Business Law Chapter 12

23. Which of the following occurs when a party threatens to file a criminal lawsuit unless consent is given to the terms of a contract? A. Duress B. Undue influence C. Durable fraud D. Criminal influence E. Duress and undue influence, but not durable fraud

A. Duress

24. Which of the following occurs when a party threatens to file a frivolous civil lawsuit unless consent is given to the terms of a contract? A. Duress B. Undue influence C. Durable fraud D. Criminal influence E. Duress and undue influence, but not durable fraud

A. Duress

11. A[n] ______ mistake is a mistake that is shared by both parties to an agreement. A. Unclear B. Mutual C. Unilateral D. Clear E. Single

B. Mutual

20. What is the effect of a negligent misrepresentation? A. There is no effect because there is no such term as "negligent misrepresentation." B. It is treated the same as an innocent misrepresentation. C. It is treated the same as a fraudulent misrepresentation. D. It is treated the same as a material misrepresentation. E. It is treated the same as an implied misrepresentation.

C. It is treated the same as a fraudulent misrepresentation.

13. In cases where both parties to a contract are mistaken about either a current or a past material fact, either can choose to ______ the contract. A. Uphold B. Confirm C. Rescind D. Refute E. Disclaim

C. Rescind

8. Legal assent is absent when a legal ______ occurs. A. Obstacle B. Question of law C. Question of fact D. Decisis E. Mistake

E. Mistake

1. Mistakes in contract law result from untrue statements made by one party to the contract. True False

False

4. In legal terms nondisclosure involves the active hiding of the truth about a material fact. True False

False

2. For fraudulent misrepresentation to be the basis for a contract rescission, the statement of fact need not be an actual assertion. True False

True

3. A negligent misrepresentation results when the party making the statement would have known the truth about the fact had she used reasonable care to discover or reveal it. True False

True

5. Scienter is present when the party accused of making the fraudulent assertion believed that the assertion was false or made the claim without any regard for whether it was true or false. True False

True

17. Which of the following is true regarding the effect of an innocent misrepresentation on a contract? A. It permits the party that was misled by the false statement to rescind the contract. B. It permits the party who made the false statement to rescind the contract. C. It permits either the party that was misled by the false statement or the party who made the false statement to rescind the contract. D. It makes the contract void. E. It permits either the party that was misled by the false statement or the party who made the false statement to rescind the contract, and it also makes the contract void.

A. It permits the party that was misled by the false statement to rescind the contract.

18. Which of the following is available to a party who was misled by a false statement contained in an innocent misrepresentation? A. Rescission of the contract only B. Compensatory damages along with rescission of the contract C. Punitive damages in addition to compensatory damages and the right to rescind the contract D. Exemplary damages in addition to compensatory damages and the right to rescind the contract E. Relevant damages only

A. Rescission of the contract only

30. Which of the following is the most likely result in the dispute between Marcy and Lucy regarding which used truck was sold assuming that both Marcy and Lucy were each innocently mistaken and did not intend to defraud the other? A. The contract will be rescinded. B. Marcy will be allowed to pick the truck she wants to buy because she is the buyer, and she may also recover damages. C. Lucy will be allowed to pick the truck she wants to sell because she is the seller. D. Marcy will be allowed to pick the truck she wants to buy because she also had a contract on the ancillary farm. E. Marcy will be allowed to pick the truck she wants to buy because she is the buyer, but she may not recover damages.

A. The contract will be rescinded.

27. Assuming that Lucy innocently made a misrepresentation regarding the spring running through the corner of the farm with no reason to believe that was not correct, which of the following is true, considering only the lack of a spring issue, if Marcy does not want to go through with the sale? A. Marcy may rescind the contract and recover compensatory damages only. B. Marcy may rescind the contract, but she may not recover damages. C. Marcy may sue for damages, but she may not rescind the contract. D. Because Lucy acted with scienter, Marcy may receive reliance damages in addition to compensatory damages, but she may not rescind the contract. E. Because Lucy acted with scienter, Marcy may receive reliance damages in addition to compensatory damages, and she may rescind the contract.

B. Marcy may rescind the contract, but she may not recover damages

10. When a contract is voidable, it may be _____. A. Chargeable B. Rescinded C. Deassented D. Reassented E. Uncharged

B. Rescinded

21. Which of the following refers to special relationships in which one person has taken advantage of his or her dominant position in a relationship to unduly persuade the other person? A. Fraudulent misrepresentation B. Undue influence C. Pressing dominance D. Pressing persuasion E. Relationship dominance

B. Undue influence

26. The resulting contract from an agreement reached because one of the parties has so much more bargaining power than the other that he or she dictates the terms of the agreement is called which of the following? A. An outrageous contract B. An out-of-bounds contract C. An adhesion contract D. An untrue contract E. An unaffirming contract

