Business law chapter 13-16 exam

Misrepresentation and Fraud

Innocent misrepresentation means the owner believes the statement to be true and has a good reason for that belief. Fraudulent misrepresentation means the owner knows that the statement is false, Or that the speaker makes a reckless misrepresentation.

Which of the following is true regarding the effect of an innocent misrepresentation on a contract?

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

City Transport Corporation and Midwest Warehouses, Inc., enter into a short-term lease for a warehouse. To be enforceable, the lease must be in writing if the warehouse is valued at

any of the above

regulatory license

law, medical, real estate license. cannot enforce contract without license.

Harry promises to pay Larry not to park in a no-parking zone in front of Harry's house. The agreement is

not enforceable because Larry has no legal right to park in the no-parking zone.

Nora promises to give Owen $500 because he does not have as much money as other people. Nora's promise is

not enforceable because Owen has not given consideration in return.

In a(n) contract, the seller guarantees to sell 100% of its output to one buyer, and the buyer agrees to accept the entire quantity. This kind of arrangement ____________ acceptable under the Uniform Commercial Code.

output; is

Exculpatory Clauses

part of a contract that attempts to release you from liability for injury to another party: Generally unenforceable when: the affected activity is in the public interest, such as medical care, public transportation, or some essential service. it attempts to exclude an intentional tort or gross negligence. the parties have generally unequal bargaining power. it is not clearly written and readily visible.

revenue raising license

raises money for the state. like hunting or fishing license

Angela makes a material misstatement of fact to Lance which he relies on it when he signs Angela's contract. Fraud exists if Angela made the misstatement...

recklessly and carelessly

Shelley celebrates her eighteenth birthday and decides that she no longer wishes to keep a car that she bought when she was seventeen. Her right to disaffirm will depend on whether

she acts within a reasonable period of time after reaching the age of majority.

Undue Influence

sneaky or passive way of overriding free will To prove there has been undue influence, one must demonstrate: A relationship between the two parties either of trust or of domination, and Improper persuasion by the stronger party

The common law statute of frauds requires that to be "in writing" an agreement must be signed by....

the defendant

A contract in which the stronger party has such power that they can dictate the contractual terms is often considered an adhesion contract.

true

A covenant not to compete will be upheld only if it is reasonable with respect to both its duration and geographical scope.

true

A minor who affirmatively misrepresents himself or herself to be an adult will not be able to disaffirm a contract, or will be held responsible in tort, in most states.

true

Generally, contracts calling for the conveyance of an interest in land must be in writing to be enforceable.

true

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

Steven, who is Wesley's guardian and trusted advisor, convinces Wesley that buying a certain parcel of land from Steven's brother-in-law at a price that is greatly inflated is a good deal. If in fact it is not a good deal, Steven may be liable for

undue influence

______ mistake is the result of an error by only one party about a material fact.

unilateral

Licensing Statutes

When a licensing requirement protects the public, any contract made by an unlicensed worker is unenforceable. When a licensing requirement is designed merely to raise revenue, a contract made by an unlicensed person is generally enforceable.

UCC: Unconscionability

With the creation of the Uniform Commercial Code (UCC), the law of unconscionability got a boost. The Code explicitly adopts unconscionability as a reason to reject a contract. Although the Code directly applies only to the sale of goods, its uncon- scionability section has proven to be influential in other cases as well, and courts today are more receptive than they were 100 years ago to a contract defense of fundamental unfairness.

For consideration to exist, there must be:

(a) A bargained-for exchange

Adhesion Contracts

Adhesion contracts are standard form contracts prepared by one party and given to the other on a "take it or leave it" basis. They are generally enforced when the two parties are of equal power, but when the parties are unequal, the contract may be ruled unconscionable.

Contracts That Must Be in Writing

Agreement for Interest in Land - A contract for interest in land must be in writing to be enforceable.

MINORS - EXCEPTIONS

Necessaries A necessary is something essential to the minor's life and welfare. On a contract for necessaries, a minor must pay for the value of the benefit received. Misrepresentation of Age Some states will not allow a minor to disaffirm if he has lied about his age. Other states allow the minor to receive only the value of the returned goods.

