Donovan v. RRL Corp

In Donovan v. RRL Corp. (2001) 26 Cal.4th 261, the defendant automobile dealer advertised a used automobile for sale in a newspaper but, as a result of proofreading and typographical mistakes made by the newspaper, the advertisement listed a specific price that was $ 12,000 less than the intended sale price. ( Id. at pp. 266-267.) The dealer refused to sell the automobile to the plaintiff, who had tendered the advertised price, and the plaintiff brought an action against the dealer for breach of contract. ( Id. at p. 267.) Affirming the judgment in favor of the dealer, the California Supreme Court first concluded that a contract arose from the dealer's advertisement and the plaintiff's tender of the advertised price. ( Id. at pp. 267, 274-275.) The high court held that Vehicle Code section 11713.1, subdivision (e), by authorizing disciplinary action against a licensed automobile dealer that fails to sell a vehicle at the advertised price before the advertisement expires, "creates a reasonable expectation on the part of consumers that the dealer intends to make an offer to sell at that price, and that the consumer can accept the offer by paying the price specified in the advertisement." ( Donovan, supra, 26 Cal.4th at pp. 267, 274-275.) The Donovan court also concluded, however, that the dealer's unilateral mistake of fact provided a basis for rescinding the contract because nothing in Vehicle Code section 11713.1 or the regulatory scheme reflected a legislative intent to supplant governing common law authorizing rescission of a contract on the ground of unilateral mistake of fact. ( Donovan, supra, at pp. 267, 286, 289.) The court held that in certain cases, "rescission for a unilateral mistake of fact is authorized where 'the effect of the mistake is such that enforcement of the contract would be unconscionable.'" ( Id. at p. 281.) "The rule is stated in terms of good faith and fair dealing. . . . A failure to act in good faith and in accordance with reasonable standards of fair dealing during pre-contractual negotiations does not amount to a breach. . . The failure bars a mistaken party from relief based on a mistake that otherwise would not have been made. During the negotiation stage each party is held to a degree of responsibility appropriate to the justifiable expectations of the other." ( Id. at p. 284.)