steve Lehto told The Autopian. Lehto shares his analysis of automotive law topics on his YouTube channel, where he has covered the story of the Cybertruck sales clause. “There ain’t nothing illegal about them saying, if you buy the truck, you can’t sell it for a year,” he says, adding “The simplest solution here is, if you don’t like the agreement, don’t sign it. Just don’t buy one of the trucks.”
This concept is very much borne out by the example of the Ford GT. Ford was famously persnickety when the GT went on sale, choosing buyers carefully based on how they would use, show, and display the vehicle. Ex-WWE star John Cena was selected as one such lucky buyer, and yet after displaying his admiration for the car, he quickly turned around and sold the vehicle just weeks after taking delivery.
Ford were quick to bring a lawsuit against the wrestler over the matter, alleging he’d made a hefty profit in selling his car, and breached their agreement. Ford’s lawsuit sought “the disgorgement of profit Mr. Cena made on his improper resale, and other damages, including, but not limited to, damages for loss of brand value, ambassador activity, and customer goodwill, which exceed $75,000.” Eventually, Cena settled the matter with Ford for an undisclosed sum, with the automaker donating the proceeds to charity. A further case went to court when a Ford GT showed up at Mecum Auctions, with that matter eventually being settled as well.
Ford’s example shows that automakers can put in place contractual measures against reselling with some degree of success. Of course, it bears noting the finer details weren’t completely tested by the courts given that cases were settled instead. Regardless, it’s a pretty straightforward piece of enforceable contract law, according to Lehto. “Ford now enforces theirs by putting a lien on the vehicle which they remove at the end of the period,” he notes, a measure he believes was taken due to the blowback from the lawsuits.
But what about this $50,000 sum Tesla seeks in the wording of its order agreement? We put the question to Attorney at Law Sheryl Weikal. It all comes down to the concept of liquidated damages, how they work from a legal standpoint, and how contracts are interpreted, she says.
“Liquidated damages is the term for a provision which fixes the amount of money a party has to pay for a breach of contract,” Weikal explained to The Autopian. “There’s nothing wrong with that, except that the liquidated damages must, to be enforceable, be reasonably related to the actual damages suffered or anticipated as a result of the breach, and those damages generally must be provable.”
It’s on that latter point that Tesla comes to grief. “If you rent my car, and the rental agreement says you have to pay me $250 for cracking my windshield, that’s enforceable if it will cost me approximately $250 to replace or repair the windshield,” says Weikal. That’s a simple case, with real damages being paid back in kind. “But if the liquidated damages are not related to actual damages suffered by the non-breaching party, or are intended to disincentivize a breach or coerce compliance with the agreement (a “do this or else” clause, essentially), it’s both unenforceable and unlawful.”
“First, there is nothing which establishes or hints at Tesla’s actual damages, largely because it’s hard to understand if they even have any,” says Weikal. “Second, it’s clearly on its face designed to prevent resales and not to compensate Tesla, and as such it’s a coercive penalty. And third, it’s an adhesion contract, which is interpreted against the drafter.”
On that last point, Weikal refers to the concept wherein a contract is drafted by an entity that has significantly more power to dictate terms than the party being asked to sign it. In this case, that’s Tesla. As per established legal convention, interpretations typically side with the consumer rather than the company that drafted the contract, to temper this power imbalance. In these contracts, big monetary penalties don’t normally fly with the courts. “That’s because in adhesion contracts, since you can’t really negotiate individual terms, liquidated damages provisions end up being land mines for often unsuspecting customers or restrictions on customers that weren’t bargained for,” Weikal explains.
Ultimately, it’s not clear Tesla could prove it had suffered $50,000 in damages from someone listing their new Cybertruck on eBay for some vastly inflated sum. In reality, as structured, it comes across as more of a threat to discourage owners from attempting a resale against the company’s wishes.
So, what conclusion can we draw at the end of the day? Ultimately, Tesla has withdrawn the clause, at least for now, suggesting someone involved realized the anti-resale provisions might not be appropriate. With that said, Ford’s success in reigning in resales of the GT suggests it can be done properly. It might be that Tesla’s legal team needs to go back to the drawing board.
I’m sorry, I got distracted after seeing the “Tap to enlarge” tag on the first image..
This made me insanely happy..
Now what are we talking about?
Personally I think any attempt at preventing resales is a waste of time. The most effective solution for killing the market for flippers is to increase the supply.
