BLAW Chapter 11

In which of the following situations would silence constitute a misrepresentation? a. The parties are dealing at arm's length in a business transaction. b. A person fails to disclose a fact which she knows would correct a mistake upon which the other party is relying, and the nondisclosure is a failure to act in good faith. c. A buyer knows that a new highway is proposed through the seller's property, making it more valuable than the seller realizes. d. All of the above.

b. A person fails to disclose a fact which she knows would correct a mistake upon which the other party is relying, and the nondisclosure is a failure to act in good faith.

Jim threatens to hit Kai in the head with a baseball bat unless Kai signs a contract agreeing to pay Jim $400 for his computer. Because of the threat, Kai signs the contract. a. this contract is voidable at Kai's option b. Jim has committed physical duress against Kai and the contract would be void c. this is an example of economic duress d. all of these

b. Jim has committed physical duress against Kai and the contract would be void

The courts would not carefully scrutinize a contract between the parties in which of the following relationships? a. Trustee and beneficiary. b. Manufacturer and wholesaler. c. Agent and principal. d. Physician and patient.

b. Manufacturer and wholesaler.

"Scienter" is a legal term which means: a. That a buyer has justifiably relied upon the seller's representations b. That the seller had knowledge that his statements are false and had the intention to deceive. c. Sales puffery. d. All of the above

b. That the seller had knowledge that his statements are false and had the intention to deceive.

The law grants relief in a situation involving mistake only where there has been: a. a unilateral mistake by one party as to the nature of the subject matter of the contract. b. a mutual mistake of material fact. c. a unilateral mistake by one party to the contract occasioned by his failure to read the document before assenting to it. d. a unilateral mistake by one party to the contract as to its legal effect.

b. a mutual mistake of material fact.

CPA: In order for a purchaser of land to avoid a contract with the seller based on duress, it must be shown that the seller's improper threats: a. constituted a crime or tort. b. actually induced the purchaser to assent to the contract. c. would have induced a reasonably prudent person to assent to the contract. d. were made with the intent that the purchaser be influenced by them.

b. actually induced the purchaser to assent to the contract.

mutual mistake

both parties to a contract have an incorrect belief about an important fact; voidable

Carl Contractor submits a bid that contains a substantial error in addition. a. This is a unilateral mistake. Carl is bound by the error. b. Carl is guilty of fraud in the inducement. c. If the error is an obvious one that the other party knew of when it accepted the contract, Carl can avoid the contract. d. Carl can avoid the contract based upon duress.

c. If the error is an obvious one that the other party knew of when it accepted the contract, Carl can avoid the contract.

A misrepresentation is material in which of the following cases: a. Seller believes goods are of less value than buyer believes them to be, but seller remains silent. b. Seller represents a fact knowing it would be likely to induce a reasonable buyer to manifest his assent. c. Seller knows the misrepresentation would be likely to induce the buyer to act. d. (b) or (c), but not (a).

d. (b) or (c), but not (a).

A fiduciary owes which of the following duties? a. Trust b. Loyalty c. Confidence d. All of the above

d. All of the above

The requisite elements of fraud in the inducement include: a. a false representation of material fact. b. a representation made with knowledge of its falsity and the intention to deceive. c. a false representation justifiably relied upon. d. All of the elements above are required to be shown.

d. All of the elements above are required to be shown.

Knowledge of falsity and intention to deceive under fraud in the inducement may be shown by: a. actual knowledge. b. lack of belief of the statement's truthfulness. c. reckless indifference as to its truthfulness. d. all of the above.

d. all of the above.

Which of the following, if any, are requisites for fraud in the inducement? a. false representation of a fact that is material b. representation is made with knowledge of its falsity and the intention to deceive c. the representation is justifiably relied on d. all of these

d. all of these

Which of the following results in a void contract? a. duress by improper threat b. fraud in the inducement c. undue influence on a party d. duress by physical force e. duress by physical force and also undue influence on a party

d. duress by physical force

effect of fault

read the contract; a mistaken party's fault in not knowing or discovering a fact before making a contract does not prevent him from avoiding the contract

improper threat

sign a contract or someone will spread misinformation; makes it voidable

bad bids

the person accepting the offers knows or should know that there is a mistake made in giving him that bid, he will not be able to take advantage of it

undue influence

the unfair persuasion of a person by a party in a dominant position based on a relationship of trust and confidence; you should be able to trust someone; look for a confidential relationship with one person with a dominant position and a person with a weaker position

duress

wrongful or unlawful act or threat that overcomes the free will of a party

fraud in the inducement

a false statement that induced you to get into the contract; voidable

unilateral mistake

a mistake that occurs when one party to a contract is mistaken as to a material fact; relief will be granted only where the nonmistaken party knows

assumption of risk

a party who has undertaken to bear the risk of mistake will be able to avoid the contract