Contracts that Violate Public Policy

Restraint of Trade: Noncompete Agreements Exculpatory Clauses Bailment Cases Unconscionable Contracts Adhesion Contracts

The Parol Evidence Rule

When two parties make an integrated contract, neither one may use parol evidence to contradict, vary, or add to its terms. Exception: Incomplete or Ambiguous If a court determines that a written contract is incomplete or ambiguous, it will permit parol evidence. Exception: Misrepresentation or Duress A court will permit parol evidence of misrepresentation or duress.

An obligation is enforceable only if it is supported by past consideration.

false

Covenants not to compete are common features of employment contracts. Currently, courts ____________ enforce these clauses.

usually

Duress/economic duress

"holding a gun to your head economically" Financial distress for one party

dangerous act

6% per year starting 30 days after debt became due

Ted's wallet is as empty as his bank account, and he needs $3500 immediately. Fortunately, he has three gold coins that he inherited from his grandfather. Each is worth $2500, but it is Sunday, and the local rare coins store is closed. When approached, Ted's neighbor Andrea agrees to buy the first coin for $2300. Another neighbor, Cami, agrees to buy the second for $1100. A final neighbor, Lorne, offers "all the money I have on me" - $100 - for the last coin. Desperate, Ted agrees to the proposal. Which of the deals is supported by consideration?

(a) Ted's agreement with Andrea, only (b) Ted's agreements with Andrea and Cami, only (c) All three of the agreement

UCC'S STATUTE OF FRAUDS SALE OF GOODS - UCC §2-201(1) - THE BASIC RULE

A contract for sale of goods worth $500 or more is not enforceable unless there is some writing, signed by the defendant, indicating that the parties reached an agreement. A change has been proposed to raise the minimum from $500 to $5,000 and to eliminate the one-year rule in sales of goods contracts.

SETTLEMENT OF DEBTS —UNLIQUIDATED DEBT

A debt is unliquidated if: (1) the parties dispute whether any money is owed, or (2) the parties agree that some money is owed but dispute how much. The parties may agree to settle for less than what is owed; this "accord and satisfaction" will be enforced if the debtor pays the agreed amount.

Wagers

A gambling contract is illegal unless it is specifically authorized by state statute. Internet gambling sites often operate from a legal location, but most states outlaw online betting. Someone taking out a policy on the life of another must have an insurable interest in that person -- or else it becomes a "wager" on their life.

SETTLEMENT OF DEBTS —LIQUIDATED DEBT

A liquidated debt is one in which there is no dispute about the amount owed. In cases of liquidated debt, if the creditor agrees to take less than the full amount as full payment, her agreement is not binding. If the debtor offers a different performance to settle the debt and the creditor agrees, the agreement is binding.

Mistake- mutual

A mutual mistake occurs when both parties negotiate based on the same factual error. If the parties contract based on an important factual error, the contract is voidable by the injured party. Conscious Uncertainty No rescission is allowed where one of the parties knows she is taking a risk.

Preexisting Duty

A promise to do something the promisor is already obligated to do is not consideration. Exception: Additional work. When a promisor agrees to do something above and beyond what he is obligated to do, the promise is generally valid consideration. Exception: Modification. If both parties agree to a modification, the best solution is to rescind the contract and draft a new one.

contracts that must be in writing pt2

Agreements That Cannot Be Performed Within One Year - Unenforceable unless in writing. Promise to Pay Debt of Another - When one person agrees to pay the debt of another as a favor to that debtor, it is called a collateral promise. If the promisor makes the guarantee out of self-interest, the statute of frauds does not apply.

UCC'S STATUTE OF FRAUDS SALE OF GOODS -UCC §2-201(3) - SPECIAL CIRCUMSTANCES

An oral contract may be enforceable, even without a written memorandum, if: The seller is specially manufacturing the goods for the buyer, or The defendant admits in court proceedings that there was a contract, or The goods have been delivered or they have been paid for.