And that’s what Tesla should put all their energy into… ramping up Cybertruck production.
I have a coworker (several actually) that have reservations. One has a really early reservation number apparently. We discussed the possibility of shipping his to the UK and selling it there. There wouldn’t be a huge market, BUT there are individuals there that would absolutely leap at the opportunity to have a cybertruck.
And the uk doesn’t use titles. They use logbooks. So once it’s registered there, it wouldn’t be a hard thing to sell without Tesla being able to do anything about it.
The Cybertruck just squeaks in under the UK weight restriction for a ‘car’, but you’d have to get an “Individual Vehicle Approval” to drive it on the road (because Tesla doesn’t officially import it here).
I’m guessing the Cybertruck would pass most of the tests ok (eg seatbelts, labels on controls), maybe with some small changes to the lighting (eg orange indicators). However, the part that could be trickiest to pass would be “Exterior Projections”, ie, parts that stick out that might hit a pedestrian. Depending on how ‘sharp’ the bodywork edges are, they might need to be rounded off, or covered in a rubber cover etc.
Even if it passed all the tests, it’s going to be a long and somewhat expensive process to get it road-registered. I’m sure someone will try though, and there’s nothing stopping anyone from driving it on non public roads.
So it may be a shady method, but I’d send it near one of the usaf bases in Suffolk. There’s a good amount of experience with USDM cars going through IVA and there’s a lot that manages to fly under the radar there. I remember a guy driving a Dodge dually while I was there. It was bold!
What field do you work in that several of your co-workers have reserved this truck? My gut says tech.
It’s tech. And an Elon company. I end up looking like a fan boy for my job and driving a used 3
Do employees of Tesla or other Elon companies get discounts on Teslas?
I’m not sure about Tesla but I know we don’t. They used to do some lease deals or free FSD a few years but that’s all I’ve ever heard of. I bought mine used.
Ive said it before and i’ll keep saying it: Manufacturers need to auction the first run of a desirable model.How is this not a thing already?? It solves everything AND gives the best profit
Aptera is taking an interesting track on this idea. They are using the first 2,000 cars to raise capital investment. There’s even a “Leader Board” where you can check out the amount invested for which slot. The minimum investment is $10k invested after Jan. 27 of this year. So far they have about 3/4 of the slots filled. The leader right now is almost 4 million dollars, to get Aptera #1.
If I had an extra $10k I wasn’t doing anything with, I’d invest to get my Launch Edition sooner. At this point, I’m probably looking at 2025-26.
No Way!Aptera are still alive?? How about that.
I hope they succeed eventually.It’s a cool design
Looks like the Elio, and we all know when those will start delivery…
I think Aptera’s a bit closer to real than Elio was in some ways, or at least less sketchy even if they’re overly-optimistic, but the odds of actually getting one still aren’t great. They already tried once starting in 2005 and had to liquidate in 2011, and I don’t see any reason to think attempt 2 by the same founders will fare better.
Still kickin’. You can check out their progress here: https://aptera.us/
They’ve been working with a firm in Italy to make molded body parts. Basically supercar stuff. I hope the price of the Launch Edition doesn’t become unobtainium. My budget is fairly fixed.
Hey! Your surmane is the same as mine! Are we related? Where are you from?
Born in Ohio, currently residing in Michigan. How about you?
Born in upstate NY but my grandfather moved there from Elyria, OH. His father was 1 of 18 kids so there are a ton of Metcalfs there. Could be a connection there
It’s possible. My great grandfather was a railroad man in the 1930s through northern Ohio. Not sure where he was born. I’ll have to ask my parents who are into genealogy.
I’ve got a bit of genealogical stuff. If you are interested let me know and I will email it to you.
This. And they could spin it for good PR by donating the amount over MSRP to charity, or something. Then everybody wins.
Charity?Great idea!
Although not a die hard fan of capitalism, there is something fundamentally wrong with this Tesla crap.
JFC, you’d think they were talking about flipping the Hope diamond, or something…this is the value added cost of doing business with a weasel bastard.
Screw them.
Isn’t Porsche combating this for the 911 S/T by only allowing it to be leased?
I have many criticisms of Tesla, but this is potentially a rock and a hard place. They do this, they get bad press now and may have to sue some buyers. They don’t try to prevent resellers, they get bad press later when would-be buyers complain about scalpers and waiting.
