Asked by Christopher Robin on Jul 30, 2024
Verified
Paco Corp. ,a building contractor,offered to sell Roy several pieces of used construction equipment.Roy,engaged in the business of buying and selling equipment,accepted the offer.Paco's written offer had been prepared by a secretary who typed the total price as $10,900,rather than $109,000,which was the approximate fair market value of the equipment.Paco learned of the error in the offer and refused delivery of the equipment unless Roy agreed to pay $109,000.Roy sued Paco for breach of contract.Which of the following scenarios is the likely outcome?
A) Paco will not be liable because there has been a mutual mistake of fact.
B) Paco will be able to rescind the contract because Roy should have known that the price was erroneous.
C) Roy will prevail because Paco is a merchant.
D) The contract is enforceable because Roy had accepted it.
Mutual Mistake
A legal concept where both parties involved in a contract have a misunderstanding about an essential fact of the agreement, potentially making the contract voidable.
Fair Market Value
The price at which an asset would exchange hands between a willing buyer and seller, each having reasonable knowledge of the relevant facts, and neither being under compulsion to transact.
Breach of Contract
Occurs when one party fails to fulfill their obligations under a contract, allowing the other party to seek legal remedies.
- Acquire knowledge of the prerequisites and situations permitting the annulment of a contract on grounds of misrepresentation.
- Acquire knowledge on particular defenses that may nullify a contract because of problems such as execution fraud, coercion, or economic fluctuations.
Verified Answer
ZK
Zybrea KnightAug 03, 2024
Final Answer :
B
Explanation :
Courts permit avoidance in cases of unilateral mistake if the mistake was so obvious that the nonmistaken party had reason to realize that a mistake had been made.Roy probably had knowledge of the value of the contract as he is in the business of selling and buying equipment and should have immediately informed Paco of the mistake in good faith.Therefore,Paco would be able to rescind the contract.
Learning Objectives
- Acquire knowledge of the prerequisites and situations permitting the annulment of a contract on grounds of misrepresentation.
- Acquire knowledge on particular defenses that may nullify a contract because of problems such as execution fraud, coercion, or economic fluctuations.