Mr Potbelly is holding a garage sale because he has to move up north due to loosing his job. Mr Slim Jim offers to purchase two items: an art pottery and the house. The art pottery sales is a sales of used goods, whereas the house sales is a real estate sales. The art pottery is worth ten times ($2’500) what Mr Potbelly wants ($250), and Mr Slim Jim even offers less than that ($200). The house is worth twice ($140’000) what Mr Potbelly wants from it ($75’000), and Mr Slim Jim even offers less than that ($70’000).
Mr Potbelly agrees with both offers verbally and starts packing the art pottery while waiting for Slim Jim’s bank check for the house. By the time Mr. Slim Jim returns with the money, Mr Potbelly has discovered that he could have earned much more money with his two sales and decides not to honour both sales contracts. Mr Slim Jim decides to sue Mr Potbelly in order to enforce both sales contracts. Issues: 1) Is the art pottery sale’s contract valid? Under what ground could Mr Potbelly decide to contest its’ validity? 2) Is the house sale’s contract valid?
Under what ground could Mr Potbelly decide to contest its’ validity? Rules 1) In order to be enforceable, a contract has to gather different elements such as: Mutual consent: both parties must have a clear understanding of what the contract is about. If one party thinks the contract is about an iron cup and the other thinks it is about a gold cup, then there is no mutual consent: each party consents to something different from the other. Offer and acceptance: a contract involves that one party offers something and the other accepts it. ? Mutual Consideration: both parties must exchange something of value.
The mutual consideration condition is not a way to escape the consequences of a bad negotiation. If a person agrees to sell an object for $50 and gets a better offer of $500 five minutes later, then the first sales contract will still be enforceable. ? Performance (delivery): in order to make the contract enforceable, the obligations to be performed under the agreement must have been executed. For example, in a sales of goods, one party must pay the price, and the other deliver the good. As long as the price hasn’t been paid, the delivery of the goods cannot be enforced.
Good faith: both parties must act in good faith, which means that the object of the sales must be clear for each of the parties. ? No violation of public policy (not relevant in this case). Last, but not least, in case of an oral sales of goods contract, the burden of proving reality of the agreement lies with the person trying to enforce the contract. 2) The sales contract which comprise transfer of property of land does have to respect the same principles as for sales of goods, but it has to respect one more condition: it has to be in writing AND signed by all parties in order to be enforceable under Statute of Frauds Law.
The existence of these conditions are criticised for enabling sellers to change their mind even as the contract is entered into (contract enforceable even if not in writing if ALL parties agree). Application 1) Mr Potbelly’s pottery sales’ contract is valid under mutual consent, offer and acceptance (both Potbelly and Slim Jim agreed on the object and the price), mutual consideration, and non violation of public policy. On the other hand, there might be a zone of discussion on performance as Mr Slim Jim has not yet paid the price, so the delivery of the goods might not be enforceable.
There might also be a zone for discussion on good faith, as Mr Potbelly though he was selling a normal pottery and Mr Slim Jim knew he was buying a piece of art (but there might be a problem in proving that he knew). Therefore, although there is little chance Mr Potbelly will escape the consequences of his bad negotiation, there is still a slight chance depending on the elements he might bring up to trial. 2) The sales’ contract of the house has not yet been written and/or signed. Therefore, Mr Potbelly will escape having to sell his house to Mr. Slim Jim.
University/College: University of California
Type of paper: Thesis/Dissertation Chapter
Date: 4 November 2016
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