Maybe there are better ways to go about it, but it’s hard to fault them for it. Of course, the demand may not even be high enough to support Cybertruck scalping. We’ll have to see what happens.
I think this would work well if they were contractually obligated to buy it back, that way you thwart scalpers but don’t hurt those who legitimately don’t like their new truck.
Sure, that would probably be a good way to go about it, with exceptions for someone totalling the vehicle or whatever. I’m sure they didn’t want to go that route in fear that a bunch of people would sell theirs back just before the end of the period if the demand looks soft enough for significant depreciation, but it could possibly be crafted in a way to avoid that, too.
That does make sense. I reckon they could limit their obligation to a “fair market rate” or something like that but that might be hard to legally define and would sound very scammy.
Yet another reason to never even consider buying a Tesla. You want to keep resale control on those trucks? Don’t sell them, just lease them.
Musk suffers at least $50,000 in damages every time someone makes fun of him.
Ouch my brain hurts. I can’t imagine you can claim reduced brand value if you sell for over MSRP or MSRP + SCREW YOU DEALER ADJUSTMENT. Also Tesla specifically I would argue it was 1 year after the contract signed because manufacturer delivered more than 1 year late.
That last sentence. Hilarious because it’s kinda true
To be honest, a lot of brands do this. Porsche was doing this for a while, as Land Rover, not so much because of flipping within the same market, but people exporting them to other markets where the normal cost would be much higher.
I had to sign a similar release when I bought my Cayman GTS, and when I asked the Bentley salesman about my hunch as to why, he said I was right on the money.
I remember Cena selling his car, I remember Ford suing him, I remember siding with everyone else on the planet that if you own an object you should be able to do what you want with the object, I even remember that the case was settled, but I have absolutely no recollection of Ford donating the proceeds to charity. The entire incident has been filed away in my memory as “FoMoCo can be dicks” which makes me wonder why any motor company would risk something like this.
That said, Tesla (and Elon) care nothing about bad PR so that wouldn’t deter them any.
It’s interesting to watch the free market collide with the free market.
Capitalism for you peons. Socialism for the Uber wealthy, and fascism for and from the corporations that rule us. Dogs how I wish Elon would be on his way to Mars. Also that truck is BF ugly
Genuine here, not being snarky: can someone explain to me why Ford or Tesla or anyone cares if someone resells immediately for huge profit? Isn’t that just free publicity? How does it hurt any company?
It has to do with maintaining control of supply and demand and realizing the correlated profit margin.
Because customers buy vehicles, and repeat customer buy more vehicles. If Tesla in this case does nothing to stop scalpers, it may piss me off after waiting in line for 4 years (not me actually, but I know people), and may never buy another vehicle from them.
1000% this. While it might be hard to show $50k in damage, the damage to the brand is real. Could be hard to correlate it to specific monetary losses, of course.
If they really care about damage to the brand, then why is the Cybertruck like that? Wny don’t the panels on Teslas seem to fit together consistently? Why is Elon Musk?
The damage is that Musk fans might snap out of their delusions if they see too many of their kind pay absurd markups, I guess.
Yeah, I was thinking about the brand damage in general, rather than specific to Tesla, which probably doesn’t need to worry about it.
OTOH if I buy a cybertruck, sell it for 30% more, I can buy another cybertruck later.
Yes thats called scalping just like what Ticketmaster does.
I guess that is the thing I ultimately don’t understand: why would you (well not you, but you get my point) think Tesla has any control over what someone who buys something from them does with the product? And to follow that: why would you (again consumer, not you) think Tesla has or (italics) should (end italics) have any control over that?
I just don’t see how it comes back to Tesla at all aside from net positive publicity: “wow the cyber truck is so popular it’s selling for x more than MSRP secondhand. Must be really cool/good!” Or “wow, seems like Tesla could be charging a lot more for the cybertruck, good on them!”
And to be clear: this goes with any hyped product not just Tesla. Phones, watches, computers, whatever.
Your argument that its only a positive publicity…Using that logic Taylour Swift obviously should be charging way more for her tickets since people are willing to pay scalpers so much for them. Scalpers scooping up 99% of tickets and selling at stupid prices has only been a net positive to Taylour Swift and everyone is super happy with kids needing to pay ridiculous sums to see a concrete…. Oh wait, no, no that’s not at all what has happened.
