Milton Edwards leased an automobile from First National Bank. The lease contained a provision whereby Milton would be liable for the automobile at the end of the lease based on its fair market value. At the end of the lease, the bank notified Milton that the value of the automobile, based on industry publications, was
$10,500 and required him to pay that amount to obtain ownership of the property. Milton objected and requested that the car be individually appraised. What must the bank do?
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A. B. C. D.C
The correct answer is C. Allow Milton to hire an independent appraiser to appraise the automobile (both parties agree to be bound by the appraisal).
Explanation: The lease agreement between Milton Edwards and First National Bank contains a provision that makes Milton liable for the automobile's fair market value at the end of the lease. However, when the lease ended, the bank notified Milton that the value of the automobile, based on industry publications, was $10,500 and required him to pay that amount to obtain ownership of the property.
Milton Edwards objected to the bank's valuation of the car based on industry standards and requested an individual appraisal of the vehicle. In this scenario, the bank must allow Milton to hire an independent appraiser to appraise the automobile (both parties agree to be bound by the appraisal).
The requirement for an independent appraisal ensures that the value of the automobile is determined fairly and objectively. This is important to protect the interests of both parties involved in the transaction. An independent appraiser is not affiliated with either party and will provide an unbiased opinion of the car's fair market value.
Therefore, the bank should not ignore Milton's request for an individual appraisal and should allow him to hire an independent appraiser. Once both parties agree to be bound by the appraisal, the independent appraiser's valuation of the automobile will determine the fair market value that Milton must pay to obtain ownership of the car.