A vehicle with substantial prior damage may generally still be sold. Where the purchaser is a consumer, however, a professional dealer must pay particular attention to how the purchaser is informed of any deviation from the condition normally expected of a comparable vehicle and how that deviation is recorded in the contract.

A general reference to prior damage or a pre-selected box in a standard contract may not be sufficient. This is demonstrated by a recent judgment of the Hamburg Higher Regional Court concerning an imported Porsche Panamera Turbo that had suffered extensive flood damage.

The Court held that the contractual information did not constitute an effective agreement on a deviation from the vehicle’s objectively expected condition. The dealer was therefore required to reverse the transaction and refund most of the purchase price.

A Porsche with a US total-loss title

The proceedings concerned a Porsche Panamera Turbo imported from the United States. The vehicle had suffered substantial flood damage and had been classified as a total loss by a US insurer.

The subsequent sales contract contained a pre-completed checkbox referring to “water exposure”. Another part of the contract contained a general statement that all vehicles imported from the United States or Canada were imported with a total-loss title.

According to the Court’s findings, the purchaser had been informed orally that the car had sustained water damage. However, the wording of the written contract did not adequately reflect the extent of the damage or the information provided orally.

“Water exposure” understated the extent of the flood damage

The Hamburg Higher Regional Court was particularly critical of the term “water exposure”.

In the Court’s view, this wording did not make it sufficiently clear that the vehicle had suffered extensive flood damage and had consequently been classified as a total loss in the United States.

The term could equally describe a much less serious incident involving contact with water. It did not disclose either the true extent of the damage or the resulting technical risks.

In a modern premium vehicle containing numerous electronic components, flood damage may have significant long-term consequences. Corrosion, control-unit malfunctions, damage to wiring systems and electronic faults emerging only at a later stage cannot necessarily be excluded.

A dealer must not describe such a condition using ambiguous or minimising language.

Strict requirements under section 476 BGB

In a sale of consumer goods, a professional seller cannot freely agree terms that deviate from the objective requirements applicable to goods free from defects.

Under section 476(1) BGB, an agreement on such a deviation is effective only if:

• the consumer was specifically informed before submitting the contractual declaration that a particular characteristic of the goods deviated from the objective requirements; and
• the deviation was expressly and separately agreed in the contract.

A general clause stating that imported vehicles may or routinely do have total-loss titles will not necessarily satisfy these requirements. The purchaser must be able to identify the precise deviation affecting the particular vehicle being purchased.

The information and the contractual agreement must therefore be vehicle-specific, unambiguous and transparent.

Oral disclosure does not cure an inadequate contract

A particularly important aspect of the decision for dealers is the Court’s finding that oral disclosure is not automatically sufficient.

Although the seller had orally informed the purchaser of water damage, the written agreement merely referred to “water exposure”. It therefore fell short of both the information allegedly provided orally and the vehicle’s actual condition.

The Court consequently found that there was no sufficiently specific and separate agreement concerning the vehicle’s negative condition.

For dealers, the practical consequence is clear: A detailed sales conversation is not a substitute for legally compliant contractual documentation. The relevant deviation must also be accurately and expressly recorded in the contract.

General clauses for imported vehicles are risky

General clauses such as

• “US import”;
• “previous damage”;
• “possible total-loss title”;
• “water exposure”;
• “vehicle not inspected”; or
• “sold as seen”

do not provide reliable protection in a business-to-consumer sale.

Such wording frequently fails to identify the particular feature that deviates from the condition ordinarily expected of a comparable vehicle. Standard clauses may also be ineffective if they are hidden in the contract, ambiguous or not separately highlighted and agreed.

Similarly, describing a vehicle as a “project car” or “vehicle for repair” will not eliminate the statutory requirements if the vehicle is in fact sold as a roadworthy used car.

Each material deviation should be described precisely

Independent dealers should not reduce prior damage to a general category. The known condition of the vehicle should be described as specifically as possible.

In the case of flood damage, the documentation should address, where known:

• when and where the vehicle was exposed to water;
• the level to which water entered the vehicle;
• whether fresh water or salt water was involved;
• which components were affected;
• whether the vehicle was classified as a total loss;
• which repairs were performed;
• which components were replaced;
• which documents concerning the prior damage are available; and
• which technical consequences cannot be excluded.

A dealer should only make factual statements supported by its own knowledge or the available records. Information that is genuinely unknown should expressly be identified as unknown. Assumptions must not be presented as established facts.

Separate confirmation by the purchaser

According to the Hamburg Higher Regional Court, the purchaser’s general signature on the sales contract did not amount to a sufficient separate agreement concerning the deviation.

For contractual purposes, dealers should therefore use a distinct and clearly highlighted section. The purchaser should separately confirm the particular deviation. Where several material deviations exist, they should be listed and confirmed individually.

