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.
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's statement about the price and profit of the motel was a fraudulent misrepresentation. Steve can choose to void the contract because he relied on Ralph's false statements, which influenced his decision to purchase the motel. Therefore, both options (a) and (c) are correct.

Ralph Sold a Motel to Steve by Stating That He