Intro to Business Law Chapter 17,18, and 19

Which of the following is a commonly recognized way by which a party's contractual obligations can be terminated?

Agreement of the parties

When, before the actual time for performance, a contracting party decides not to complete the contract, this is known as a(n) ______________ repudiation

Anticipatory

Which of the following terms refers to a situation when performance is still objectively possible, but would be extraordinarily injurious or expensive to one party?

Commercial impracticability

Which of the following is not a type of contractual condition?

Deterrent condition

_________________ remedies are typically unique solutions specifically crafted to the demands of the situations

Equitable

____________________ conditions are those that are not explicitly stated, but are inferred from the nature and language of the contract

Implied

Which of the following are major obstacles to legal assent?

Mistake, misrepresentation, undue influence, duress, and unconscionability

Which of the following occurs when nearly all of the terms of the agreement are complete; there has been an honest effort to complete all of the contract terms; and there has been no willful departure from the terms of the agreement?

Substantial performance

A mistake can be of two types. One is a mistake of fact about the deal. The other is a mistake of the ____________of what is being exchanged.

Value

Contractual conditions may be _____________________

either implied by law or expressly inserted into the contract by the parties

A false assertion does not have to be an actual statement. It may also be an act of concealment or nondisclosure. This is known as a __________________

false assertion of fact

Gabe and Nelson entered into a contract where Gabe agreed to buy a sword owned by Nelson for $300. Gabe thought he was buying the Japanese sword owned by Nelson, but Nelson intended to sell the French rapier. Obviously, the two parties committed a mistake of fact which results in a(n) __________________

lack of assent

In a case where no actual damages resulted from a breach of contract, the court may award the plaintiff ___________ damages

nominal

If a person had no knowledge of a claim's falsity, we say that he or she lacked ____________

scienter

Special relationships in which one person takes advantage of a dominant position in a relationship to unfairly persuade the other interfere with that person's ability to make his or her own decision to enter into a contract is known as

undue influence

In order for a mutual mistake to interfere with legal consent, the following must be present:

1) A basic assumption about the subject matter of the contract 2) A material effect on the agreement 3) An adverse effect on a party who did not agree to bear the risk of mistake at the time of the agreement

In order for the courts to find a nondisclosure of a material fact to be equated with and have the same legal effect as a false assertion, the following elements must be present

1) A relationship of trust exists between the parties to the contract 2) There is failure to correct assertions of fact that are no longer true 3) A statute requires the disclosure, such as mandatory disclosures under residential real estate sales laws 4) The nondisclosure involves a dangerous defect, such as bad breaks in a car that is being sold

Which of the following are reasons for a court to invalidate a contract based on a unilateral mistake?

1) One party made a mistake about a material fact, and the other party knew or had reason to know the mistake 2) The mistake was caused by a clerical error that was accidental and did not result from gross negligence 3) The mistake was so serious that the contract is unconscionable, that is, so unreasonable that it is outrageous

Identify the factors that would result in rescission of a contract based on duress

1) One party threatens physical harm or extortion to gain consent to a contract 2) One party threatens to file a criminal lawsuit unless consent is given to the terms of the contract. (Threats to bring cival cases against a party to a lawsuit do not constitute duress unless the suit is frivolous) 3) One party threatens the other's economic interests (this is knows as economic duress). For instance 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 specified in the original agreement

In order for the courts to find a nondisclosure of a material fact to be equated with and have the same legal effect as a false assertion, the following elements must be present:

1) Relationship of trust exists between the parties to the contract 2) There is failure to correct assertions of fact that are no longer true 3) A statute requires the disclosure, such as mandatory disclosures under residential real estate sales laws 4) The nondisclosure involves a dangerous defect, such as bad brakes in a car that is being sold

Factors that are considered by a court in undue influence claims include all of the following:

1) Was the dominant party rushing the other party to consent? 2) Did the dominant party gain undue enrichment from the agreement? 3) Was the non-dominant party isolated from other advisers at the time of the agreement? 4) Is the contract unreasonable because it overwhelmingly benefits the dominant party?

