Did Jim And Laura Buy A Car?

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Jim and Laura Buyer visit the local car dealership because they are interested in buying a new car. The car they currently have is aging and is starting to have mechanical problems. Jim and Laura would share the new car, and use it to go back and forth to work and school. Before going to the dealership, Jim and Laura decide that they can only afford $400.00 a month in car payments.
Once at the car dealership, Jim and Laura meet Stan Salesman. Stan shows them several vehicles and Jim and Laura test-drive several of the cars. Jim and Laura particularly like the blue 4-door sedan. Therefore, they agree to give Stan Salesman a $100.00 deposit to hold the car for a day. Stan Salesman does not give them the receipt but guarantees that the $100.00 is refundable. No documents were signed.
The next day, Stan Salesman calls Jim and Laura to ask them when they would like to take delivery of the car. Jim and Laura, on the way home from the dealership, decided that they were not going to buy the car because they did not want to spend that money each month. Therefore, Jim and Laura tell Stan Salesman that they have decided not to buy the car and request their $100.00 deposit back.
Stan insists that the $100.00 was a deposit on the car and was meant to be part of the contract to buy the car. Stan is very persistent and insistent that Jim and Laura have contracted to buy the car; therefore, the $100.00 will be applied to the purchase price of the car. Jim and Laura are shocked and angry as not only do they not want to spend the money, but now feel as though they are being duped by Stan Salesman.
Jim and Laura have an appointment to see a lawyer in a few days, but know you are a student taking a business law class and come to you for advice. They are very frazzled, and understandably upset that they may have just purchased a car. Since you have been taking business law, you have read and understand the elements of a contract and the defenses to a contract. Therefore, although you are not a lawyer, you provide some basic advice from what you’ve learned in your business law class.
ASSIGNMENT: Advise Jim and Laura based on the above facts as presented and the material covered in the lessons by answering each section in the template below. In this touchstone, be sure to address the following:
Identify the elements that must be present for a legal contract to exist. Define each element using examples.
Determine the facts from the scenario that you will use to support your decision on whether or not a contract exists for the purchase of the automobile.
Decide whether or not there was a contract for the purchase of the automobile.

Sample Solution

Elements of a Contract

There are four essential elements that must be present for a legal contract to exist:

  • Offer: A clear and definite statement of the terms of an agreement that the offeror is willing to be bound by.
  • Acceptance: An unequivocal acceptance of the offer by the offeree.
  • Consideration: Something of value that is exchanged between the parties to a contract.
  • Mutual assent: A meeting of the minds between the parties on the essential terms of the contract.

Examples:

  • Offer: Jim and Laura say to Stan, “We would like to buy the blue 4-door sedan for $400.00 a month.“
  • Acceptance: Stan says, “I accept your offer.“
  • Consideration: Jim and Laura give Stan a $100.00 deposit, and Stan agrees to hold the car for them.
  • Mutual assent: Both parties agree on the price of the car, the monthly payments, and the terms of the deposit.

Facts from the Scenario

Jim and Laura visited a car dealership with the intention of buying a new car. They test-drove several vehicles and particularly liked the blue 4-door sedan. They agreed to give Stan Salesman a $100.00 deposit to hold the car for a day. No documents were signed.

The next day, Jim and Laura decided that they did not want to buy the car and requested their $100.00 deposit back. Stan Salesman insisted that the $100.00 was a deposit on the car and was meant to be part of the contract to buy the car.

Was There a Contract for the Purchase of the Automobile?

Based on the facts presented, it is unlikely that a contract existed for the purchase of the automobile.

Offer: Jim and Laura made a clear and definite offer to buy the blue 4-door sedan for $400.00 a month.

Acceptance: Stan Salesman accepted the offer when he took the $100.00 deposit from Jim and Laura.

Consideration: Jim and Laura gave Stan a $100.00 deposit, and Stan agreed to hold the car for them.

Mutual assent: However, it is questionable whether there was mutual assent between the parties. Jim and Laura intended to purchase the car, but they changed their minds before the deal was finalized. Stan Salesman may have believed that there was a contract, but Jim and Laura never intended to be bound by the agreement.

Conclusion

It is unlikely that a contract existed for the purchase of the automobile. The element of mutual assent is questionable, as Jim and Laura never intended to be bound by the agreement. Jim and Laura should be able to get their $100.00 deposit back.

Advice to Jim and Laura

Jim and Laura should contact Stan Salesman and demand the return of their $100.00 deposit. If Stan refuses to return the deposit, Jim and Laura may need to file a lawsuit in small claims court.

Jim and Laura should also keep a copy of all documentation related to the transaction, such as the receipt for the deposit and any text messages or emails between them and Stan Salesman. This documentation will be helpful if they need to file a lawsuit.

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