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 The questions that follow the scenario deal with the circumstances under which the contract can be rescinded as a result.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. Sarita had access to all of the financial statements of the business, from which any reasonably informed business person could have discovered the losses. Sarita did not look at the statements or have her accountant do so. She simply took Juan at his word. When Sarita finds out the truth, she seeks to rescind the sale agreement claiming innocent misrepresentation and fraud. Which of the following is true? Multiple Choice A buyer like Sarita never has an obligation to discover a seller's false statements; thus, the contract is voidable. Actually, this is a case of unilateral mistake, rather than fraud or misrepresentation; thus, Sarita can only rescind the contract if she can prove that Juan honestly believed the business turned a profit. The contract is voidable due to both fraud and innocent misrepresentation; Sarita can rescind it at her election. Sarita's blind reliance on Juan's assertion that the business was profitable was not justifiable, so she cannot rescind the contract. Sarita will be able to rescind the contract if she can prove that Juan made the statement about the business's profitability with the intent to defraud her