Enforcement Of Binding Commitment

[CompTrex]

I don't know, but it just seems like when one of your big questions is 'can they enforce this agreement?', you probably shouldn't be getting into the agreement in the first place. Let's just assume that they can and that they will and make our decision from there.

 

[bowers baldwin]

In my UN-official opinion Elio Motors would not have the time, energy or money to go after the thousands of individuals holding a reservation to try to enforce any agreement.

If people bail out its still a win for EM (at least the non-refundable) they get to keep the money ant not produce anything for it.
Imagine 20,000+ all-in deposits not claimed, that's a huge chunk of chash for nothing. Not saying that will actually happen, but there will be some who wont follow through.

 

[FC]

To me, enforceable or not, does it meet DoE requirements? I am assuming it does, which leaves me just wondering how many
binding commitments they need so they can get to the building of my Elio.

 

[Dooltd]

I don't know, but it just seems like when one of your big questions is 'can they enforce this agreement?', you probably shouldn't be getting into the agreement in the first place. Let's just assume that they can and that they will and make our decision from there.

Exactly.
Deliver Elio #1471 and I will gladly uphold my end of the agreement.

 

[pistonboy]

If EM enforced the agreement on anyone, it would be a billion dollars of bad publicity and help seal the death of the company.

The media would absolutely roast them over this and people would be afraid to buy a vehicle from them.

 

[Marshall]

Exactly.
Deliver Elio #1471 and I will gladly uphold my end of the agreement.

Yes and no. There is some question about how binding it is if the Elio isn't produced. That's when getting out of it is important to most. It's redundant for most if the Elio is produced. We've already put down good money to get one so walking away isn't really likely.

 

[floydv]

I don't think the question is about how binding is the commitment if the Elio ISN'T produced. Clearly, you can't be forced to buy something that isn't made. You would be excused from such a contract because it's impossible for the contract to be completed by the seller. (Note this doesn't excuse you from losing a non-refundable deposit, which wasn't premised on EM actually producing the Elio.)

The real question is how binding is the commitment if the Elio IS ACTUALLY produced. In other words, is the commitment binding if the Elio that's actually produced materially different from what a person understood he or she was committing to buy at the time that commitment was made?

 

[Maurtis]

To me, enforceable or not, does it meet DoE requirements? I am assuming it does, which leaves me just wondering how many
binding commitments they need so they can get to the building of my Elio.

I was wondering that myself. They mentioned needing 65,000 reservations, but did not mention how many of those need to be binding commitments for the ATVM. Say you only got 1,000 binding commitments out of those 65k refundable and non-refundable, that would seem like it would not make a difference. And surely they do not need all 65,000 to be binding commitments.

I wonder if there will be another push after they finally get the 65,000 reservations to get more converted to commitments? "Commit by Valentine's Day 2017 to feel the love"?

 

[Rob Croson]

If the Elio isn't actually built, then the commitment to buy one is irrelevant. They can't force you to buy something that doesn't exist. And as pistonboy says, attempting to force people to buy the vehicle would mean the death of the company. It's bad business and bad publicity.

There are several ways it could go:

1. Elio goes under without ever building your vehicle. Result: Your vehicle is never made, and the commitment is void. You can't be forced to buy something that doesn't exist. Remember that the commitment is to buy a vehicle, not to hand over $7K on demand.
2. Elio builds your vehicle, but it's substantially different than what was advertised when you reserved. (i.e. they build a hybrid SUV that gets 30 MPG.) There's no way that such a purchase commitment would be enforced. When you promise to buy a Chevy Cobalt, you can't be forced to purchase a Ferrari.
3. This has two parts:
   • (Pretend this is 3a.) Elio builds a vehicle that legally fulfills their end of the bargain, but you don't want to buy it. For 3a, let's pretend the Elio is a low-quality piece of junk. Elio won't be able to sell them, and will go out of business long before any lawsuit could come to fruition. They won't have the financial resources to file 65,000 lawsuits, and probably won't even build more than a couple thousand vehicles to begin with. It will be a lawyer feeding frenzy. Your commitment to buy a vehicle is small potatoes, assuming they ever make enough to get that far through the list, and no one really cares about it.
   • (Pretend this is 3b.) Elio builds a vehicle that legally fulfills their end of the bargain, but you don't want to buy it. For 3b, let's pretend the Elio is awesome (as it of course will be), but you just can't/don't want to buy it. This is actually the best case for Elio. You lose your deposit, because it was clearly stated as non-refundable, and they get to sell the trike for full price to someone else. Your commitment is ignored, because trying to enforce it would be a PR nightmare, and everyone but you is happy.
4. Elio builds your vehicle, and it's exactly what you wanted. You get your Elio, and everyone is happy.

#1 would suck for everyone.

#2 is highly unlikely. EM seems pretty focused on what they are going to deliver. The likelihood of a paradigm shift is astronomically small. If you think that you'd love to own the P5 (albeit with some refinements and polish), then you really don't have much to worry about.

#3a is probably not going to happen, as long as we're being realistic in our expectations and don't think we're going to be getting a luxury sedan. This is going to be an inexpensive economy car.

#3b would be sad. After waiting all this time, to not be able to actually get what you wanted, for whatever reason, would suck. Especially since you'd lose your deposit.

#4 is what we all want, and I think we're on track to get.

Out of all of this, there is no chance in hell that anyone is going to be dragged to court and forced to buy a $7000 car. Remember that EM only has a $1,000 profit baked in. It would cost them a lot more than $1,000 to press a court case.

As an aside: IMHO, the $7,000 price that we've been given has a lot less than the $1,000 profit EM has been shooting for. And I bet the $7,300 price doesn't hit the $1,000 profit margin, either. The $7,000 dollar price is probably not projected to be a loss, or a very minimal one, at most. So worst case, the $7,300 price is break-even. That means to get the $1,000 profit they were shooting for, the final non-reservation price probably won't be more than $8,300. A more likely top-end price would be $8,000. Even that is getting a bit high, based on their years-long projected price of $6,800. I'm figuring between $7,800 and $8,000.

 

[Maurtis]

As an aside: IMHO, the $7,000 price that we've been given has a lot less than the $1,000 profit EM has been shooting for. And I bet the $7,300 price doesn't hit the $1,000 profit margin, either. The $7,000 dollar price is probably not projected to be a loss, or a very minimal one, at most. So worst case, the $7,300 price is break-even. That means to get the $1,000 profit they were shooting for, the final non-reservation price probably won't be more than $8,300. A more likely top-end price would be $8,000. Even that is getting a bit high, based on their years-long projected price of $6,800. I'm figuring between $7,800 and $8,000.

Exactly what I was thinking. I said earlier that I thought the MSRP would end up being closer to $8k. It makes sense that the $7k for binders would be near cost or slightly under and the $7,300 would be a little over cost since you had to put in a little carrot to get people to commit. So $8k to the general public would have their $1k profit built in.