Required information Introduction Read the overview below and complete the activities that follow. Juan Sells His Business Sometimes a person will enter a contract because she relied on false information provided by the other party to the contract. Often in such circumstances it would be unfair to require her to remain bound to the contract, because she did not consent to enter the contract in which she actually finds herself. In this activity we look at a fictional scenario in which one party to a contract makes a false statement to the other about the subject of the contract. The questions that follow the scenario deal with the circumstances under which the contract can be rescinded as a result. CONCEPT REVIEW: Contracts induced by misrepresentation or fraud are generally considered to be voidable. Case Analysis Read the mini case and answer the questions that follow. Juan recently sold his business to Sarita. The business was in poor shape when he sold it to her and she has realized that it is inevitably a losing proposition. Sarita wants a way out of the deal. Assume, for this question only, the following: During the negotiations Juan guaranteed Sarita that the business had turned a profit in each of the past 5 years. Actually, it lost money in each of those years, although Juan did not know that. When Juan made the statement about the business's profitability, however, Sarita was conferring with her attorney and did not hear it. Her friend Harry, who was observing the negotiations, heard Juan's statement. Before long, when Sarita realizes what a bad deal she's made, she laments the fact to Harry. When Harry inquires how a business that had been profitable under Juan was suddenly losing money, Sarita is confused. They finally realize that Harry heard Juan's misstatement about the business's profitability and Sarita did not. Even so, Sarita is thrilled. With Harry as her key witness, she seeks to rescind the sale agreement claiming innocent misrepresentation. Which of the following is true? Multiple Choice Rescission, because Juan intended to defraud Sarita. No rescission, because Juan's claims of the business's profitability would not have been material to Sarita if she had heard them. No rescission, because Juan lacked sufficient knowledge of the false nature of his statement and did not intend to trick Sarita. Rescission, because Juan's claims of the business's profitability would have been material to Sarita if she had heard them. No rescission, because Sarita did not actually rely on Juan's false statement about the business's profitability