Unconscionable contracts

An unconscionable contract is one that a court refuses to enforce because of fundamental unfairness. The two factors that most often led a court to find unconscionability were: oppression - meaning that one party used its superior power to force a contract on the weaker party; and surprise - meaning that the weaker party did not fully understand the consequences of its agreement.

Mr. and Ms. Ahrens wanted to buy a trailer court owned by Charles Dodd. The Ahrenses drafted and signed a contract to buy "Blue Bell Trailer Court" for $305,000. The contract stated that the trailer court included 31 acres. Dodd held the deed to a 33.72 acre tract of land; the land included the 31 acres of Blue Bell Court and two more acres on which Dodd lived. The Ahrenses wrote a check to Dodd for $65,000, noting "trailer park" on the check. Dodd cashed the check. Later, Dodd refused to sell the trailer park to the Ahrenses, who sued. Question: This case raises two issues under the statute of frauds. What are they?

Answer: The two issues are, first, whether there was a writing and, second, whether the writing was clear and complete.

capacity

Capacity is the legal ability to enter into a contract. Minors (under age 18) and those with mental impairment usually lack capacity. Consent refers to whether a contracting party truly understood the terms of the contract and whether she made the agreement voluntarily. Problems with consent and capacity make a contract voidable.

Accord & Satisfaction by Check

Common Law ruling: If a debtor writes "Full Settlement" on a check, and the creditor cashes it, the payment is in full whether or not it was the right amount. UCC §3-311 Affirms the Common Law ruling, but adds two exceptions: Organizations may notify debtors that any offers to settle debt for less than the whole amount must be directed to a certain person. The creditor can refund the paid amount within 90 days and then demand the full amount.

Consideration

Consideration is the inducement, price, or promise that causes a person to enter into a contract and forms the basis for the parties' exchange. Consideration can be anything that someone might want to bargain for. A promisor is the person who makes the promise, and promisee, the person to whom the promise is made. Value - Consideration requires legal benefit to the promisor or legal detriment to the promisee. Legal benefit means receiving something of measureable value. Bargained-for Exchange - Consideration involves reciprocity. The parties must have bargained for whatever was exchanged and struck a deal.

Mentally impaired persons

Definition A person with mental illness or defect, who is unable to understand the nature and consequences of a transaction. Generally creates only a voidable contract. Intoxication When an intoxicated person makes a contract, it is voidable. Restitution A mentally infirm party who seeks to void a contract must make restitution.

MINORS

Disaffirmance A minor generally may disaffirm a contract; that is, he may notify the other party he refuses to be bound by the agreement. The minor also has the option of filing a suit to rescind the contract, that is, to have a court formally cancel it. Restitution A minor who disaffirms a contract must return the consideration he has received, to the extent he is able. Timing Minors may disaffirm a contract up to a reasonable time after turning 18, unless they ratify the contract after turning 18.

Electronic contracts

E-signatures are valid in all 50 states. Almost all states have adopted the Uniform Electronic Transactions Act UETA declares that electronic contracts and signatures are as enforceable as those on paper. Electronic Signatures in Global and National Commerce Act (E-SIGN) extends UETA's principles to interstate and foreign commerce.

Preexisting Duty: Exceptions

Exception: Additional Work When a party agrees to do something above and beyond what he is obligated to do, his promise is generally valid consideration. Exception: Modification Additional consideration is necessary for a modification of contract terms because it is unfair for one party to get something more, while the other does not. Exception: Unforseen Circumstances When unforeseen circumstances cause a party to make a promise regarding an unfinished project, that promise is generally valid consideration.

BAILMENT CASES

Exculpatory clauses are very common in bailment cases. Bailment means giving possession and control of personal property to another person. The person giving up possession is the bailor, and the one accepting possession is the bailee.

Melnick built a house for Gintzler, but the foundation was defective. Gintzler agreed to accept the foundation if Melnick guaranteed to make future repairs caused by the defects. Melnick agreed but later refused to make any repairs. Melnick argued that his promise to make future repairs was unsupported by consideration. Who will win the suit? Is either party acting unethically? Which one, and why?

