Case Problem:
Question 1. Hezasan, Inc., offers to buy P-Pal Corporation. On May 1, P-Pal gives Hezasan copies of P-Pal's financial statements for the previous year. The statements show an inventory of $1,000,000. On May 15, P-Pal discovers that the previous year's inventory is overstated by $500,000, but does not inform Hezasan. On June 1, Hezasan, relying on the financial statements, buys P-Pal. On June 10, Hezasan discovers the inventory overstatement. What legal theories can be applied and what remedies are available? Why?