LaFazia v. Howe

The Howes (defendants) negotiated to buy Arthur LaFazia and Dennis Gasrow's (plaintiffs) deli, questioning its profitability especially after reviewing its tax returns, but ultimately signed a $90,000 purchase contract (paying $60,000 down and signing a $30,000 promissory note) after LaFazia convinced them it was a good business. The contract itself expressly stated the Howes were relying only on their own judgment about the business's past, present, or prospective volume and profits, and were not relying on any representations from LaFazia on that subject. When the deli's business turned out to be bad, the Howes paid down $20,000 of the note but never paid the remaining $10,000; LaFazia sued for breach of the promissory note, and the Howes counterclaimed for fraud in the inducement based on LaFazia's earlier representations about profitability. The trial court granted LaFazia summary judgment, and the Howes appealed.