MrBuyer,the Plaintiff in the Action,was Attempting to Enforce a Contract

question 3

Multiple Choice

Mr.Buyer,the plaintiff in the action,was attempting to enforce a contract in which the defendant,Mr.Seller,agreed to sell to the buyer his property,Blackacre,for $100 000.Which of the following,by itself,would be sufficient to allow Mr.Seller to get out of the contract?

• A)At the time of the contract,unknown to Mr.Buyer,Mr.Seller did not understand the quality and nature of this act because of mental incapacity.
• B)The $10 000 was not enough (i.e.,not fair).
• C)Although both parties agreed to this,no money had actually been paid on the contract,not even a deposit or a down payment.
• D)Mr.Buyer referred to essential terms in a letter sent to Mr.Seller.
• E)There was only a verbal agreement between Mr.Seller and Mr.Buyer.

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Definitions:

Endowment Effect

The tendency people have to place higher valuations on items they possess (are endowed with) than on identical items that they do not possess; perhaps caused by loss aversion.

Behavioral Economists

Economists who study how psychological, social, cognitive, and emotional factors affect the economic decisions of individuals and institutions.

Inconsistent Anchoring

A cognitive bias where individuals rely too heavily on an initial piece of information (anchor) to make subsequent judgments but inconsistently adjust away from that anchor.

Prospect Theory

A behavioral economic theory that describes the way people choose between probabilistic alternatives that involve risk, where the probabilities of outcomes are known.