Donovan v. RRL Corp.
Citation and Court
Donovan v. RRL Corp., 26 Cal. 4th 261 (Cal. 2001)
Facts
A Lexus dealership (RRL Corp.) advertised a used Jaguar in a newspaper at a price of $25,995 due to a typographical error—the intended price was significantly higher. Donovan saw the ad, went to the dealership, and attempted to purchase the car at the advertised price. The dealership refused to sell at that price. Donovan sued, arguing the advertisement constituted an offer he had accepted.
Issue
Whether a car dealer that published an advertisement listing a car at an erroneously low price due to a typographical error could rescind the transaction on the ground of unilateral mistake.
Holding
The California Supreme Court held that the dealer was bound by the advertised price; it could not rescind based on unilateral mistake because the buyer was innocent and had not been at fault in causing the error, but the court also examined whether the statutory framework required the dealer to sell.
Rule / Doctrine
Under California law (Vehicle Code § 11713.1(e)), a licensed dealer is bound by an advertised price. A unilateral mistake may justify rescission only when the mistaken party can show the mistake was material, enforcement would be unconscionable, and the other party had reason to know of the mistake or caused it—elements not met here.
Significance
Illustrates how statutes and licensing regulations can make advertisements binding offers in the car dealer context, departing from the common law rule that advertisements are mere invitations to deal. Also analyzes the unilateral mistake doctrine and its limits.