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Business Law Essay

1715 words - 7 pages

Facts
Lexus of Westminster, a car dealership in California, placed an advertisement in the Costa Mesa Daily Dot, a local newspaper, which presented a number of used cars for sale. Unbeknownst to the dealership, however, the advertisement mistakenly listed the price of a 1995 Jaguar XJ6 Vanden Plas as $25,995. Brian J. Donovan, who was looking to buy a car at the time, saw the advertisement and found that the price was quite reasonable. The next day, Donovan went to Lexus of Westminster where he found the Jaguar listed in the advertisement. After test driving and inspecting the car, Donovan offered to buy the car at price stated in the Daily Dot advertisement. A Westminster salesperson ...view middle of the document...

Application
When the Westminster placed the advertisement for the sale of a car in the newspaper, it included, among other information, certain details about the car such as its price, color, make, year of production and vehicle identification. When construed under Section 11173.1 (e) of the California Vehicle Code, this information reasonably justifies that a customer in the general public would see the dealer’s advertisement as an offer to sell and that no further action needed to be performed by the customer in order to buy the product other than payment. Indeed, under such circumstances, acceptance of the offer occurs when the customer agrees to pay for the product at the advertised price.
Westminster is a licensed dealership, and its advertisement was similar to a supermarket that publishes a book of coupons to encourage the sale of its products. Accordingly, once Donovan saw the advertisement, it is reasonable to believe that he would think that Westminster intended the advertisement to be an offer to which all he needed to do was communicate his acceptance which he did so by going to the dealership and offering to pay the price as advertised.
Conclusion
A valid contract did exist between Westminster and Donovan for the sale of the Jaguar. Westminster’s advertisement in the Daily Dot for a specifically used Jaguar at a designated price constituted a valid offer that may be accepted by tendering the advertised purchase price. When Donovan offered to pay the price immediately at the dealership a contract was created.
Issue 2
If a contract existed, are there grounds for Westminster to avoid its enforcement?
Rule 2
A party may rescind the contract if their consent to the contract was given by a mistake. The mistake cannot be caused by the neglect of a legal duty. The rescission of the contract is available for a mistake of fact. A mistake of fact is defined as an unconscious ignorance or forgetfulness of a fact in the past, present of future that regards a basic assumption in the agreement between parties and has a material effect adverse to the mistaken party. A significant error in the price terms of the contract is a mistake that regards the basic assumption of the agreement and is materially adverse to the mistaken party.
Application
The price quoted in the advertisement was clearly a mistake of fact. As was revealed during the trial, Westminster had originally wanted the quoted price to be placed for the 1994 Jaguar XJ6 model of the car and not the 1995 model. Donovan himself admitted that he thought the price for the 1995 model was substantially higher than the price quoted in the newspaper advertisement, and that is what drew his interest. Moreover, although Westminster was required under California Vehicle Code to make sure that the information in the advertisement was accurate; their lack of knowledge that the newspaper, whom they have no control over, made a typo does not result in a mistake of law. As the court noted, “it defies...

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