Gintzler should, and did. The consideration to support Melnick's promise of repairs was Gintzler's acceptance of the defective foundation. He was under no obligation to accept a house in that condition. Gintzler v. Melnick, 116 N.H. 566,364 A.2d 637 (1976).

PLAINTIFF'S REMEDY FOR MISREPRESENTATION OR FRAUD

If the maker's statement is fraudulent, the injured party generally has a choice of rescinding the contract or suing for damages. Sale of Goods UCC §2-721 permits a party to rescind a contract and then sue for damages whether the misrepresentation was fraudulent or innocent.

Contracts that Violate a Statute

Illegal agreements fall into two groups: those that violate a statute, and those that violate public policy. Wagers Licensing Statutes Usury

Mutuality of Obligations

Illusory Promise If one party's promise is conditional, the other party is not bound to the agreement. Requirements and Output Contracts under UCC See Ch. 11 for definitions of these contracts. Section 2-306 of the UCC expressly allows output and requirements contracts in the sale of goods

Kerry finds a big green ring in the street. She shows it to Leroy, who says, "Wow. That could be valuable." Neither Kerry nor Leroy knows what the ring is made of or whether it is valuable. Kerry sells the ring to Leroy for $100, saying, "Don't come griping if it turns out to be worth two dollars." Leroy takes the ring to a jeweler who tells him it is an unusually perfect emerald, worth at least $75,000. Kerry sues to rescind.

Kerry will lose, based on conscious uncertainty. If Leroy knew the ring was valuable, Kerry could win based on unilateral mistake. If both parties were certain that it was worthless, Kerry could win based on mutual mistake. But here, the parties are aware that it might be priceless and might be worthless. Each has accepted the risk and must live with the results.

Tindall operated a general contracting business in Montana. He and Konitz entered into negotiations for Konitz to buy the business. The parties realized that Konitz could succeed with the business only if Tindall gave support and assistance for a year or so after the purchase, especially by helping with the process of bidding for jobs and obtaining bonds to guarantee performance. Konitz bought the business and Tindall helped with the bidding and bonding. Two years later, Tindall presented Konitz with a contract for his services up to that point. Konitz did not want to sign but Tindall insisted. Konitz signed the agreement, which said: "Whereas Tindall sold his contracting business to Konitz and thereafter assisted Konitz in bidding and bonding without which Konitz would have been unable to operate, NOW THEREFORE Konitz agrees to pay Tindall $138,629." Konitz later refused to pay. Comment.

Konitz need not pay. Tindall's work had already been performed, without any expectation of payment, when the parties signed the contract. Past consideration is no consideration, and the contract is void. Tindall v. Konitz Contracting, Inc., 249 Mont. 345, 783 P.2d 1376, 1989 Mont. LEXIS 348 (1989).

Kent contracted to provide John consulting services for $20. per hour. The fair value of the services was $90. per hour, but Kent badly needed the money due to a debt to a loan shark. John was aware of the debt, although he did not have a special relationship with Kent and had nothing to do with the debt. Kent now wishes to rescind the contract claiming duress.

Lose because John's actions did not constitute duress.

The Statute of Frauds

Many agreements are unenforceable, unless it, or some memorandum of it, is in writing and signed. These include: For any interest in land That cannot be performed within one year To pay the debt of another Made by an executor of an estate Made in consideration of marriage; and For the sale of goods over $500 Once a contract is fully executed, it makes no difference that it was unwritten.

Which of the following requires consideration in order to be binding on the parties?

Modification of a contract involving the sale of real estate

Promissory Estoppel

Moral Consideration: Even in the absence of consideration, a court may enforce a promise, if this will prevent a great injustice to the relying party. Some courts will require donors to make good on their pledges to charities, even though the charitable organization has promised nothing in return. This is called "moral consideration."

Brockwell left his boat to be repaired at Lake Gaston Sales. The boat contained electronic equipment and other personal items. Brockwell signed a form stating that Lake Gaston had no responsibility for any loss to any property in or on the boat. Brockwell's electronic equipment was stolen and other personal items were damaged, and he sued. Is the exculpatory clause enforceable?

