Ralph and Aisha engaged Emma, a realtor, to sell their variety store. Emma represented to buyer Pavel that "this was a typical general store," selling gas, oil, hardware, beer, and groceries. She reported that the store had an annual gross income of over $1 million. Emma failed to inform Pavel that one-third of the store's profit was attributable to an accompanying lawn and garden equipment distributorship that Ralph and Aisha were not including in the sale. When Pavel visited the business, Emma directed him away from the garage area where the lawn and garden equipment was stored. Throughout all of these negotiations, Ralph and Aisha were unaware of Emma's misrepresentations. After purchasing the store, Pavel learned of the importance of the equipment sales from Ralph and Aisha. Are Ralph

Question

and Aisha liable for Emma's misrepresentation?

What will be an ideal response?

Answer 1

Yes, Ralph and Aisha are liable for Emma's misrepresentation. A person who is induced to enter a contract by the misrepresentation of an agent has the same remedies as if he had contracted with any person who made a misrepresentation. Emma's representation that the $1 million in sales came from the operation of "a typical general store," in the absence of any subsequent clarification, constituted a misrepresentation. A principal is liable for the misrepresentations made by his agent, within the scope of the agent's authority, whether or not the principal knows of the agent's misconduct. This is not true, if the third person knows that the agent has exceeded his actual authority. In this case, Pavel was unaware that Emma was exceeding her actual authority or misrepresenting facts until after the purchase.