C. An adhesion contract

12. Although there are some exceptions, a[n] ______ mistake does not generally void a contract. A. Unclear B. Mutual C. Unilateral D. Clear E. Single

C. Unilateral

15. Which of the following must a mutual mistake involve in order for a mutual mistake to interfere with legal consent? A. A basic assumption about the subject matter of the contract only. B. A material effect on the agreement only. C. A basic assumption about the subject matter of the contract and an adverse effect on a party who did not agree to bear the risk of mistake at the time of the agreement, but not a material effect on the agreement. D. A basic assumption about the subject matter of the contract, an adverse effect on a party who did not agree to bear the risk of mistake at the time of the agreement, and a material effect on the agreement. E. An admission by one of the parties that a misrepresentation occurred.

D. A basic assumption about the subject matter of the contract, an adverse effect on a party who did not agree to bear the risk of mistake at the time of the agreement, and a material effect on the agreement.

22. Which of the following is involved in a situation in which a person refuses to perform according to a contract unless the other person either signs another contract with the one making the threat or pays that person a higher price than was specified in the original agreement? A. Fraudulent duress B. Contractual duress C. Negligent duress D. Economic duress E. Specific duress

D. Economic duress

29. Which of the following would be the result if Marcy attempts to rescind the contract and recover damages only on the basis of the neighbor's objection to a pig farm? A. Marcy may rescind the contract and recover damages because Lucy made an implied misrepresentation. B. Marcy may rescind the contract but may not recover damages because Lucy made an implied misrepresentation. C. Marcy may recover damages but may not rescind the contract because Lucy made an implied misrepresentation. D. Marcy may not rescind the contract nor may she recover damages because she, Marcy, made a unilateral mistake. E. Marcy may rescind the contract but may not recover damages because she, Marcy, made a unilateral mistake.

D. Marcy may not rescind the contract nor may she recover damages because she, Marcy, made a unilateral mistake.

28. Assuming that Lucy fraudulently made a misrepresentation regarding the spring running through the corner of the farm knowing the statement was not correct, which of the following is true, considering only the lack of a spring issue, if Marcy does not want to go through with the sale? A. Marcy may rescind the contract, and she will recover $10,000 in damages which is an amount set by federal law. B. Marcy may rescind the contract, but she may not recover damages. C. Marcy may sue for compensatory damages regardless of whether she can establish injury, but she may not rescind the contract. D. Marcy may rescind the contract, and she may also sue for compensatory damages if she can establish injury. E. Marcy may rescind the contract and she may also recover damages, but only nominal damages.

D. Marcy may rescind the contract, and she may also sue for compensatory damages if she can establish injury.

19. A[n] ______ misrepresentation results when the party making the statement would have known the truth about the fact had he used reasonable care to discover or reveal it. A. Innocent B. Material C. Immaterial D. Negligent E. Scienter

D. Negligent

25. Which of the following occurs when a party threatens to file a nonfrivolous civil lawsuit unless consent is given to the terms of a contract? A. Duress B. Undue influence C. Durable fraud D. Criminal influence E. None of the above

E. None of the above

16. When a person who makes a misrepresentation has no knowledge about the falsity of the claim, it is said that the person lacked ______. A. Information B. Premeditation C. Planning D. Plotting E. Scienter

E. Scienter

14. George offers to sell Penelope a ring that George found in his yard. He and Penelope look at the ring and decide that they are not sure what it is, probably just a shiny stone. Penelope pays George $10 for the ring. The ring turns out to be a diamond worth much more than $10. George wants the ring back, and Penelope refuses. What is the most likely result? A. The ring will be returned to George because of mutual mistake. B. The ring will be returned to George because of unilateral mistake. C. The ring will be returned to George because equity. D. The ring will remain with Penelope unless George can establish that she was negligent in not recognizing the ring's true value. E. The ring will remain with Penelope because the parties contracted on the assumption that they did not know the value of the ring.

E. The ring will remain with Penelope because the parties contracted on the assumption that they did not know the value of the ring.

9. What was the result in Scott v. Mid Carolina Homes, Inc., the case in the text in which the defendant attempted to rescind a contract to sell a mobile home because the salesperson was acting under a mistake of fact when he gave the plaintiff the sales price? A. The seller was allowed to rescind the contract because a unilateral contract was involved. B. The seller was allowed to rescind the contract because a bilateral contract was involved. C. The seller was allowed to rescind the contract because the mistake involved a price differential of over 25%. D. The seller was allowed to rescind the contract because the mistake involved a price differential of over 50%. E. The seller was not allowed to rescind the contract.

E. The seller was not allowed to rescind the contract.

6. Undue influence refers to those special relationships in which one person has taken advantage of his or her dominant position in a relationship to unduly persuade the other person. True False

True

7. Threatening physical harm or extortion to gain consent to a contract is classified as duress. True False

True