Cengage Advantage Books: Fundamentals of Business Law Today 10th Edition by Roger LeRoy Miller

تمرين 16

FACTS Clara Lee agreed to buy Rosalina Robles's dental practice and to lease her dental offices in Chicago, Illinois. The price was $267,000, with $133,500 allocated to goodwill -that is, the market value of the good reputation of the business. After Lee took over the practice, Chicago Magazine and other local media revealed that Gary Kimmel, one of Robles's dentists, had illegally treated underage prostitutes in the practice's offices after hours. The media reported that Kimmel was under investigation by federal officials for this and other activities.
Lee filed a suit in an Illinois state court against Robles, seeking to rescind the contract. Lee alleged that Robles had deliberately withheld the information about Kimmel, and that this information "adversely impacted the desirability and economic value of the practice." The court ruled in Lee's favor and awarded rescission and damages, which included the purchase price, less Lee's unpaid rent and a portion of her income during Lee's ownership of the practice. Robles appealed.
ISSUE Was Lee entitled to the rescission of her contract with Robles on the basis of fraud?
DECISION Yes. A state intermediate court affirmed the lower court's award of rescission and damages. The court stated that, "The [lower] court's judgment was consistent with the manifest weight of the evidence presented at trial."
REASON The parties' agreement for the sale of the dental practice required Robles to disclose "any material information," including actions by a "governmental agency that materially alters the desirability or economic potential of the assets." The testimony of Lee and a business appraiser at the trial indicated that information about Kimmel's activities "would have been material to a reasonable dentist's decision to purchase the practice."
Robles knew about the federal investigation of Kimmel-both the Federal Bureau of Investigation and Chicago Magazine had interviewed her about Kimmel's activities. Robles, however, failed to disclose this information to Lee. The evidence showed that Robles's failure was "purposeful and not the result of any mistake or accident." Her "nondisclosure was designed to prevent [Lee] from gaining relevant information that may have caused [her] to not proceed with the sales transaction."
FOR CRITICAL ANALYSIS-Legal Environment Consideration When rescission is awarded, what is the measure of recovery?What did the recovery include in this case?