business law 200 midterm

The term rescind means to end a contract.

TRUE

Threatening to breach a contract unless the party agrees to modify the terms of a contract is an example of economic duress.

TRUE

To be duress, the threat need not be wrongful or illegal but must be improper - that is, improper to use as leverage to leverage to induce a contract

TRUE

Undue influence cases often involve a relationship of trust and confidence between the contracting parties.

TRUE

When one of the parties offers a disproportionately small amount of money in settlement of a debt and refuses to pay more, it is a form of economic duress.

TRUE

One of the differences between fraud and misrepresentation is that:

in fraud cases, the injured party has the option of suing for monetary damages.

A fact is considered to be material in a misrepresentation case when:

it plays an important role in inducing a person to enter into a contract.

Which of the following statements, if false, is most likely to create liability for fraud or misrepresentation?

"This crane will lift a 10,000-pound load."

Which of the following is most likely to constitute undue influence?

A clergyman using a parishioner's emotional susceptibility to get the parishioner to contract with the clergyman.

Which of the following meets the requirements of consideration?

A promise that involves the exchange of a legal value

Which of the following is an exception to a consideration requirement?

Charitable subscription

Which of the following is often taken to be the equivalent of an assertion?

Concealment

_____ is a wrongful coercion that induces a person to enter or modify a contract.

Duress

A party who has the right to rescind a contract may do so at any time.

FALSE

A promise not to sue another party is not consideration, because the promise does not convey any legal value to the other party.

FALSE

Gross inadequacy of consideration is by itself a sufficient reason to set aside a contract.

FALSE

While economic pressure may amount to undue influence, it cannot constitute duress.

FALSE

Why is past consideration not a consideration in a present promise?

It does not pertain to the present exchange.

Can a local businessman pay a police officer $50 a week to watch the business more closely?

No, Public Officials cannot give consideration on duties already supposed to perform

Geometry Co. manufactures microchips for electrical products. Jojoba monopolizes the supply of gallium arsenide, which is used heavily in the manufacturing of microchips. Because of this monopoly and the demand for microchips, Geometry enters into a long-standing agreement with Jojoba for 20 years. For the first couple of years, due to the huge demand for the microchips, Geometry insisted on timely delivery of the raw material. However, once the demand slumped, Geometry asserted economic duress to avoid the contract. Will Geometry be successful?

No, because Geometry has already taken benefits under the contract for two years.

Helen worked for ABC Motors for 25 years. The president of ABC said to her: "In consideration of your past service for 25 years, I promise to give you a new car next week." However, he did not give the car. Is this promise legally enforceable?

No, legal consideration is absent.

Mr. Blue gave Mr. Green $1000 to help his family out. Later Mr. Blue entered into a sales contract with Mr. Green and wanted the consideration to be in part the $1000. What is the term for the $1000?

Past Consideration

Joe sells his business to Shirley. During the negotiations, Joe negligently tells Shirley that the business has earned a profit for the last five years. In reality, the business operated at a loss for each of those years. However, Shirley did not hear Joe's misstatement. Shirley cannot rescind the contract because:

Shirley did not actually rely on Joe's misstatement

A contract may be voidable even if the person making the misrepresentation believes in good faith that what he/she says is true.

TRUE

A party injured by fraud in a contract for the sale of goods can both rescind the contract and sue for damages.

TRUE

Concealment involves the active hiding of a fact, whereas nondisclosure is the failure to volunteer information.

TRUE

Consideration can be a promise for another promise.

TRUE

Consideration is what distinguishes enforceable agreements from gratuitous promises

TRUE

Duress involves threats and coercion while undue influence involves persuasion to susceptible individuals.

TRUE

In determining whether consideration exists, the law is not concerned with any disproportion in value between the things exchanged in a contract.

TRUE

In return for services Charles performed for Richard in the past, Richard promises to pay Charles $1000. There is no consideration for Richard's promise.

TRUE

John promises to pay Robert $100 per week, in exchange for Robert's promise not to beat John up. There is no consideration for John's promise.

TRUE

Michael and William contracted for Michael to mow William's lawn once a week for 20 weeks, at a price of $20 per week. Later, without terminating the first contract, the parties modify the contract as follows: Michael will mow William's lawn in exactly the same way for exactly the same time period, in exchange for William's promise to pay Michael $22 per week. There is no consideration for William's promise.

TRUE

Misrepresentations can either be innocent or fraudulent.

TRUE

Mr. Blue gave his favorite nephew Jim Jr, who is a mechanic, $1000 in January. Later that year he needed his car repaired. In the sales contract Mr. Blue indicated that the amount owed should be deducted from the money already paid. A court will find that Mr. Blue failed to give proper consideration for the contract

TRUE

Mr. Green agrees to an offer to drive Ms. White to the airport for $20, but "only if I feel like it". Mr. Green has failed to give sufficient consideration to create a contract with Ms. White.

TRUE

Mr. Green agrees to purchase a lawn mower from Ms. White for $300. The act of payment of $300 by Mr. Green is consideration for the act of passing ownership of the lawn mower from Ms. White to Mr. Green.

TRUE

Ratification ends the right to rescind a contract.

TRUE

Reliance means that an individual acts because of an assertion of another party.

TRUE

Which of the following elements establishes a case of duress?

The contract was induced by improper threat.

Jerry owns a parcel of land. Nate, one of Jerry's closest friends and an attorney, has persuaded Jerry to sell the land to Nate at a price substantially below fair market value. At the time Jerry sold the land, he was resting in a nursing home recovering from a serious illness. If Jerry desires to set aside the sale, which of the following causes of action is most likely to be successful?

Undue influence

Consideration can be a(n) _____ in the case of a unilateral contract.

act

Bob's threat to breach an existing contract unless Lauren makes another contract with Bob is considered:

an element of duress, depending mainly on the coerciveness of the threat.

In order to satisfy the consideration requirement to form a contract, the consideration exchanged by the parties must:

be legally sufficient.

The main difference between concealment and nondisclosure is that:

concealment is always regarded as an assertion of fact, while nondisclosure may or may not amount to such an assertion

Gift promises are not generally enforceable because they lack:

consideration

27. An important difference between duress and undue influence is that:

duress is wrongful coercion, while undue influence is unfair persuasion.

In order for the consideration requirement in contracts to be met:

each party must give consideration.

Daniel is a senior at State University. Brian, