Plaintiff sued defendant, alleging that May, on behalf of defendant, made false and fraudulent statements on which plaintiff relied when he purchased the park. Decision?

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Plaintiff sued defendant, alleging that May, on behalf of defendant, made false and fraudulent statements on which plaintiff relied when he purchased the park. Decision?

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Plaintiff, Gibson, entered into negotiation with W. S. May, president of Home Folks Mobile Home Plaza, Inc., to buy Home Plaza Corporation. Plaintiff visited the mobile home park on several occasions, at which time he noted the occupancy, visually inspected the sewer and water systems, and asked May numerous questions concerning the condition of the business. Plaintiff, however, never requested to see the books, nor did May try to conceal them. May admits making the following representations to the plaintiff: (a) the water and sewer systems were in good condition, and no major short-term expenditures would be needed; (b) the park realized a 40 percent profit on natural gas sold to tenants; and (c) usual park vacancy was 5 percent. In addition, May gave plaintiff the park’s accountant-prepared income statement, which showed a net income of $38,220 for the past eight months. Based on these figures, plaintiff projected an annual net profit of $57,331.20. Upon being asked whether this figure accurately represented income of the business for the past three years, May stated by letter that indeed it did. Plaintiff purchased the park for $275,000. Shortly thereafter, plaintiff spent $5,384 repairing the well and septic systems. By the time plaintiff sold the park three years later, he had expended $7,531 on the wells and $8,125 on the septic systems. Furthermore, in the first year, park occupancy was nowhere near 95 percent. Even after raising rent and the charges for natural gas, plaintiff still operated at a deficit. Plaintiff sued defendant, alleging that May, on behalf of defendant, made false and fraudulent statements on which plaintiff relied when he purchased the park. Decision?

Explanation & AnswerSolution by a verified expert

Explanation

Plaintiff G cannot sue Individual M for misrepresentation and fraud because the plaintiff relied only on the information provided by Individual M without collecting the material facts from the financial documents in person, which is not justifiable.
Plaintiff G can sue Individual M to get damages because the eight-month statement of income showing the annual income is going toact as a material proof in the case. Plaintiff G's reliance on the documents before entering into the contract is correct.

Verified Answer

The various conclusions of the case are:

The arguments of Plaintiff G arenot correct because relying on Individual M'sstatement without accessing the book of accounts isnot justified.
The arguments of Plaintiff G are correct because relying on the information based on the income statement and personal visits before entering the contract proves the materiality of the case.

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