A possible structure would be:

“The purchaser was expressly informed, before submitting the contractual declaration, that the vehicle deviates from the objective condition ordinarily expected of a comparable used vehicle in the following respects: …”

The specific damage must then be described completely and in comprehensible terms. Such wording will only be effective if the pre-contractual information was actually provided in good time and the contract accurately reflects the circumstances of the individual vehicle.

Documentation must begin before the contract is signed

Section 476(1) BGB does not merely require the deviation to be recorded in the purchase agreement. The consumer must be specifically informed before submitting the contractual declaration.

The dealer should therefore document:

• when the purchaser received the information;
• which records concerning previous damage were provided;
• whether photographs or expert reports were shown;
• which questions the purchaser asked; and
• that the information was provided before the binding order was placed.

If the purchaser is confronted with the information for the first time in a pre-prepared purchase agreement, it may be doubtful whether the pre-contractual information requirement has been satisfied.

Outdated standard contracts should not be used without review

Many standard vehicle sales contracts do not adequately reflect the requirements of German consumer sales law applicable since 2022.

A standard exclusion of liability for defects is generally ineffective against a consumer. Older clauses concerning an “agreed condition” may also fail to protect the dealer if they do not satisfy section 476(1) BGB.

Independent dealers should therefore review their purchase and sales documentation, particularly where they trade in:

• imported vehicles;
• repaired accident-damaged vehicles;
• vehicles affected by flood or fire damage;
• vehicles with foreign total-loss or salvage titles;
• modified vehicles; or
• vehicles without a full manufacturer’s warranty.

Conclusion

The Hamburg Higher Regional Court imposes strict requirements on professional dealers selling substantially damaged vehicles to consumers. Dealers are permitted to sell such vehicles, but they must inform the purchaser of the condition in good time, precisely and unambiguously. The specific deviation must also be expressly and separately agreed.

The term “water exposure” was insufficient to describe the extensive flood damage suffered by the Porsche Panamera. General references to US imports and total-loss titles could not remedy the inadequate description.

For independent dealers, the greatest risk is therefore not necessarily the sale of a previously damaged vehicle itself. The decisive risk lies in incomplete, ambiguous or minimising documentation. A dealer who understates, obscures or merely generalises substantial prior damage may ultimately be required to reverse the entire transaction.

Case reference: Hamburg Higher Regional Court, judgment of 24 March 2026 – 11 U 44/25; preceding decision: Hamburg Regional Court, judgment of 24 February 2025 – 322 O 160/24.

This article provides general information only and does not constitute legal advice in any individual case.

Transactions involving classic cars, sports cars and collectors’ vehicles are not always documented as formally as their considerable value would warrant. Long-standing business relationships, personal friendships and informal arrangements sometimes take the place of a clearly drafted written agreement.

A recent judgment of the Frankfurt am Main Higher Regional Court (Oberlandesgericht Frankfurt am Main) illustrates the risks involved. The dispute concerned the ownership of a Ferrari Daytona and the allegation that title to the vehicle had been transferred to a motor vehicle dealer merely “pro forma”.

The Court dismissed the claim for surrender of the vehicle. The previous owner had failed to prove that the transfer of ownership had been a sham transaction.

The dispute over a Ferrari Daytona

The claimant, a collector of high-value sports cars, acquired a Ferrari Daytona in 1996. After the vehicle subsequently ceased to be roadworthy, it was deregistered.

In 2006, the defendant, a motor vehicle dealer and long-standing friend of the claimant, purchased another Ferrari Daytona. This second vehicle had previously belonged to the claimant’s father and was later acquired by the claimant.

In 2010, the first Ferrari was transported from Switzerland to Germany and placed in the defendant’s possession. The dealer subsequently held the vehicle documents and keys, arranged for the car to be repaired and later used it himself.

In 2012, the claimant signed a written confirmation stating that the dealer was the owner of the vehicle. The dealer then registered the Ferrari in his own name.

Several years later, the claimant demanded the return of the vehicle. He alleged that ownership had been transferred only as a sham. According to his account, the dealer was merely intended to appear as the owner so that the Ferrari could be permanently registered in Germany. The claimant maintained that the parties had always intended title to remain with him.

The Regional Court and the Higher Regional Court reached different conclusions

The Giessen Regional Court initially upheld the claim for surrender of the vehicle. On appeal, however, the Frankfurt am Main Higher Regional Court reversed that decision and dismissed the claim.

The Higher Regional Court held that the claimant had not proved that he remained the owner of the Ferrari.

Although the claimant had initially presented a sufficiently detailed account of an allegedly “pro forma and purely external” transfer, the dealer subsequently disputed that account in substantiated terms. According to the dealer, ownership had genuinely been transferred to him, partly in recognition of various services he had provided to the claimant.

