Donovan v. RRL Corp.

Supreme Court of California · 2001 · Contracts

Contractsofferacceptanceadvertisementautomobile dealerVehicle Code section 11713.1(e)statute of fraudssigned writing

Facts

Defendant, a licensed automobile dealer, placed a newspaper advertisement listing a specific 1995 Jaguar XJ6 Vanden Plas for $25,995, but the price resulted from the newspaper's typographical and proofreading errors after defendant had instructed that a different 1994 Jaguar be listed at that price. Plaintiff saw the ad, went to the dealership, verified the vehicle identification number, and attempted to buy the 1995 Jaguar by tendering the advertised price. Defendant immediately informed plaintiff the price was a mistake, refused to sell at that price, offered to reimburse plaintiff's fuel, time, and effort, and later sold the car for over $38,000 after having paid $35,000 for it. The trial court found the mistake was made in good faith and not intended to deceive the public.

Issue

Did the dealer's advertisement constitute an offer that plaintiff accepted by tendering the advertised price, and if so, did the dealer's printed name satisfy the statute of frauds? If a contract was formed, could defendant rescind it because the advertised price resulted from a good-faith unilateral mistake of fact?

Rule

A licensed automobile dealer's advertisement for a particular vehicle at a specific price, construed in light of Vehicle Code section 11713.1(e), constitutes an offer that is accepted when a consumer tenders the advertised price while the vehicle remains unsold and before the advertisement expires. The dealer's printed name in such an advertisement can constitute a signature satisfying the statute of frauds. A contract may be rescinded for unilateral mistake of fact, even when the other party did not know of the mistake, if the mistaken party proves: (1) a mistake regarding a basic assumption on which it made the contract, (2) a material adverse effect on the agreed exchange, (3) the mistaken party does not bear the risk of the mistake, and (4) enforcement would be unconscionable; ordinary negligence alone does not bar rescission absent failure to act in good faith and in accordance with reasonable standards of fair dealing.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Lakeview Auto Group, a licensed dealer in San Diego, runs a newspaper ad listing a specific used SUV by VIN for $21,400, plus tax and registration, and states the ad expires Sunday. On Saturday morning, Nina Patel goes to the lot while the SUV is still unsold and tenders the full advertised price, but the salesperson says the ad was only meant to start negotiations.

Under the governing rule, is the dealership's best argument likely to prevail?

Explanation. A licensed automobile dealer's advertisement for a particular vehicle at a specific price, viewed in light of the statutory scheme governing dealer ads, objectively justifies a consumer's understanding that it is an offer. That offer is accepted when the consumer tenders the advertised price while the vehicle remains unsold and before the ad expires. The majority rejected the idea that the mistaken or incomplete subjective intent of the dealer controls at the formation stage, and it also rejected the notion that the possibility of later paperwork prevents contract formation.