Contracts

Question Two

Mike and Polly, two adults, intended to marry. They went to Helen’s jewelry store to select an

engagement ring. Mike purchased a diamond ring for $5,000 and gave it to Polly the next day. Polly

noticed a chip in the diamond and took it back to Helen, who agreed that the stone would be replaced at

no cost with a stone of equal or greater value. One month later, Polly discovered that Mike was a

convicted sex offender. She immediately called off the wedding. Mike said, “Keep the ring.”

Polly returned to Helen’s store a few weeks after calling off the wedding and sought a refund of the

$5,000 paid for the ring. Helen refused to refund the money. Polly pointed out this text on the receipt: “If

you are not satisfied with the purchase of this jewelry, return the item within 90 days for a refund of its

full value.”

Helen said, “Although you are returning the ring within the 90-day period, Polly, only the buyer (Mike)

has the right to a refund. However, I do have a replacement diamond, like we talked about earlier, and I’ll

take care of that right now,” which she did within the hour – then handed the ring back to Polly.

Polly took the ring to a certified gem appraiser who told her correctly that the replacement diamond was

a fake diamond, and that the ring was only worth about $50. The original chipped stone had been

discarded, and its actual value cannot be established – Polly will never know if it was real or fake. Helen

did not know the replacement diamond was fake because it was such a good forgery that it was nearly

impossible to tell.

Using common law principles (not UCC), answer these questions with complete explanations:

1. Is Polly entitled to enforce the refund obligation?

2. If so, how much money is Helen obligated to refund?

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