Joe sells his business to Shirley.During the negotiations,Joe negligently tells Shirley that the business has earned a profit for the last five years.In reality,the business operated at a loss for each of those years.However,Shirley did not hear Joe's misstatement.Shirley cannot rescind the contract because:
A)Joe's false statement was negligent rather than intentional.
B)Joe's misstatement was not material.
C)Shirley did not actually rely on Joe's misstatement.
D)an untrue assertion of fact was made.

Question

Quizplus · Accepted Answer

Reliance means that a person pursues some course of action because of his/her faith in an assertion made to him/her.For misrepresentation to exist,there must have been a causal connection between the assertion and the complaining party's decision to enter the contract.Since Shirley was not aware that an assertion had been made,there has been no reliance.Hence,she cannot make a rescission based on it.

Joe Sells His Business to Shirley