No, said the North Carolina Supreme Court. The court held that boat repairing is in the public interest and that it is against public policy for a company in that business to use an exculpatory clause to escape liability for its own negligence. The clause was void and Brockwell won. Note that while most states would extend public policy to cover auto repairs, not all states would include boat repairs, Brockwell v. Lake Gaston Sales & Service, 105 N.C. App. 226, 412 S.E.2d 104, 1992 N.C. App. LEXIS 39 (N.C. Ct. App. 1992

Roy Newburn borrowed money and bought a $49,000 truck from Treadwell Ford. A few months later the truck developed transmission problems. Newburn learned that the truck had 170,000 more miles on it than the odometer indicated. The company admitted the mileage and promised to install a new transmission free. Treadwell did install the new transmission, but when Newburn came to pick up the truck, Treadwell demanded that he sign a general release absolving the dealership of any claims based on the inaccurate mileage. Treadwell refused to turn over the truck until Newburn finally signed. The truck broke down again, and delays cost Newburn so much income that he fell behind on his loan payments and lost the truck. He sued Treadwell, which defended based on the release. Is the release valid?

No. Newburn signed under economic duress. Treadwell had no right to hold the truck, Newburn had no reasonable alternative, and Treadwell's conduct caused economic distress. The release was invalid and Newburn was entitled to damages for his losses. Newburn v. Dobbs Mobile Bay, Inc., 657 So.2d 849, 1995 Ala. LEXIS 137 (Ala.1995).

Guyan Machinery, a West Virginia manufacturing corporation, hired Albert Voorhees as a salesman and required him to sign a contract stating that if he left Guyan he would not work for a competing corporation anywhere within 250 miles of West Virginia for a two-year period. Later, Voorhees left Guyan and began working at Polydeck Corp., another West Virginia manufacturer. The only product Polydeck made was urethane screens, which comprised half of 1 percent of Guyan's business. Is Guyan entitled to enforce its noncompete clause?

No. The noncompete clause is unenforceable here because the two companies are not really in competition and Guyan therefore has no confidential information or customer lists to protect. Voorhees v. Guyan Machinery Co., 191 W. Va. 450, 446 S.E.2d 672, 1994 W.Va. LEXIS 27 (1994).

Special problem: Silence

Nondisclosure of a fact is misrepresentation only when disclosure is necessary: To Correct a Previous Assertion To Correct a Basic Mistaken Assumption A seller must report any known latent defect that the buyer is not expected to discover himself. To Correct a Mistaken Understanding about a Writing In A Relationship of Trust When one party naturally expects openness and honesty, based on a close relationship, the other party must act accordingly.

Joe purchased a motorcycle from Big Honkin Bikes on May 1, 2011. Joe's 18th birthday is June 17, 2011. Which of the following actions would not be effective as a ratification of the contract of purchase?

On June 16, 2011, Joe remitted an installment payment.

PAROL EVIDENCE

Parol evidence refers to anything (apart from the written contract itself) that was said, done, or written before the parties signed the agreement or as they signed it.

contracts that must be in writing pt 3

Promise Made by and Executor of an Estate - An executor's promise to use her own funds to pay a debt of the deceased must be in writing to be enforceable. Promise Made in Consideration of Marriage - Unenforceable unless in writing.

CPA QUESTION Two individuals signed a contract that was intended to be their entire agreement. The parol evidence rule will prevent the admission of evidence offered to:

Prove the existence of a contemporaneous oral agreement modifying the contract

Mistake-unilateral

Sometimes only one party enters a contract under a mistaken assumption, a situation called unilateral mistake. to rescind for unilateral mistake, a party must demonstrate that she entered the contract of a basic factual error and that either: (1) enforcing the contract would be unconscionable or (2) the nonmistaken party knew of the error.

