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Keywords

contractplaintiffdefendantrescission
contractplaintiffdefendantrescission

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Furtado v. Gemmell, 242 Or. 177, 408 P.2d 733

Facts

The Furtados sought to purchase a machine shop in Echo, Oregon, after being misled by the defendants about the business's financial performance. The listing claimed a net income of $16,000, but the actual income was significantly lower. Despite attempts to verify the financials, the Furtados were not given access to the books and were led to believe the business was performing well. After taking possession, they discovered the true financial state of the business and filed for rescission.

The Furtados sought to purchase a machine shop in Echo, Oregon, after being misled by the defendants about the business's financial performance. The listing claimed a net income of $16,000, but the actual income was significantly lower. Despite attempts to verify the financials, the Furtados were not given access to the books and were led to believe the business was performing well. After taking possession, they discovered the true financial state of the business and filed for rescission.

Issue

Did the defendants' misrepresentation regarding the business's income entitle the plaintiffs to rescind the contract?

Did the defendants' misrepresentation regarding the business's income entitle the plaintiffs to rescind the contract?

Rule

A material misrepresentation, even if made innocently, can be grounds for rescission of a contract if it induces the deceived party to enter into the transaction.

A material misrepresentation, even if made innocently, can be grounds for rescission of a contract if it induces the deceived party to enter into the transaction.

Analysis

The court found that the defendants had made a material misrepresentation regarding the business's income, which was a statement of fact rather than opinion. The Furtados, being inexperienced, relied on this false information when deciding to purchase the business. The court emphasized that the misrepresentation was significant enough to warrant rescission, as the actual income was less than half of what was represented.

The court found that the defendants had made a material misrepresentation regarding the business's income, which was a statement of fact rather than opinion. The Furtados, being inexperienced, relied on this false information when deciding to purchase the business. The court emphasized that the misrepresentation was significant enough to warrant rescission, as the actual income was less than half of what was represented.

Conclusion

The Supreme Court reversed the lower court's decision and granted the Furtados rescission of the contract due to the material misrepresentation by the defendants.

The Supreme Court reversed the lower court's decision and granted the Furtados rescission of the contract due to the material misrepresentation by the defendants.

Who won?

The Furtados prevailed in the case because the court found that they were misled by the defendants' false representations regarding the business's income.

The Furtados prevailed in the case because the court found that they were misled by the defendants' false representations regarding the business's income.

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