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 $28,000.Steve made no attempt to verify the statements until after the transaction was completed.In this case:
A)Ralph has committed fraudulent misrepresentation.
B)Steve is bound by the contract, because he failed to verify the statements which were made to him.
C)the contract is voidable at Steve's option.
D)Two of the above, (a) and (c).

Question

Quizplus · Accepted Answer

Ralph committed fraudulent misrepresentation by falsely stating the purchase price and annual net profit. Steve can choose to void the contract due to Ralph's misrepresentation. Therefore, options (A) and (C) are both correct. Steve's failure to verify the statements does not excuse Ralph's fraudulent misrepresentation, so option (B) is incorrect.

Ralph Sold a Motel to Steve by Stating That He