Legal Updates

Material information relating to a business that was concealed during the negotiations for its acquisition is grounds for canceling the transaction

August 10, 2018
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A purchaser purchased a car wash business, immediately after receiving keys and possession of the property began to receive threats of his and family life from criminals in order to stop running the business. In the context of the threats, the criminals revealed that the seller was involved with them, a fact that was not revealed to the purchaser as part of the negotiations for the acquisition of the business. In light of the aforesaid, is the purchaser entitled to cancel the transaction on the grounds that he was deceived and demand that the purchase money be returned?

 

The court accepted the purchaser’s claims and held that as far as the information that the business was subject to threats was exposed to the purchaser during the negotiation stage, he would not have entered into the transaction. This is a material flaw concerning the information regarding the business from the point of view of the purchaser and his family that is, in fact, misleading, which grants the purchaser the right to cancel the transaction. The court ordered the return of the purchase money to the purchaser, as well as the imposition of a compensation in respect of the purchaser's aggravation of ILS 10,000.