The burden was therefore on the claimant to prove that both parties had lacked the intention to bring about an actual transfer of ownership and that the transaction was merely a sham within the meaning of section 117 of the German Civil Code (Bürgerliches Gesetzbuch – BGB).

He failed to do so.

The party alleging a sham transaction bears the burden of proof

Under section 117(1) BGB, a declaration of intent that must be made to another person is void if it is made with that person’s consent merely for appearance’s sake.

A sham transaction requires both parties to agree that the declared legal consequences are not genuinely intended. A unilateral belief that someone remains the “real” or beneficial owner is insufficient.

The party alleging that an externally documented transfer of ownership was merely fictitious generally bears the burden of presenting and proving the relevant facts.

Several circumstances weighed against the claimant:

• He had signed a written confirmation that the dealer owned the vehicle.
• The dealer held the vehicle documents and keys.
• The dealer had arranged for the Ferrari to be repaired and registered in his own name.
• Some of the invoices submitted could not be clearly attributed to the Ferrari in dispute.
• The claimant’s evidence during his personal examination was inconclusive because of substantial gaps in his recollection.

The claimant was therefore unable to prove that he had retained ownership despite the externally documented transfer.

Vehicle documents do not determine ownership on their own

The judgment should not be understood as meaning that the person holding the German registration certificate Part II automatically owns the vehicle. Nor is the person registered as the keeper necessarily the civil-law owner.

Nevertheless, possession of the vehicle documents and keys, registration, physical possession, repair orders and written declarations may all provide important evidence of whether and to whom ownership was transferred.

In litigation, the overall combination of these circumstances may prove decisive.

Particular risks for independent vehicle dealers

Independent dealers do not always take possession of high-value vehicles through a conventional purchase. Other arrangements commonly include:

• sale on commission;
• brokerage or sales agency;
• custody and storage;
• repair or restoration;
• sale on behalf of a customer;
• transfer by way of security;
• fiduciary ownership arrangements; and
• temporary registration in the dealer’s name.

The higher the vehicle’s value, the greater the risk created by oral, incomplete or contradictory arrangements.

Uncertainty arises in particular where a dealer receives the documents and keys, pays for restoration work, registers the vehicle in its own name or uses it for an extended period without clearly defining whether it acts as owner, custodian, broker or agent.

What dealers should record in writing

Whenever a high-value vehicle is taken into possession, the legal basis of that possession should be clearly documented. The agreement should specify:

• the complete vehicle identification number;
• make, model, year of manufacture and mileage;
• the vehicle’s current owner;
• the legal nature of the transaction;
• the purchase price or other consideration;
• the time at which ownership is to pass;
• the transfer of documents and keys;
• the right to register or use the vehicle;
• the scope of any brokerage or sales mandate;
• responsibility for repair, transport and storage costs; and
• the conditions and deadlines governing the return of the vehicle.

If title is expressly not intended to pass to the dealer, this must be stated equally clearly. In the case of fiduciary ownership or a transfer by way of security, the purpose, duration and obligation to retransfer ownership should be precisely defined.

Expressions such as “pro forma only”, “temporarily transferred” or “registered through the dealer for the time being” do not provide sufficient legal certainty.

Restoration and repair costs also require documentation

For collectors’ vehicles, restoration, transport and storage costs can quickly become substantial. The dealer should therefore document:

• who commissioned the work;
• who is responsible for the costs;
• whether an advance payment was agreed;
• whether the dealer has a right of retention; and
• whether the costs may be deducted from the purchase price or sale proceeds.

Each invoice should clearly identify the specific vehicle. Where several vehicles of the same model are involved, the model designation alone is insufficient. The complete vehicle identification number should appear on every instruction and invoice.

Conclusion

The Frankfurt am Main Higher Regional Court’s judgment demonstrates the considerable litigation risk created by informal arrangements involving valuable vehicles. A party alleging years later that a documented transfer of ownership was merely a sham must be able to prove that allegation.

Independent dealers should therefore clearly document who owns a vehicle and the legal basis on which they are entitled to possess, repair, register or sell it.

When dealing with a Ferrari, classic car or other collectors’ vehicle, a personal relationship of trust must never replace proper contractual documentation.

Case reference: Frankfurt am Main Higher Regional Court, judgment of 19 August 2026 – 3 U 20/26; preceding decision: Giessen Regional Court, judgment of 21 January 2026 – 2 O 195/25.

Procedural status: According to the Court’s official press release, the judgment is not yet final. The unsuccessful claimant may lodge a complaint against the refusal to grant leave to appeal to the German Federal Court of Justice.

This article provides general information only and does not constitute legal advice in any individual case.