Defendant buyer sought review of a judgment of the Superior Court of Los Angeles County (California), which held the buyer in breach of contract for the purchase of a liquor license and for nonpayment of rent in connection with a lease of a restaurant. The trial court awarded a money judgment to plaintiff seller and denied the buyer any relief on its counterclaims.
Overview: civil code 1162
The seller and the buyer contracted for the sale of personal property and the good will of a restaurant business. The buyer alleged that the seller made misrepresentations about the daily volume of business of the restaurant. The seller filed an action for breach of contract. The buyer filed a counterclaim based on its attempted rescission of the contract. The court reversed that part of the trial court’s judgment awarding the seller a money judgment. The court affirmed the denial of the buyer’s counterclaim. The court concluded that: 1) the representation by the seller as to the daily volume of business of the restaurant was a material one; 2) in view of the fact that the seller made the representation knowing that it was false and untrue, the seller could not have avoided rescission on the ground of negligence on the part of the buyer in failing to make an inquiry; and 3) the buyer was entitled to rely upon the representation and was not under an obligation to make an independent investigation. Regarding the buyer’s counterclaim, because the rescission was effective, the buyer was not entitled to damages that would have been based on an affirmance of the contract.
The court reversed that portion of the trial court’s judgment awarding the seller a money judgment. The court affirmed that portion of the trial court’s judgment that denied the buyer any recovery on its counterclaim.
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