Owens Inc. was a business that sought revenue by buying coffee beans from producers in Latin American countries, and then packaging and distributing the beans in the U.S. To maximize profits, Owens Inc. bought both the highly reputed Arabica beans and the cheaper Robusta beans. Owens Inc. would often mix the Robusta with the Arabica beans, but advertise the coffee beans as pure Arabica beans. This would allow Owens Inc. to benefit from the higher market prices of the rarer Arabica coffee. Starbucks entered into a ten-year contract with Owens Inc. to buy their marketed Arabica beans. However, on further inspection, Starbucks discovered that Owens Inc. had been misrepresenting the quality of their coffee beans. Consequently, Starbucks sought to terminate their contract with Owens Inc. A U.S. district court heard their case, and the court found that their contract lacked legal assent, and that Owens Inc. was required to pay for damages, including the money Starbucks had spent on Owens's coffee beans. But what if the facts of the case were different? Select each set of facts below that could change the power of that court to hear the case. Instead of Owens' diluting the quality of Arabica coffee beans, the producers that supplied Owens with coffee beans had laced the Arabica beans with Robusta, but marketed them to Owens as pure Arabica. Owens had no knowledge that this had occurred, and Starbucks still discovered that the Arabica beans were impure. Starbucks had been informed by Owens that Owens had laced its marketed Arabica coffee beans with Robusta beans. Owens intended to deceive Starbucks as well as other companies with whom it conducted business. Rather than Owens' lacing the Arabica coffee beans with Robusta beans, the producers that supplied Owens with coffee beans had mixed their Arabica beans with Robusta beans, and marketed them to Owen as pure Arabica. However, the court found that Owens could have discovered that this was occurring by using reasonable care.

1)Instead of Owens' diluting the quality of Arabica coffee beans, the producers that supplied Owens with coffee beans had laced the Arabica beans with Robusta, but marketed them to Owens as pure Arabica. Owens had no knowledge that this had occurred, and Starbucks still discovered that the Arabica beans were impure. 2)Starbucks had been informed by Owens that Owens had laced its marketed Arabica coffee beans with Robusta beans.

Abigail was shopping in an antique store and was drawn to what appeared to be an antique plate. THE antique dealer said the plate was created in the 1800s in England. In reality, the plate was made in China in 2000. The plate was stamped with this information on the bottom. Abigail bought he plate, but later sued for fraudulent misrepresentation. The court will not rescind the contract because ________________________________

Abigail did not have justifiable reliance since she could have easily discovered the falsity of the sellers claims

Each of the following is an example of a discharge by mutual agreement EXCEPT? Novation Mutual rescission Accord and satisfaction Alteration of the contract Substituted contract

Alteration of the contract

________________ performance occurs when all aspects of the parties' duties under the contract are carried out perfectly

Complete

____________________ conditions occur when each party's performance is conditioned on the performance of the other

Concurrent

Which of the following damages are foreseeable damages that result from special facts and circumstances arising outside the contract itself, and must be within the contemplation of the parties at the time the breach occurs?

Consequential

Which of the following is a foreseeable damages resulting from circumstances arising outside the contract itself? Compensatory damages Punitive damages Liquidated damages Nominal damages Consequential damages

Consequential damages

Which of the following refers to termination of a party's obligations under a contract?

Discharge

Which of the following is not a type of monetary damages available in a successful breach of contract lawsuit?

Existential

If a seller actively hides an important fact about the product he or she is selling, then the contract for the sale could be rescinded on which of the following grounds? Nondisclosure Fraudulent misrepresentation Unilateral mistake of fact Mutual mistake of fact Undue influence

Fraudulent misrepresentation

A substituted contract ___________ discharges the parties from their obligations under the sold contract and replaces those obligations with the new obligations imposed by the substituted contract

Immediately

Jeff was shopping for a good used car. He met Seth, the salesperson, and asked Seth many questions about the car. Seth told Jeff that the car Jeff was asking about had very low mileage and that he knew that himself since he had processed the sale of the car from the former owner. In reality, Seth had personally set back the odometer in the car. What kind of scienter did Seth have?

Intent to deceive

Each of the following is true of a mutual mistake of fact EXCEPT? A basic assumption about the subject matter of the contract must be present to establish a mutual mistake occurred. An adverse effect on a party who did not agree to bear the risk of mistake at the time of the agreement must be found to establish a mutual mistake occurred. Courts can void a contract for reason of a mutual mistake of fact only after establishing three basic conditions. Rescission is fair when a mutual mistake occurs because any agreement under such a condition is an illusion. One form of a mutual mistake occurs when one party makes a mistake about a material fact, and the other party knows about the mistake.

One form of a mutual mistake occurs when one party makes a mistake about a material fact, and the other party knows about the mistake

Which of the following is not a commonly recognized way by which a party's contractual obligations can be terminated?

Raw material price increase

Which of the following terms refers to the situation where a court allows a contract to be rewritten because the document does not reflect the parties actual agreement, or there are inconsistencies in the contract?

Reformation

Parties may agree that they simply wish to discharge each other from their mutual obligations and therefore cancel the contract. This is known as mutual _______________

Rescission

What constitutes the termination of a contract?

Rescission

What constitutes the return of any property given up under the contract?

Restitution

According to the Restatement (Second) of Contracts, discharge by reason of impracticability requires that the party claiming discharge prove all but which of the following elements?

