D is corrent. Under innocent misrepresentation a contract is voidable by one party if the other party has misrepresented a material fact. Since the misrepresentation is an innocent misstatement made in good faith (i.e., no scienter), the only remedy available to the party voiding the contract is rescission. Rescission is the annulment of the contract whereby parties are placed in the position they held before the contract was formed. All benefits received from the contract must be returned by both parties.
A is incorrect. Punitive damages are never available for breach of contract. Additionally, if an injured party received both compensatory damages and punitive damages (again though punitive damages are not possible), then the damages would exceed the injury, which is also impermissible.
B is incorrect. The aggrieved party is not allowed to sue for damages since the misrepresentation made was an innocent misstatement.
C is incorrect. An injured party will be afforded some remedy. For most formation defenses, such as innocent misrepresentation, the remedy is rescission.
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