KwikFix, a Fortune 500 company, contracts with Allied Rocket, another huge company, to provide the software for Allied's new Jupiter Probe rocket for $14 million. The software is negligently designed, and when the rocket blasts off from Cape Kennedy, it travels only as far as Fort Lauderdale. Allied Rocket sues for $200 million and proves that as a result of the disaster it lost a huge government contract, worth at least that much, which KwikFix was aware of. KwikFix responds that its contract with Allied included a clause limiting its liability to the value of the contract. Is the contract clause valid?

The clause is enforceable because both parties are sophisticated corporations. There is no unconscionability problem because this is not an adhesion contract and the terms were negotiated by sophisticated corporations that could have taken their business elsewhere if they were dissatisfied with the contract.

Raymond Barrows owned a 17-acre parcel of undeveloped land in Seaford, Delaware. For most of his life Mr. Barrows had been an astute and successful businessman, but by the time he was 85 years old, he had been diagnosed as "very senile and confused 90 percent of the time." Glenn Bowen offered to buy the land. Barrows had no idea of its value, so Bowen had it appraised by a friend, who said it was worth $50,000. Bowen drew up a contract, which Barrows signed. In the contract, Barrows agreed to sell the land for $45,000, of which Bowen would pay $100 at the time of closing; the remaining $44,900 was due whenever Bowen developed the land and sold it. There was no time limit on Bowen's right to develop the land or any interest due on the second payment. Comment.

The contract is voidable by Barrows's family. Barrows suffered from a mental impairment, senility. The contract is completely one sided, with almost no money as a down payment and no interest. This reinforces the impression that Barrows was impaired. The family was permitted to rescind. Barrows v. Bowen, 1994 Del. Ch. LEXIS 63 (Del. Ch. 1994).

what the writing must contain

The contract or memorandum must be signed by the defendant, and It must state with reasonable certainty: the name of each party the subject matter of the agreement, and all of the essential terms and promises.

Restraint of Trade

To be valid, an agreement not to compete must be ancillary to a legitimate bargain. Sale of a Business When a noncompete agreement is ancillary to the sale of a business, it is enforceable if reasonable in time, geographic area, and scope of activity. Employment A noncompete clause in an employment contract is generally enforceable only if it is essential to the employer, fair to the employee and harmless to the general public.

Reality of consent

To rescind a contract based on misrepresentation or fraud, a party must show three things: (1) there was a false statement of fact; Puffery (exaggerated "sales talk") is not a statement of fact. (2) the statement was fraudulent or material; and (3) the injured person justifiably relied on the statement.

USURY

Usury laws prohibit charging excess interest on loans. Credit card debt: Even if a state's usury statute applies to credit cards, savvy lenders can often avoid limits on interest rates. The Supreme Court has ruled that when national banks issue a credit card, they can use the rate of their own state or of that of the consumer, whichever is higher.

Now assume that Vicky has loaned George $50,000. George again mentions that he is going to learn to hang glide during spring break, so Vicki purchases the $100,000 life insurance policy on George's life. If George dies and the insurance company refuses to pay...

Vicki will win $50,000.

At a fraternity party, George mentions that he is going to learn to hang glide during spring break. Vicki, a casual friend, overhears him, and the next day she purchases a $100,000 life insurance policy on George's life. George has a happy week of hang gliding. But on the way home, he is bitten by a parrot and dies of a rare tropical illness. Vicki files a claim for $100,000. The insurance company refuses to pay.

Vicki will win nothing.

UCC'S STATUTE OF FRAUDS SALE OF GOODS -UCC §2-201(2) - MERCHANTS' EXCEPTION

Within a reasonable time of making an oral contract, if one merchant sends a written confirmation to the other, and the confirmation is definite enough to bind the sender herself, then the merchant who receives the confirmation will also be bound by it unless he objects in writing within 10 days.

Mandy verbally tells a motorcycle dealer that she will make her son's motorcycle payments if he falls behind on them. Will Mandy be legally required to live up to this agreement?

Yes, if Mandy will be the primary driver of the motorcycle.

