Question: Ron buys 1,000 Smudgy Dolls for his toy store. Karen, the seller, tells him the...

Transcribed Image Text:

Question: Ron buys 1,000 "Smudgy Dolls" for his toy store. Karen, the seller, tells him the dolls are in perfect condition, even though she knows their heads are defectively attached. Ron sells all of the products but then has 1,000 angry customers with headless dolls. Ron sues Karen, seeking rescission of the contract and punitive damages. What is the likely outcome? (a) Ron will be able to rescind, based on fraud, but he cannot recover punitive damages as well. (b) Ron will be able to rescind, based on fraud, and may also obtain punitive damages. (c) Ron may win a case of misrepresentation, but not one of fraud. (d) Ron will lose unless he can show that Karen intended to harm Ron's business. (e) Ron will win only if he can show that both parties were mistaken about a basic assumption. Strategy: Karen knew her statement was false, so this is a case of fraud. Ron must prove a false statement of fact; fraud or materiality; and reliance. Can he do so? Notice also that this is a contract for the sale of goods, giving the plaintiff additional remedies. (See the "Result" at the end of this section.)