They edit some files, or simply use a differt carset than you do.
The fact that F1C is easily moddable (i.e. it's quite easy for users to
create additional/different cars and tracks), also means it's quite easy to
change the performance values of the original cars. Unfortunately, servers
only indicate there's a difference to the server configuration instead of
locking out drivers whose installations differ (which, on an other level, is
good as different language versions, the no-CD patch and custom paintjobs
have also been known to generate this error).
The long and short of it, for any online racing game, is: don't race against
people you can't trust to voluntarily keep a level playing field with you.
Jan.
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