Ricki goes to a baseball game. The back of her ticket clearly reads: "Fan agrees to hold team blameless for all injuries - pay attention to the game at all times for your own safety!" In the first inning, a foul ball hits Ricki in the elbow. She ____________ sue the team over the foul ball. Ricky spends the next several innings riding the opposing team's first baseman. The very nicest thing she says to him is, "You suck, Franklin!" In the eighth inning, Franklin has had enough. He grabs the ball boy's chair and throws it into the stands, injuring Ricki's other elbow. Ricki _____________ sue the team over the thrown chair.

cannot; can

Red announces that he plans to paint his Rolls-Royce pink. Walker, who cannot bear the sight of pink Rolls-Royces, offers to pay Red $500 to paint the car a more traditional color. Red accepts Walker's offer. Walker's promise to pay is

enforceable because Red agreed to refrain from doing something that he was legally entitled to do.

A contract is enforceable even if the terms are so uncertainty as to performance that the promisor has not definitely promised to do anything.

false

A later promise to do what one already has a legal duty to do is legally sufficient consideration.

false

Evidence of prior agreements that differ from the terms of a subsequent written contract can be ordinarily be introduced in court to alter the written contract.

false

If the parties to a contract reasonably attach materially different meanings to a contract term, their mutual misunderstanding will prevent the contract from being rescinded.

false

Reliance on a statement of opinion issued by a non-expert will generally entitle the party who relied on the statement to damages or other relief.

false

Under the doctrine of promissory estoppel, every gratuitous promise is binding if the promisee changes position in reliance on the promise.

false

Bob sells a car to Fred but intentionally fails to mention that the odometer, which reads 39,000 miles, was disconnected 20,000 miles ago. Bob would likely be liable for

fraud

5. Jim, about to start a pickup soccer game, asks Desiree if she will hold his wallet while he plays. Desiree, a law student, says, "Sure, if you'll sign this exculpatory clause holding me blameless for negligence." Jim is very surprised, but he signs the paper that Desiree holds out for him. A bailment _________ been created. If Desiree is careless and loses the wallet, she __________ be liable to Jim.

has; will not

Raul wants to plant a garden, and he agrees to buy a small piece of land for $300. Later, he agrees to buy a table for $300. Neither agreement is put in writing. The agreement to buy the land ____________ enforceable, and the agreement to buy the table ____________ enforceable.

is not; is

Best Goods Company this week makes a new promise to pay its employee a bonus for work that they did the previous year. If Best fails to pay the bonus and the employees sue, the court will likely hold that the promise

is unenforceable because the promisor received no subsequent material benefit and the promisee rendered no subsequent services; i.e., no current consideration was given.

Scarborough's Department Store opens for business on a busy shopping day just before Christmas. A hurried clerk places a sign in the middle of a table piled high with red cashmere sweaters. The sign reads, "SALE - 100% Cashmere - $0.99 Each". The sign, of course, was supposed to read "$99 each." This is a ___________ mistake, and customers ______________ be able to demand that Scarborough's sell the sweaters for 99 cents.

unilateral; will not

Veronica has a beer and then makes a contract. She continues drinking, and her blood alcohol level eventually rises to .09, which is just above her state's threshold for drunk driving. She makes a second contract while in this condition. Veronica's first contract is ___________________, and her second contract is __________________.

valid; valid

Linda subsequently purchases a new car. The contract is is adjudicated incompetent by a court and a guardian is appointed, but she

void

Jerry is so mentally ill, that he is unable to understand the nature and consequences of his transactions, but he has not been adjudicated insane. Penny has been adjudicated insane, and a court has appointed a guardian to handle her affairs. Jerry's contracts are _____________, and Penny's contracts are ______________.

voidable; void

In December 2012, Eric hires a band to play at a huge graduation party he is planning to hold in May, 2014. The deal is never put into writing. In January 2014, if he wanted to cancel the job, Eric _____________ be able to do so. If he does not cancel, and if the band shows up and plays at the party in May, 2014. Eric ______________ have to pay them.

will; will

base statute

written agreement to pay interest in texas. maximum rate is %18 per year without worrying about usury.