Thinking of lending your classic car to somebody? Think a bit more before you do…
We are grateful to Nigel Adams for this article. Nigel is a partner at Goodman Derrick, one of the Guild’s Commercial Partners.
“Somebody with great wisdom once said: “When you decide to trust a person you will end up either with a friend for life or a lesson for life”. If you decide to lend your classic car to someone you need to take a moment to make sure you end up with a friend for life, rather than what might be a painful lesson – here is how I think that might be done:
Who are you dealing with and what use will they make of your car?
All of us have at some point been let down by people we have trusted. Throw in to the mix an old and possibly temperamental car and the chances of something going wrong increase. Knowing who you are dealing with is the first step towards identifying what sort of risk you might be running when lending your car to someone. A good friend borrowing your car (yet again) for a short trip to the coast is one thing, but what if you are letting a racing driver have use of your car at an event or possibly lending your car to an organisation for a photoshoot? Your friend may know about the poor brakes and stodgy steering, but if the person borrowing your car for the first time does not know about all of its quirks, you will need to make sure they know what the do’s and don’ts are so they can drive it safely and are aware of any issues.
Is your car going to be driven hard? Will you also be involved in the drive so you can keep an eye on things? Is there a chance that anyone else might use the car while in the custody of the borrower? Does your borrower have the means to pay for repairs or any liabilities to third parties which might be incurred? All of these matters need to be considered and discussed before you say “yes” to the loan of your car and most important of all is to decide and agree on who will pay if something goes wrong. It can often be tricky to separate out the cause of an accident – was it pure driver error or was there a mechanical fault present as well? One solution might be to come to an agreement that the car is being borrowed in the condition in which it is found and so the borrower is to be responsible for any breakdown costs or other problems which occur when he or she is behind the wheel.
You ought to check your own car insurance policy to ensure that your classic car remains covered by insurance when it is being borrowed. Insurance policy documents are not always readily available to review (certainly in my household), nor are they always easy to interpret so make use of your broker and get them to confirm the position for you. It is also worth checking if the borrower of your car has their own insurance cover in place as well. Again, they might also check with their broker. Note that a ‘Driving other cars’ or ‘Driving other classics’ clause in the borrower’s policy may only insure them on a third party liability basis and also note that it is also more than likely that the vehicle must already be insured by the owner/keeper to benefit from these provisions.
If the car is being used for a rally or is to be entered in a track day for example, then bespoke insurance might be required and a word with your broker is in order to make sure you have the cover you need. It is also as well to be informed of the limitations of the cover you get for any motorsport event and you should not assume that an insurance policy will take care of anything and everything which happens on a track. Any limitations ought to be brought to the attention of the borrower as well.
Should you record anything in writing?
This may not be always be necessary if your good friend is borrowing your car and he or she appreciates that if they damage the car they will pay for its repair. However, if you are sharing a drive on an event or lending the car to another driver then it is worth recording the terms on which the other driver gets to use your car and how any problems or claims might be dealt with.
A written agreement ought to set out the insurance position (along with any agreement over who will pay any extra premium); that you have brought to the attention of the other driver any issues or problems with the car; any restrictions on the driving ought also to be set out clearly (e.g. that the engine will not be revved beyond a certain speed or driven beyond a certain speed etc) and of course any agreement reached as to responsibility for repairs or liabilities to third parties ought to be set out fully.
These things can also work in reverse: for example if you are borrowing a car belonging to another person or sharing a drive on an event, it is also useful to discuss obligations and liabilities so that everyone is clear as to what their responsibilities are. We have recently put together a contract for a young racing driver who regularly takes drives in other people’s cars, often of high value. The contract seeks to apportion liability and also to exclude liability where possible.
With the values of classic cars reaching ever higher levels, it is well worth taking a moment before you lend or borrow a classic car to consider means to protect yourself from the risk of something going wrong.”
If you would like to talk to Nigel in more detail about this subject matter, please contact us, and we’ll put you in touch.
(This article should not be taken as constituting legal advice, of course)