The breaching party violated a duty of care to the party claiming discharge, and caused damages as a result

Which of the following was the result in Orville Arnold and Maxine Arnold v. United Companies and Michael T. Searls, involving the issue of whether an arbitration agreement entered into as part of a consumer loan transaction containing a substantial waiver of the consumer's rights, including access to the courts, while preserving for all practical purposes the lender's right to a judicial forum, is void as a matter of law? The court upheld the agreement based upon principles of freedom of contract. The court upheld the agreement as far as the plaintiffs' duty to arbitrate but stated that the same obligation would be imposed on the defendants. The court upheld the agreement so long as the parties agreed that plaintiffs would not be required to pay the defendants' attorney fees even if the defendants prevailed at arbitration. The court found that the waiver of the plaintiffs' rights to a judicial forum considered along with the defendants' retention of such rights and other unfair aspects of the agreement required a finding that the arbitration agreement was void. The court found that the agreement was void because a consumer loan transaction was involved.

The court found that the waiver of the plaintiffs' rights to a judicial forum considered along with the defendants' retention of such rights and other unfair aspects of the agreement required a finding that the arbitration agreement was void.

Which of the following is true regarding types of conditions? There is only one type of condition: precedent. There are two types of conditions: precedent and subsequent. There are three types of conditions: precedent, subsequent, and concurrent. There are four types of conditions: precedent, subsequent, concurrent, and timeliness. There are at least ten types of conditions, and their identification varies based upon the subject matter.

There are three types of conditions: precedent, subsequent, and concurrent.

When a party to a contract has so much more bargaining power than the other that he or she dictates the terms of the contract, then such a contract would likely be rescinded on which of the following grounds? Duress Undue Influence Fraudulent misrepresentation Unconscionability Mistake of fact Move the case from the court in one geographic location to another within the same system

Unconscionability

Abbie, an attorney, was negotiating a contract with Barb to provide her with legal services. Abbie wrote up a contract and gave it to Barb and said "take it or leave it". Can the contract be rescinded on the basis of unconscionability?

Yes, although the contract is for services and not goods, Abbie wrote up all of the terms to the contract and told Barb to "take it or leave it".

Bruce agrees to lease Tim's commercial property until Bruce is offered a job from his dream company, Google. The condition to which Bruce and Tim are agreeing to is called: a condition precedent. a condition subsequent. a condition concurrent. a novation. an implied condition

a condition subsequent.

Sometimes the parties to a contract agree to discharge each other from their obligations. They may do so through discharge by ___________ and satisfaction

accord

A contract that results from unconsionability is known as ___________________________

an adhesion contract

________________ damages are said to compensate the plaintiff for his or her loss of the benefit of the _____________

compensatory; bargain

Contracts containing conditions affecting the performance obligations of the parties are called ___________ contracts

conditional

Contractual _________________ may be either implied by law or expressly inserted into the contract by the parties

conditions

According to the Uniform Commercial Code, if the buyer breaches the contract for the sale of goods before accepting the goods and the seller is unable to resell the goods to another buyer, the seller may be able to recover the _________________ ____________________ as damages

contract price

If the breach is a minor one, it may entitle the non-breaching party to _______________, but it does not __________________ the non-breaching party from the contract

damages, discharge

Negligent misrepresentation occurs when someone makes a statement of material fact that he or she thinks is true, but he or she could have known the truth by using reasonable care to_______________________

discover or reveal the truth

In a case of fraudulent or negligent misrepresentation, a victim can___________________

either rescind the contract or keep the contract and sue for damages

James negligently misrepresented that a baseball card was a highly collectible and rare card. He did not mean to deceive the buyer of the card, but the court found that he was negligent. Therefore, the buyer will receive ____________

either rescission of the contract or damages

Specific performance is sometimes called specific _______________

enforcement

Punitive damages are also known as __________ damages

exemplary

An injunction is an order either ________________________ a person to do something or ________________________ a person from doing something

forcing; prohibiting

Consequential damages are _________________ damages that result from special facts and circumstances arising outside the contract itself

foreseeable

An intentional and knowing false representation of a material act that is intended to mislead the other party is known as a

fraudulent misrepresentation

Sometimes, when a contract is entered into, both parties recognize that the contract is to fulfill a particular purpose, and the happening of that purpose is said to be basic assumption on which the contract is made. If, due to factors beyond the control of the parties, the event does not occur, and neither party had assumed the risk of the event's non-occurrence, the contract may be discharged pursuant to the __________ of purpose doctrine.

