1. Simth owned five acres of land inWilton, New York, on which were two springs
ID: 1098687 • Letter: 1
Question
1. Simth owned five acres of land inWilton, New York, on which were two springs of mineral water and machinery to bottle the mineral water. Smith sold the real property to Brown for $300,000 representing that the water was natural mineral water and could be bottled or sold as it flowed from the ground. Smith also represented to Brown that the daily natural flow of water from the two springs was 4,200 gallons. Brown entered into possession and purchased and installed modern machinery for the bottling and distribution of the mineral water. He soon discovered that the water was not natural mineral water, but fresh water to which certain chemicals had been added. He also discovered that the daily flow did not exceed 160 gallons. By the time he discovered these facts, Brown had expended $75,000 for the installation of new machinery.
a) Did Smith commit fraud? Explain.
b)What remedy or remedies, if any, are available to Brown? Explain.
2. On April 1, Sontos, a dealer in mining stocks, sold to Burns, 10,000 shares of Alaska Uranium, Inc., at $5 per share, knowingly misrepresenting that Alaska Uranium, Inc. had proven uranium deposits in its Alaska properties. Burns paid Santos for the stock on April1.
On April 15, on the advice of friens, Burns had the corporation investigated and found that it had never had any prospects of uranium, but that it had just discovered to copper vein on its property and was putting it into production. During the following February, Burns receivd and deposited a $100 check from Alaska Uranium Inc. for its one cent per share dividend. One month later, Burns regretted his purchase.
a) In an action by Burns against Santos to disaffrim the contract on the grounds of fraud, judgment for whom? Explain.
b) In an action by Burns against Alaska Uranium Inc. to recover damages based on fraud, judgement for whom? Explain.
Explanation / Answer
First question is answered below.
1. Yes, Smith committed a fraud because he did not meet his promised requirements from the contract.
2. In order to remdify the situation, Smith should pay for the damages to Brown by either making payment in monetary terms or replacing the quality of water supplied.
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