Adam wants to buy a six-passenger car. The salesman tells him that the two-seat sports car Adam sees on the car lot would be just perfect for six people. Adam test drives the car and then buys it. a. Adam is not entitled to relief based on fraud because he was not justified in relying upon the salesman's representation that the car would seat six people b. the salesman is in a confidential relationship with Adam c. the element of scienter is missing in this fact situations d. Adam has a valid cause of action for fraud

a. Adam is not entitled to relief based on fraud because he was not justified in relying upon the salesman's representation that the car would seat six people

Which of the following would be considered to be a misrepresentation of a material fact for purposes of establishing fraud in the inducement? a. a statement of value, such as "this is the best car in town for the money" b. "This car has a new radiator" c. "In my opinion, this is the best buy for the money" d. "This style of jacket is going to to be the most popular style next year"

b. "This car has a new radiator"

mistake in the meaning of terms

no contract formed if the parties have different meaning to their assent

Matt sells bikes at a local discount store. To encourage Bob to buy a more expensive model than he originally contemplated, Matt tells Bob, "This is the most awesome bike money can buy at this price. You can expect lots of riding pleasure." Based on this statement Bob buys the bike. A week later, before his bike is fully paid for, Bob sees a far superior bike for a lower price at another store. Bob a. cannot avoid the contract because the statements were opinions or sales puffing b. cannot avoid the contact if he has taken possession of the bike c. can avoid the contract with Matt because of fraud in the execution of the agreement d. can avoid the contract with Matt based on fraudulent misrepresentation

a. cannot avoid the contract because the statements were opinions or sales puffing

In order for an act or threat to constitute duress, it needs to be at least: a. contrary to public policy. b. tortious, but not necessarily criminal. c. a criminal act or threat. d. none of the above.

a. contrary to public policy.

A package is delivered to your door and the delivery person asks you to sign a receipt for the package. You actually sign a promissory note promising to pay the delivery person $5,000! The note is: a. void due to fraud in the execution. b. voidable due to fraud in the execution. c. void due to fraud in the inducement. d. voidable due to fraud in the inducement.

a. void due to fraud in the execution.

A contract assented to by a party acting under improper physical coercion is: a. void. b. voidable at the election of the coerced party. c. binding on both parties. d. none of the above.

a. void.

Which of the following would be a statement of fact? a. For the price, this is the best typewriter available. b. This is the one that I would recommend. c. This furniture was refinished last year. d. With a few more lessons, you should be able to compete in the regional dance competition.

c. This furniture was refinished last year.

Jill contracts to purchase Kevin's automobile under the belief that she can sell it at a profit to Linda, but after Jill has bought the car, she finds out that Linda isn't interested in buying it. a. could rescind the agreement if she was mistaken in her estimate of the value of auto b. can rescind the agreement c. cannot avoid the contract d. can sue Linda for detrimental reliance

c. cannot avoid the contract

Albert found a stone in his yard and took it to Bob, a jeweler, for evaluation. Although Bob knew what the stone was, he told Albert that he wasn't sure as to the nature of the stone, but that he thought it was a topaz. Bob then offered to buy the stone for $25 and Albert agreed. Later Albert found out the stone was an uncut diamond worth about $700. The sales contract: a. can be voided upon fraud in the execution b. can be voided based upon fraudulent misrepresentation c. is a valid contract that should be enforced by the law, because neither party knew the exact nature of the stone at the time of the sale d. can be voided based upon mistake as to the identity of the subject matter

c. is a valid contract that should be enforced by the law, because neither party knew the exact nature of the stone at the time of the sale

