Ralph sold a motel to Steve by stating that he had paid $250,000 for it and that his net average annual profit from the business has been $40,000.In reality he paid $100,000 for the motel and has earned a net average annual profit of only $30,000.Steve made no attempt to verify the statements until after the transaction was completed.In this case:
A) Ralph has committed fraudulent misrepresentation and the contract is voidable at Steve's option.
B) Steve is bound by the contract,because he failed to verify the statements which were made to him.
C) the contract is not voidable,but Steve may sue for damages.
D) the contract is automatically void.

Question

Quizplus · Accepted Answer

Ralph made a false statement of fact regarding the price he paid and the net average annual profit, with the intention of inducing Steve to enter into the contract. Steve relied on these false statements and did not verify them before entering into the contract. This constitutes fraudulent misrepresentation, which makes the contract voidable at Steve's option.

Ralph Sold a Motel to Steve by Stating That He