Reference no: EM132227999

Wilkinson Corporation is in the business of buying up small hotels in rural locations that are not currently well served by the big chains. Lacey Smith, the purchasing manager for Wilkinson, contacts Leo Wright, the owner of a small hotel with 100 rooms in Podunk, Iowa, expressing an interest in buying his hotel. During Lacey and Leo’s conversation, a number of comments are made by Leo, including the facts that: 1) the hotel nets $100,000 per year before taxes, 2) the hotel has recently been fully renovated as far as carpeting and the kitchen area, and 3) that he has been in business in Podunk for 30 years and “active in making Podunk what it is today.” However, Leo notes he is looking to retire and move to Montana. He also mentions he has projections that the hotel will net at least $100,000 in the following year because the Octoberfest was rained out last year and will boost the revenue this year.

Leo provides the books and records for the hotel which show that last year (2016) the hotel netted only $50,000. Lacey, knowing the mindset of the owner of Wilkinson in getting this done, proceeds to finalize the purchase and a contract is signed on August 1, 2017. After a year the hotel is at a breakeven basis and has no net revenue, just covers expenses. Furthermore, one of Lacey’s assistants brings to her attention a newspaper article that had appeared in the Podunk Courier in July of 2016 indicating that Argent Corporation, the main employer in the area, after failing to reach an agreement with the city of Podunk was in the process of shutting down production there and thinking of moving its operations elsewhere. Lacey wants Wilkinson Corporation to sue Leo and recover its purchase price. What are the legal issues that need to be addressed? Will Wilkinson prevail if it proceeds with the litigation?