Quach v Mustafa

In *Quach v Mustafa*, the New South Wales Court of Appeal considered an appeal concerning a dispute over a contract for the sale of a business. The appellants, Mr. and Mrs. Quach, were the purchasers of a restaurant business from the respondent, Mr. Mustafa. The central issue revolved around whether the purchasers were entitled to terminate the contract due to alleged misrepresentations made by the vendor regarding the business's financial performance.

The Court was required to determine whether the representations made by the vendor concerning the business's takings and profitability constituted actionable misrepresentations that entitled the purchasers to rescind the contract. Specifically, the court had to assess whether these representations were false, whether they were material to the purchasers' decision to enter into the contract, and whether the purchasers had affirmed the contract after becoming aware of the alleged falsity of the representations.

The Court of Appeal found that the representations made by the vendor were indeed false and that they were material to the purchasers' decision to buy the business. However, the Court also held that the purchasers, by continuing to operate the business for a period after discovering the true financial position, had affirmed the contract. This affirmation meant they had lost their right to rescind. The legal principle applied was that a party seeking to rescind a contract for misrepresentation must act promptly upon discovering the truth and cannot continue to take the benefits of the contract.

Consequently, the Court of Appeal dismissed the appeal, upholding the primary judge's decision that while misrepresentations had occurred, the purchasers had affirmed the contract and were therefore not entitled to terminate it.