Question:

Yasmine is negotiating to buy Stewart's house. She asks him what condition the roof is in. "Excellent," he replies. "It is only 2 years old, and should last 25 more." In fact, Stewart knows that the roof is 26 years old and has had a series of leaks. The parties sign a sales contract for $600,000. A week before Yasmine is to pay for the house and take possession, she discovers the leaks and learns that the mandatory new roof will cost $35,000. At the same time, she learns that the house has increased in value by $60,000 since she signed the agreement.

What options does Yasmine have?

Strategy:

You know intuitively that Stewart's conduct is as shabby as his roof. What is the legal term for his deception? Fraud. Does fraud make an agreementvoid or voidable? Does it matter? (See the "Result" at the end of this Exam Review section.)