Alice agrees to buy John’s truck for $50,000. After the sale contract is signed but before Alice hands over the money to John, Alice notices some spots on the side of the truck. She asks John for an assurance that there is no rust on the truck. John promises Alice there is no rust. Later Alice discovers there is a lot of rust in the truck and wants to sue John for breach of contract. Select the best response.

Question

BlackTom AI · Accepted Answer

The scenario presents a contract for the sale of a truck and a later assurance about rust given before payment. To analyze each option, we’ll consider contract formation, consideration, and misrepresentation concepts.

Option a: 'Alice can sue John for damages but not terminate the contract because the statement was only verbal.' While a verbal misrepresentation can give rise to damages, the statement about rust could also amount to a breach of an express or implied term if the contract or surrounding circumstances imply no rust. However, the key issue here is whether John’s promise about rust creates a binding modification or new contractual obligation absent consideration, not merely the ability to sue for damages based on misrepresentation. This option misses the critical point that a promise made after formation generally requires consideration to modify the contract; otherwise, it is not binding as a contractual term. Moreover, misrepresentation can allow rescission, not only damages, depending on the jurisdiction.

Option b: 'This situation is similar to Masters v Cameron, as the contract had not been concluded when the statement was made.' Masters v Cameron concerns preliminary negotiations and what constitutes a binding agreement; the facts here state that the sale contract was signed before the rust issue was raised. Therefore, the contract had in fact been concluded, which undermines the parallel to Masters v Cameron. The claim that the contract had not been concluded at the time of the statement is inconsistent with the given timeline and weakens this option.

Option c: 'Alice can sue John because the statement made was clear and equivocal.' The statement that there is no rust could be interpreted as a clear assertion, but the claim’s legal effect depends on whether it constitutes a misrepresentation or a contractual term, and whether it was intended to be binding without consideration. If there is no consideration for modifying the contract to incorporate that promise, the statement may not create an enforceable term. Additionally, even a clear statement could be treated as misrepresentation, which could allow rescission or damages, but the lack of consideration for a post-formation promise complicates treating it as an enforceable modification.

Option d: 'The original contract was concluded, and there was no consideration from Alice to John to create a binding contract for John’s promise about the rust' This option emphasizes two crucial points: first, that the sale contract was indeed concluded prior to the rust assurance; second, that John’s promise about rust lacks consideration from Alice to bind John to a modification of the contract. Under traditional contract law, a post-formation promise to alter terms generally requires new consideration to be binding; without it, the promise cannot be enforced as a contractual modification. Consequently, the Rust promise is unlikely to bind John as a contractual term, though misrepresentation or breach could still lead to other remedies depending on the jurisdiction and theory pursued (e.g., misrepresentation or breach of an implied term, if any).

Collectively, these analyses show that the central issue hinges on whether John’s rust assurance creates a binding modification requiring consideration, and whether misrepresentation theories would apply given the contract was already formed. Option a overemphasizes damages without addressing modification issues; option b misreads the timing relative to Masters v Cameron; option c overstates enforceability based on a clear statement without considering the need for consideration or the nature of the misrepresentation. Option d correctly flags the absence of consideration for a post-formation promise and the fact that the contract had already been concluded, making the rust assurance non-binding as a contractual modification while still leaving open potential misrepresentation remedies under appropriate legal theories.

MCD2070 - T3 - 2025 Intention and Consideration Quiz

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