Changing subjects, there are a lot of houses in HOA’s out there, and guess what, when you buy a house in an HOA, you join the HOA, and like it not they have a TON of control over what YOU own. How can that be, YOU own it? Oh wait, YOU signed a contract to buy the house, YOU had the choice to NOT buy the house and not be under that control.
Same here, if YOU buy a cybertruck that has a no-sell provision, guess what YOU are under that control, you signed a contract. If YOU don’t like it, DONT BUY THE TRUCK…
So following your logic, if these sorts of things are so un-popular, nobody will buy the Cyber truck, or anything else with a clause like this, and those anticipated hot items will sit in lots/on shelves and companies will learn. But thats not at all what has happened.
All this rage about these provisions would make perfect sense if it was a permeant thing, so effectively it’s a lease, rage away. But a 1 year provision.. this hurts/impacts absolutely nobody but scalpers. Sure, there is the 0.00000001% that will buy one then house burns down, loses their job, etc etc, that needs to sell, but they have provisions to deal with that.
So why does anyone care (that isn’t a scalper), it boggles my mind.
it was really bad press for car companies during covid when their limited edition models immediately got thrown on auction sites for triple MSRP, so I could see why a manufacturer would try to step in.
If someone can immediately resell a product for multiples of the purchase price, it just means that the original seller dramatically undervalued the product.
Yes and no. Usually for fadmobiles like these that are not intended as limited production, initial demand from the “fashionable” exceeds a traditional sale price. Problem is that this kind of demand goes away quickly over time. If the manufacturer prices for initial demand, they’ll have to DRAMATICALLY drop the price for later buyers to move enough cars, which pisses off potentially loyal customers who bought early as their car’s value has dropped by a massive amount overnight and also negatively affects resale statistics. The high initial price also turns off some would-be later buyers both in terms of bad will and the perception may be that the car must suck if they drop the price, say, 40% overnight.
There’s also the reviews. The product is reviewed when new and against its initial price. The relative value of the car (now poor as it is objectively overpriced to anyone but some fashion/influencer parasites) will be reviewed relative to that. The GRZ twins are really well reviewed as they are a great value at $30-35k. If they were initially listed at $50k, I would bet good money the reviews would not be nearly so good as the quality and performance just aren’t at that level. BUT THEN, you get these lackluster reviews, which discourages the fashionistas from buying at the overinflated initial price because the car now has no buzz. Dealer markup is a different story (which Tesla doesn’t have any of). It can still be harmful, but to a much smaller degree.
Also—ignoring all that—how do you forecast for this initial demand?
Of course, Tesla has literally done this to some extent by making huge cuts to the prices of their cars. Just another way they do things differently, I guess.
I hate crap like this. As others said, if I buy it with my money (or credit), I should be able to sell it. It’s just bullying. Let’s face it: even a very good and successful lawyer should realistically be daunted when faced with a large corporate legal team
I still feel confused and like this whole situation is analogous to ticket scalping. (For the record, I do not want a Cybertruck. I think they look cool, but are mostly bad in every other way.)
I feel like 6 months to a year before reselling would be a fair policy to fight scalping until production ramps up a bit more–by then, making a profit reselling could be less likely, and who’d want to “flip” a car that they have to keep somewhere for that period of time, but also maintain and such? I really don’t see an easy answer here, but given that cars are “big-ticket” items, I do think some effort to prevent no-effort flipping is warranted.
Yeah, that above was my knee-jerk reaction. But, reality is nuanced and almost never simply black & white, as I hate scalpers, too. Just glad I don’t have to figure this out.
It gets even more convoluted for a manufacturer which has dealers adding ‘limited availability’ surcharges onto MSRP.
<sigh>
“The simplest solution here is, if you don’t like the agreement, don’t sign it. Just don’t buy one of the trucks.”
Can I not buy one of the trucks if I don’t care about the agreement one way or the other? I really want to not buy one of the trucks.
Love it.
I have good news for you…
I would never buy a product from a company that presumed to tell me what I can do with my property after the sale. Just as I will never purchase a home in an area with an HOA. Eff the tyrants.
This is why I never bought an iPhone. Early on they would remove your apps if they didn’t like them, replace normal screws with security screws during unrelated maintenance, and brick your phone if you did a jailbreak. I’m sorry, but once I buy something I own it. If I want to void a warranty I’ll do it – and I won’t expect you to honor it when I do. But telling me how I can dispose of my property, or maintaining some sort of control over it after purchase is BS.
