Facts
- An automobile dealer advertised a used 1995 Jaguar in a local newspaper at a price far below the dealer’s intended price due to typographical and proofreading errors attributable to the newspaper process.
- A consumer read the advertisement, went to the dealership, inspected the vehicle, and tendered the advertised price to purchase it.
- The dealer refused to sell the vehicle at the advertised price.
- The consumer sued for breach of contract, asserting that the advertisement and tender created an enforceable agreement.
- A statute governing licensed dealers made it unlawful to fail to sell a motor vehicle at the advertised total price while the vehicle remained unsold and before the advertisement expired.
Issues
- Whether, in light of Vehicle Code § 11713.1(e), the dealer’s newspaper advertisement constituted an offer that could be accepted by tendering the advertised price, thereby forming a contract.
- If a contract formed, whether the dealer could rescind based on unilateral mistake of fact regarding the advertised price, notwithstanding the statutory requirement to sell at the advertised price.
Decision
- The California Supreme Court held that the advertisement, in the statutory context, constituted an offer and that a contract satisfying the statute of frauds arose when the consumer tendered the advertised price.
- The Court held that the dealer was entitled to rescind the contract based on unilateral mistake of fact because enforcement would be unconscionable and the mistake met the requirements for rescission.
- The Court concluded that Vehicle Code § 11713.1(e) did not displace common-law rescission for qualifying unilateral mistake.
- The Court reversed the judgment enforcing the advertised price and reinstated judgment for the dealer.
Legal Principles
- Although advertisements are generally invitations to negotiate at common law, a statutory scheme may create a reasonable consumer expectation that a dealer’s advertised price constitutes an offer capable of acceptance by tendering that price.
- A contract formed under such a statute may still be rescinded for unilateral mistake when: (1) the mistake concerns a basic, material term; (2) enforcement would be unconscionable; (3) the mistaken party did not bear the risk of the mistake and exercised reasonable care (ordinary negligence alone is not a bar); and (4) the parties can be restored substantially to the status quo.
- “Neglect of a legal duty” barring mistake-based relief requires more than mere carelessness; it refers to breach of a duty imposed by law (e.g., fiduciary or statutory duty) or bad faith.
- Statutory prohibitions on failing to sell at an advertised price may inform offer-and-acceptance analysis and regulatory consequences, but do not necessarily eliminate equitable contract defenses absent clear legislative displacement.
Conclusion
The court treated the dealer’s statutorily regulated price advertisement as a binding offer accepted by the consumer’s tender, but held the dealer could rescind because a good-faith, material pricing mistake would make enforcement unconscionable and rescission could restore the parties to their precontract positions.