Samuel owned a cake-making business and shop. He decided to sell the business and shop, because he is suffering ill-health and wished to move area to be near his son. Samuel entered into negotiations with Ida. Ida is experienced in the catering industry, although had not solely concentrated any business on cakes before.
Prior to entering into the contract, Samuel and Ida discussed the sale of the business. Ida was very concerned about the cost of supplies for the business, and whether or not she could make a profit. As honestly as he could, Samuel told Ida that the costs of supplies for his cake business were 26,000 per year (although there were no terms put into the contract to this effect). Ida was a little sceptical that the costs were so low, but did not ask any further questions, or engage a business adviser to examine the business. Ida entered into a contract with Samuel to purchase the business, partly because it was so conveniently situated for her.
Samuels statement to Ida about the cost of supplies was entirely correct at the time. However, because of his preoccupation with his own circumstances, Samuel overlooked telling Ida this figure
that he had given her about the costs of supplies included a substantial 30% discount that he had been in the habit of receiving from his major supplier and that this supplier had recently written to him to tell him that in the future they would not be able to provide the discount.
Once Ida purchased the business, and because the cost of supplies was higher without the discount from the major supplier, Ida does not make any profit from the business in her first year and now desperately wants to get out of the contract to buy the business and get her money back. Since selling the business, Samuels illness has grown worse and he has moved out of the area to be near his son. He is very anxious at the thought that something has gone wrong with the sale of the business and is worried about having to leave his son. The worry has also made his illness worse.
Advise Ida as to whether there is an actionable misrepresentation. Once you have done this, and assuming that there is an actionable misrepresentation, advise as to the remedies the court would be likely to award.