A contract was made for 125 bales of cotton to arrive on a ship named "Peerless" from Bombay. Unbeknownst to either party to the contract, there were two ships named "Peerless," both of which were sailing from Bombay. One sailed in October and the other in December. The buyer had in mind the ship sailing in October, but the seller had in mind the ship sailing in December. Each party held his belief in good faith. When the goods failed to arrive on time, the buyer sued for breach of contract. The court found: a. the seller was guilty of fraud in the inducement for failing to disclose to the buyer which ship would contain the goods b. the seller was in breach and mush pay damages c. no contract existed due to mistake in meaning of terms d. none of these

c. no contract existed due to mistake in meaning of terms

In determining whether an improper threat constitutes duress, it must be shown that: a. the threat would have induced a reasonable person to assent to the contract. b. the threat was intended by the coercing party to coerce assent on the part of the person claiming to be the victim of duress. c. the threat actually coerced assent on the part of the person claiming to be the victim of duress. d. none of the above

c. the threat actually coerced assent on the part of the person claiming to be the victim of duress.

A contract entered into or induced by undue influence on the part of the dominant party is: a. valid. b. void. c. voidable. d. unenforceable.

c. voidable.

Steven has a typed copy of a contract, which he would like to have Thomas sign. Thomas, who needs glasses to read typing, doesn't want to sign until he has read the document, but Steven convinces Thomas to sign it anyway, because it is a "standard" contract for this type of situation. Is the contract which Thomas signed binding upon him? a. yes, because he has made a unilateral mistake of law b. no, because he entered into it based upon fraud in the execution c. yes, because he was negligent in not ascertaining its contents d. no, because he did not read it

c. yes, because he was negligent in not ascertaining its contents

Marcus is a salesman for Outdoor Life. He is telling a potential customer the virtues of a particular tent, by making the claim that "It's tougher than a Baylor bear!" If this customer buys the tent, only to find it destroyed by bears in the campground, a. she has a valid claim because Marcus had knowledge that his statements were false and the statements were made with the intention to deceive b. she does not have a valid claim because Marcus is not an expert in bears or tents c. she has a valid claim because she has justifiably relied upon Marcus' representation d. she does not have a valid claim because Marcus' talk was just sales puffery

d. she does not have a valid claim because Marcus' talk was just sales puffery

fraud in the execution

deceives you about the nature of the contract; renders a contract void

T/F Actionable fraud can usually be based on a statement of opinion as well as a statement of fact.

false

T/F Bill Businessman has decided to buy a copying machine on an installment contract from the Business Supply Store. After looking at machines, Bill is in a hurry, so he signs the agreement without reading it. Later, he discovers that the interest rate is 22% and that there are no guarantees on the machine. Bill can avoid the contract based on mistake.

false

T/F Duress in the form of improper threats must be explicit in order to render the resulting contract voidable.

false

T/F Duress in the form of physical force renders the resulting agreement voidable.

false

T/F Harold Homeowner went to Al's Auto Dealership to look at cars. Harold found a 1980 Plymouth Horizon that he thought would be a good car for his teenagers to drive to school. Al said, "This is the best car in town." Harold buys it for $1,000. Two weeks later, the car breaks down. Al is guilty of fraud in the inducement.

false

T/F In deciding whether a threat is sufficient to constitute duress, the fact that the act or threat would not affect a person of average strength and intelligence is determinative.

false

T/F When parties are dealing at arm's length, silence or nondisclosure usually constitutes fraud.

false

T/F A contract induced by an innocent misrepresentation is actionable provided all of the remaining elements of fraud are present and the misrepresentation is material.

true

T/F Active concealment, or action intended or known to be likely to keep another from learning a fact he otherwise would have learned, can form the basis for fraud.

true

T/F Before one can avoid a contractual obligation based upon undue influence, there must exist a confidential relationship between the parties involved.

true

T/F Fraud in the execution consists of a misrepresentation that deceives the defrauded person as to the very nature of the contract being entered.

true

T/F Fraud in the inducement will result in the contract being voidable.

true

T/F In a legally challenged contract between a guardian and his ward, the law presumes that the guardian took advantage of the ward.

true

T/F It has generally been held that contracts induced by threats of criminal prosecution are voidable, regardless of whether the coerced party had committed an unlawful act.

true

T/F Justifiable reliance requires that the misrepresentation contribute substantially to the misled party's decision to enter into the contract.

true

T/F Undue influence is the taking of unfair advantage of a person by reason of a dominant position based upon a confidential relationship.

true