Smith and Roberson's Business Law 16th Edition by Richard Mann,Barry Roberts

Exercise 7

Bettye Gregg offered to purchase a house from Head Seeman, Inc. (seller). Though she represented in writing that she had between $15,000 and $20,000 in equity in another home that she would pay to the seller after she sold the other home, she knew that she did not have such equity. In reliance upon these intentionally fraudulent representations, the seller accepted Gregg's offer and the parties entered into a land contract. After taking occupancy, Gregg failed to make any of the contract payments. The seller's investigations then revealed the fraud. Head Seeman then brought suit seeking rescission of the contract, return of the real estate, and restitution. Restitution was sought for the rental value for the five months of lost use of the property and the seller's out-of-pocket expenses made in reliance upon the bargain. Gregg contends that under the election of remedies doctrine, the seller cannot both rescind the contract and recover damages for its breach. Is Gregg correct? Explain.