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Grano owns a forty-room motel on Highway 100. Tanner is interested in purchasing the motel. During the course of negotiations, Grano tells Tanner that the motel netted $30,000 during the previous year and that it will net at least $45,000 the next year. The motel books, which Grano turns over to Tanner before the purchase, clearly show that Grano’s motel netted only $15,000 the previous year. Also, Grano fails to tell Tanner that a bypass to Highway 100 is being planned that will redirect most traffic away from the front of the motel. Tanner purchases the motel. During the first year under Tanner’s operation, the motel nets only $18,000. At this time, Tanner learns of the motel’s previous low profits and the planned bypass. Tanner wants Grano to return the purchase price.
What are the chances of Tanner getting his funds back? How do you know?
Did Grano commit fraud? Why or why not?
Was Grano’s conduct deceitful, and if so, should those actions affect the decision in this case?
What possible scenarios can you think of in which a contracting party can act ethically and still commit fraud?
