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  3. Chan wanted to sell his business in which Lee was interested. During the course

Chan wanted to sell his business in which Lee was interested. During the course

游客2025-06-21  37
问题 Chan wanted to sell his business in which Lee was interested. During the course of negotiations in January, Chan correctly represented the takings to be about ＄40,000 a month.
The contract was not signed until June when takings had fallen to ＄1,000 a month owing to Chan’s illness. Chan did not mention the drop when the contract was entered into in June.
Can Lee rescind the contract?
选项
答案 A misrepresentation is an untrue statement of fact made by one contracting party to the other to induce the other party to enter into contract.
In general, a representation is a statement of some existing facts or past events.
Silence does not normally amount to representation. But where a statement is true when it is made, and subsequently becomes false before the conclusion of the contract, the statement is representation.
In with v. O’Flanagan, 1936, where the defendant was a medical practitioner who wished to sell his practice. In January, 1934, the defendant informed the plaintiff that the income from the practice was ＄2,000. Five months later when the contract was signed the income had fallen considerably due to the defendant’s illness and no mention of this fact was made to the plaintiff. The plaintiff claimed rescission of the contract. It was held that the plaintiff could rescind the contract as there was misrepresentation.
Chan’s statement concerning takings to be ＄4,000 a month during the negotiation is true. But five months later, the takings had fallen to ＄1,000. Chan’s representation, following the legal principle of above-mentioned case, turns to be false before the conclusion of the contract.
Chan should correct his statement concerning the takings after the change, but he kept silent. His silence amounts to misrepresentation which affects the genuineness of assent of the other party—Lee.
Lee can rescind the contract.
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