Question

Allen enters into a contract with Joe to sell his car. However by mistake, he undervalues his car. Though the actual value of the car is $6000, he sells it to Joe for $3000. During the purchase, Joe is aware of the actual value but does not communicate this fact to Allen. Which of the following is likely to be true in such a scenario?

Answer 1

C) Joe is entitled to keep the car because the contract is valid.

Step-by-step explanation:

The undervalued price of the car is $3000

Joe is entitled to keep the car because the contract is valid.

Allen and Joe had an agreement about the car which is; Allen asked Joe to pay $3000 as the seller of the car while Joe agreed to buy the car at that price.

It is not the responsibility of the buyer (Joe) to determine price of a product rather, the seller(Allen) is expected to do a market research and evaluate cost of production before giving price to the buyer. Every buy wants to maximize utility at a minimum cost and that is what Joe has done. It is not an offense to buy a product at the price stated by the seller which is why Joe is entitled to keep the car. Allen wasn't forced or coerced to sell the car at an undervalued price.