Maintaining control like this, with an upfront contract, for a specified period of time, that I can get over.
What I can’t get over is something like Apple bricking your phone or Tesla blocking Supercharging, because you the buyer did not sign a contract upfront that made it clear what would happen if you did a jailbreak on your iPhone.
The odds of the comments on this sticking to Tesla the company and legalese vs. insulting Elon for the umpteenth time are not looking so hot for the former. Like the US Figure Skating Team winning the Super Bowl level odds.
And, yes, Tesla the company trying to get “creative” with this clause is not really all that surprising. Shit, if it was legally bulletproof every manufacturer in the world would have already been doing it.
Tesla has a funny concept of “bulletproof.”
hahahha!!! Nice one 🙂
It’s easy to make fun of Elon…
No “but.” It just really is.
Which makes it lame. They are all hacky insults that have been typed a million times. It’s not exactly a hot take anymore.
I think at least some people do it out of frustration over the fact that he’s likely to continue to be an assclown for a very long time and there’s nothing anyone can really do about it, because he’s making someone a lot of money somehow.
It used to be easier to ignore people like him.
On the surface, Letho is right. If you don’t like the contract, don’t take the deal.
OTOH, I can’t think of another consumer product that is sold with such a clause. I bought it, I own it, I can do what I like with it.
Seems like I’ve read something similar about another company recently but I can’t remember what it was. May have read it here even? Well, even if I’m wrong about that I’m sure that Tesla isn’t the first (nor was Ford) and likely wouldn’t be the last.
I’ve heard that Ferrari is pretty particular about who buys their cars and what owners do with those cars after purchase.
Yeah, I decided years ago that I would never buy a car from them. That’ll teach ‘em!
I’m joining you in the boycott!
You sell the car we send Guido over to break your face.
Ferrari has the luxury of penalizing those customers by just refusing to do business with them in the future.
Bristol used to be very strict, all their sales were done out of a single, company-owned showroom in London, and if they didn’t like the way you looked or what you did for a living, they just wouldn’t sell one to you.
I think Toyota has a somewhat similar system for the Century
I think I saw something on the lightning site a while ago that a European automaker was essentially leasing owners the car. The lease was for the first year (?) of ownership to prevent flipping.
Was it the Tundra in Australia, which gives early drivers significant restrictions in what they can say about the vehicle and do with the vehicle? I’m sure they also can’t sell, but I think it’s a lease, anyway.
It was also a pre-production mule basically, if I remember correctly.
Yeah, they have to take it in for diagnostics and the like frequently, too. It’s an interesting program.
It was a beta test program that people knew about going in.
True, just trying to guess what balloondoggle was thinking of. That said, if someone buys a vehicle with a well-publicized clause in the contract, they arguably know what they are getting into going in, too.
That might be it. If it had been less legit I would probably remember it better.
Legal, ethical, and smart business are all three different categories. Any action could fit in to none, one, two, or all three categories. Businesses who focus on all three have strong reps and people like them. Many top earning businesses are much closer to the only category being “smart business” and make enough profit to fend off concerns about legal and ethical.
the resell clause itself is legal, though perhaps not ethical. however, on a mass market product, its probably not smart business. Ford, with a super limited production halo car, was in a very different business position putting this clause on the GT. It wouldn’t impact total sales volume But putting this clause on what is intended to be a high volume mass production car? Bad business that could legitimately impact their ability to sell volume.
In the end, I’m with you. My product, my choice. Thats why I hate that video games and movies are all going streaming. I no longer get to own anything if they get their way. So yeah, Lehto is right. don’t like it? Don’t sign it.
I mean… Ford did it with the GT. Porsche does it with special versions of the 911 currently. Ferrari does it as well. Tesla isn’t the first to do it, nor will they be the last.
John Deere says “Hold my beer”
What about GM? You weren’t allowed to see a Corvette C8 for at least 6 months without losing warranty protection. I think they did the same with the Escalade-V.
I think that ran under the radar. This is pretty common.
I have purchased UK version DVDs of movies and they clearly state on the case that they cannot be resold.
I think the UK does that with books too, maybe even be prohibited from lending them (like a library). But I gather the UK is a different country, so the laws are a little different there.
Happy to see Steve Lehto linked here! I love his channel.