When a passenger speaks to a driver, he or she is co-located with the driver, is generally aware of the situation, and can stop speaking to allow the driver to focus on the driving task. In-car dialogue systems ignore these important aspects, making them more distracting than even cell-phone conversations. We developed and tested a ``situationally-aware'' dialogue system that can interrupt its speech when a situation which requires more attention from the driver is detected, and can resume when driving conditions return to normal. Furthermore, our system allows driver-controlled resumption of interrupted speech via verbal or visual cues (head nods). Over two experiments, we found that the situationally-aware spoken dialogue system improves driving performance and attention to the speech content, while driver-controlled speech resumption does not hinder performance in either of these two tasks.