frustration

In order to receive damages as a result of fraudulent misrepresentation, the plaintiff must demonstrate that ______

he or she was injured or harmed by the misrepresentation

If a unilateral mistake has been made about a material fact of the contract, the courts are _______________________

hesitant to void the contract

Express conditions are explicitly stated in the contract and are usually preceded by words such as conditioned on, _________________, provided that, or _____________

if, provided that, or when

Objective _____________ means it is, in fact, not possible to lawfully carry out one's contractual obligations

impossibility

The basic for a determination of unconscionability is primary the difference

in bargaining power of the parties

Courts do not allow a non-breaching party to intentionally _______________ his or her damages

increase

A false statement about a material fact that was based on an innocent belief that the false statement was true is a(n)

innocent misrepresentation

A promise that the courts will require the parties to obey is known as ______________

legal assent

A party seeking equitable relief must prove that the contract is ___________ valid, except when seeking relief in ____________-contract.

legally; quasi

Trey was a pilot for a large airline. He also spent his spare time selling his homemade vitamins. These vitamins were capsules filled with cod liver oil, but Trey told his customers that these vitamins were a cure for cancer. Trey knew that the cod liver oil in the vitamins would never cure cancer, but he made the claim anyway. He promised that if the customers would invest in a month to month delivery plan for these vitamins that the purchaser would never be plagued with cancer again. Suppose that Paul bought the vitamins and then got cancer. He would sue Trey for fraudulent misrepresentation. Paul will _______________

lose, because he should not have relied on Trey's representation

A(n) ___________________ breach discharges the non-breaching party from his or her obligations under the contract

material

Tiffany went to a jewelry store with her finance to pick out her engagement ring. The jeweler showed her a tray of diamond engagement rings and Tiffany picked out the one she liked. The jeweler told her that the ring was genuine diamond ring, but the jeweler knew for a fact that it was re ally cubic zirconia is a

misrepresentation

A court was asked to void a contract based on mutual mistake. The parties had entered into an agreement where the seller of goods believed that he was to deliver the goods on the truck which was designated as Route 1. However, the buyer thought he was contracting for the truck designated as Route 2. The only difference between the 2 trucks was the deliver date. Route 1 shipment would be delivered one day sooner than goods hipped on Route2. The later delivery didn ot really affect the buyer in any negative way. The buyer was so furious about the late delivery that he wished to teach the trucking company a lesson and requested the court to void the contract. The court will _______________________-

not void the contract, since at least one of the elements of mutual mistake is missing

Sometimes the parties to the agreement want to replace one of the parties with a third party. this substitution of a party is called a(n) ______________

novation

If a contract resulted from duress, the innocent party can ____________________

opt to void the contract

In most situations, parties discharge their obligations by doing what they respectively agreed to do under the terms of the contract. This is called discharge by ______________

performance

A condition __________________ is a particular event that must occur in order for a party's duty to arise

precedent

If a construction contract is breached by the landowner before the construction is begun, damages are simply lost

profits

Recovery in _____________-contract is often sought when a party thought a valid contract existed, and thus gave up something of value relying on the existence of a contract

quasi

The court insist on a "meeting of the minds" to have a valid contract and even if a misrepresentation was innocent and without intent, the court will __________________

rescind the contract

A contract that is voidable can be _______________, where the person canceling the contract is required to return everything she gave the other party and return anything the other party gave to her

rescinded

The remedy that is most appropriate when a mutual mistake has occurred is __________________

rescission

Brenda went shopping for an new computer at a nearby computer store. Her salesperson, Alan, had been told by another sales associate that a free printer was to be given to any customer who purchased an new laptop. This was not the case, but Alan believed the sales associate since he had been working at the store for two years. Alan told Brenda about the free printer, and Brenda purchased the laptop. Unfortunately Brenda was charged for the printer. Brenda was very angry and went to court. The judge found that there was innocent misrepresentation, and therefore, Brenda can be given _______________________

rescission of the contract, but no damages

In false misrepresentation, the party knows that the misrepresentation is false, yet still makes the representation to another party. This indicates that the party making the misrepresentation has _____________

scienter

Liquidated damages are also referred to as ______________ damages

stipulated

_________________________ impossibility means it would be very difficult to carry out the contract

subjective

A condition ________________ is a future event that terminates the obligations of the parties when it occurs

subsequent

A weight loss product was advertised on TV as being a safe way to lose weight. The advertisements did not indicate that the consumer of the product would probably be likely to have dangerously high blood pressure and an increased likelihood of heart attack. The consumer can __________________________

take legal action against the advertiser due to misrepresentation

Through ____________, parties discharge their duty by making an offer to perform and being ready, willing, and able to perform

tender

The injured party has two responsibilities in a case of false assertion. The first is that there is no claim of false assertion if the falsity is obvious, and the other is that there is no claim of false assertion if ________________________________

the falsity could have been discovered by inspecting the item

A mistake can be of two types. One is a mistake of fact about the deal. The other is a mistake of the _______________ of what is being exchanged.

value