Reference no: EM133281859

Question: A recently graduated student, Rick, was transitioning into the business world. He contacted Shane who owned a highly successful art auction house and began negotiations for the sale of that business. During the negotiations, Shane said, he had been running the business for years and that Rick could expect to earn around $500,000 per year going forward. Not wanting to rush into a decision, Rick decided to take a month or two to review the corporate financials and consider whether the business was a solid investment. Shane happily turned over the financial information for him to review. A few days later, Shane received word from one of the prominent artists who exclusively sold his work at Shane's auction house. Unfortunately, the artist was quitting the art business and moving to a rural community in Brazil; as such he would no longer be auctioning off any artwork. Understandably, this was a big shift, and Shane guessed that business revenues would probably drop by around $250,000. Nevertheless, Shane decided that artists tend to be strange and thought maybe the artist would change his mind, so Shane kept the information to himself. Rick completed the purchase of Shane's business and was very disappointed to learn that the projected revenues without the artist was going to be around $150,000 (substantially less than initially expected).

Is Shane liable for misrepresentation for being silent about the artist leaving to himself? Why or why not? Explain and apply the law fully.