## Facts

- Leasco Corporation, through its Berger division, formed McCreary‑Koretsky International, Inc. (MKI) to acquire the assets of a financially troubled California engineering firm.
- Peter T. Taussig, a vice president and counsel within the Berger division, investigated the target business, reviewed its contracts and financial statements, and had continuing access to MKI’s internal information.
- In early 1971, Taussig agreed to buy all MKI stock from Leasco for $625,000 and to release Leasco from guarantees on MKI bank loans.
- The written stock-purchase agreement contained an integration/no-reliance clause limiting representations and warranties to those stated in the contract.
- Before closing, Taussig received financial information showing MKI incurred a February 1971 net loss linked to a project design error and reconstruction costs.
- Taussig refused to close, asserting rescission based on mutual mistake and misrepresentation or nondisclosure of material facts.
- The district court rejected those defenses, found Taussig in breach, ordered specific performance at a reduced price with related obligations, and entered a $669,000 judgment when Taussig did not perform.

## Issues

1. Whether the stock-purchase agreement was voidable for mutual mistake concerning MKI’s condition or prospects.
2. Whether Leasco’s alleged misrepresentations or nondisclosure induced the agreement and justified rescission.
3. Whether Taussig’s refusal to close constituted a breach, and whether damages in the amount awarded were a proper remedy after nonperformance.

## Decision

- The Second Circuit affirmed the judgment.
- The court held rescission was not justified because there was no mutual mistake about an existing, basic fact at contracting; the later loss reflected business risk and future performance uncertainty.
- The court held there was no actionable misrepresentation or justifiable reliance, given the predictive character of earnings statements, Taussig’s access to information, and the agreement’s integration/no-warranty clause.
- The court upheld the finding of breach and affirmed the $669,000 damages award following Taussig’s failure to perform as ordered.

## Legal Principles

- Mutual mistake supports rescission only when both parties are mistaken about an existing, basic fact; disappointed expectations about future earnings or performance ordinarily do not qualify.
- Statements about anticipated earnings or projections are generally treated as opinion or prediction rather than misstatements of present fact, absent additional proof.
- A party with substantial access to relevant information, especially a sophisticated insider, faces a heightened barrier to showing reasonable reliance on alleged extra-contractual representations.
- An integration/no-reliance clause strengthens enforcement of the written allocation of risk and limits rescission based on claimed additional representations or omissions.
- When rescission defenses fail, refusal to close under a stock-purchase agreement constitutes breach, and a money judgment may be affirmed where the trial court’s remedy is supported by the contract and the proven loss.

## Conclusion

The court enforced the stock-purchase agreement, rejecting rescission based on mutual mistake and misrepresentation because the asserted error concerned business contingencies and future performance, and because the buyer’s knowledge, access to information, and the agreement’s integration clause defeated any claim of justifiable reliance; the breach finding and damages award were affirmed.


Leasco Corp. v. Taussig, 473 F.2d 777 (2d Cir. 1972)