## Facts

- Sellers owned a 9.1-acre parcel in Eagle River, Alaska, and marketed it for sale through listings stating it had 580 feet of highway frontage and substantial gravel deposits (first “over 1 million” in gravel; later at least 80,000 cubic yards).
- Buyers were contractors in the gravel-extraction business and negotiated to purchase the property for $385,000, motivated by the stated frontage and gravel value, and insisting on gravel rights.
- Transaction documents included provisions addressing gravel removal, and buyers promptly began commercial use, including purchasing a gravel scale and extracting gravel.
- After closing, buyers discovered the parcel had about 415 feet of highway frontage and the gravel was effectively exhausted after about 6,000 cubic yards.
- Buyers paid about $99,000, stopped paying in December 1977, and sued for rescission and restitution.
- The trial court denied rescission and restitution, finding no actual reliance, no material misrepresentation, and no justified reliance.
- Buyers appealed.

## Issues

1. Whether statements about highway frontage and gravel quantity were material misrepresentations supporting rescission of a land-sale contract.
2. Whether the buyers actually relied on those statements in entering and performing the contract.
3. Whether the buyers’ reliance was justified given their experience and opportunity to investigate.
4. Whether an innocent (non-fraudulent) material misrepresentation can justify rescission and restitution under Alaska law.

## Decision

- The Alaska Supreme Court reversed and remanded.
- The court held the frontage and gravel statements were material misrepresentations, not mere sales talk.
- The court held the trial court’s “no reliance” finding was clearly erroneous; the record showed buyers relied on the gravel and frontage representations.
- The court held the buyers’ reliance was justified; a purchaser may rely on a seller’s material factual representations unless the failure to discover the truth is wholly irrational, preposterous, or in bad faith.
- The court held rescission may be based on an innocent material misrepresentation.
- The case was remanded to determine monetary relief consistent with rescission/restitution principles, including appropriate offsets.

## Legal Principles

- A material misrepresentation in a land transaction may justify rescission even if made innocently.
- Representations that are specific and quantifiable (e.g., frontage footage; measured gravel quantities) are likely material where they affect value and intended commercial use.
- A land purchaser may rely on a seller’s material factual representations and generally has no duty to verify them; recovery is barred only when the purchaser’s failure to discover the truth is wholly irrational, preposterous, or in bad faith.
- In rescission and restitution, the buyer may recover payments made subject to offsets for the buyer’s use of the property and for any harm or depletion attributable to the buyer’s activities.

## Conclusion

The Alaska Supreme Court held that specific, false representations about highway frontage and gravel quantity were material and reasonably relied upon, and that even innocent misstatements can warrant rescission and restitution; it remanded for calculation of appropriate monetary relief and offsets.


Cousineau v. Walker, 613 P.2d 608 (Alaska 1980)