Madison Purchased a Three-Year-Old Computer from Kami for $300

question 59

Multiple Choice

Madison purchased a three-year-old computer from Kami for $300.Kami told her the price seemed fair but she really had no idea what it was worth and just wanted to get rid of it.Madison,who knew little about computers,thought she had a great deal.After Madison returned home,she discovered from a computer expert friend of hers that the computer was not worth as much as she believed.Madison wanted to return the computer claiming that they were both mistaken about value,but Kami said,"No way!" Who should win in the dispute between Madison and Kami and why?

• A)Kami should win because Madison's unilateral mistake does not void the contract.
• B)Kami should win because mistaken beliefs about the subjective value of an item do not affect the validity of a contract.
• C)Madison should win because there was a mistake of fact at the time the contract was entered.
• D)Madison should win because mistaken beliefs about the subjective value of an item can affect the validity of a contract.
• E)Madison should win because there was a unilateral mistake of fact.

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Definitions:

Tax Revenue

The income that is gained by governments through taxation, which is used to fund public services and goods.

External Costs

Costs that fall on third parties who are not directly involved in a transaction or economic activity.

Marginal Social Costs

The total cost to society of producing one extra unit of a good or service, including both private costs and any externalities.

Property Rights

Legal rights to use, derive benefit from, and transfer property.