Private sale of motorcycle and private loan for the same

Howdy!  Hope everyone is doing well.

I'm searched for quite a while, here and elsewhere, and though I've come across semi-relevant purchasing agreements and "contract for title" type forms, I can't quite find what I'm looking for (perhaps I'm not using the correct terminology).  Obviously I can draft my own, but would feel better having guidance to make sure all bases are covered.  The transaction is taking place in Jefferson County, KY.

An elderly friend (hereafter "seller") is selling their motorcycle to one of their "friends" (hereafter "buyer").  Thus far, they have agreed the buyer will give down payment amounting to nearly half the purchase value within the next few days, and the balance will be paid in monthly $200 increments until satisfied (which, if all goes smooth, should be within the year).  The seller has already allowed the buyer to take physical possession of the bike (she is aware, of course, that's a silly thing to do before being paid in full and particularly before a contract has been signed - friend or no friend...but neither here nor there now), but the title will not be transferred until the loan is paid in full.  Though payments are to be made monthly, their agreement regarding "default terms" pretty much boils down to the balance must be paid in full by April 2012.  I'm encouraging her to be a bit more proactive and nail down some dates...i.e. payments to be made on the 7th and no later than the 12th of each month....and to apply a late fee of some sort for payments received after the 12th (the latter mostly to encourage prompt payment, as the seller doesn't have too many folks looking out for her, I don't personally know the buyer well, and, as the seller has given me authority to handle matters such as this, want to make the strong impression to the buyer they are dealing with a "to the letter" gal rather than an elderly lady they may intentionally or unintentionally take advantage of).  Further, I am strongly encouraging that the two agree the buyer is defaulting on the loan once two consecutive monthly payments are missed so that the seller doesn't have to wait til April 2012 to repo the bike.

Because the buyer already has physical possession but will not have title til balance is paid, what all must be done to protect the seller from certain liability issues (i.e. wrongful death suits, tickets, etc.)?  Is contractually obligating the buyer to have full coverage til loan is satisfied enough?  Should the seller have the full coverage policy, ensuring her insurer knows she is not the normal driver? 

Does someone have a contract template that would apply to this sort of arrangement, addressing matters all matters I've discussed here - i.e. payment plan, late fees, default terms, full coverage insurance (or other advised should-haves as asked above), and ultimate title transfer?  Are there other matters that should be addressed in an arrangement such as this?

Thanks a million in advance!

Duvessa

Your friend has already put her foot in the bear trap by releasing possession of the bike. This is not going to end well.

Where is the buyer's incentive to sign anything or pay anything now that he's got the bike?

There is so much wrong with this situation that I don't even know where to start.

Frankly, I suggest that you back away from this and have her go to an attorney. For one thing, helping her is practicing law without a license. For another, you'll be blamed for anything that goes wrong with your "help" and there goes the friendship.

Duvessa:

Does someone have a contract template that would apply to this sort of arrangement, addressing matters all matters I've discussed here - i.e. payment plan, late fees, default terms, full coverage insurance (or other advised should-haves as asked above), and ultimate title transfer?  Are there other matters that should be addressed in an arrangement such as this?

If you are not a lawyer, then what you are attempting to do in drafting a specific contract for your friend is the unauthorized practice of law. I suggest you not try that. If your friend wants help with drafting up a contract, she ought to contact a contract attorney. The answers to some of your questions are state law specific, and looking for some boilerplate agreement on-line is NOT a good idea. What you find may not be good, may not cover things that are important in her state, or otherwise is not sufficient for this. What I'm getting at is that apart from the problem that practicing law without a license could create legal problems for you, if you don't know what you are doing you can create problems for your friend in this deal, too.

Moreover, they have already made a contract here, and the buyer is under no obligation at this point to modify it in favor of your friend. If they do modify it, they'd need to take care that additional consideration exists on both sides for the modification or it may not be enforceable.

I wouldn't have recommended she finance the deal, but if she really wanted to do it, the better path almost certainly would have been to structure it so that she gave title to the buyer but retained a lien on the title. That would relieve her of problems that may come from being the owner of the motorcycle, like citations for the buyer's failure to have insurance, proper tags, etc.

Your desire to help a friend is commendable. But just as you wouldn't want to operate on your friend if you are not a surgeon, you ought not help your friend with legal matters if you are not a lawyer. You can do more harm than good in both circumstnces.

You should not be giving legal advice. You should not be drafting legal documents. If she wants advice or a formal contract she should be talking to a local attorney.

I agree--stay out of the middle of this---you have no upsides...and to practice law as such is looking for problems.

If the deal called for balance to be paid by April 2012 then payment 24 minutes before the deadline is OK and there is no reason for buyer to agree to change it to earlier.

I most certainly would NOT allow buyer to drive on my tags--and seller would be wise to just go get her tags-unless the sales deal expressly called for her tags to remain on bike (unwise).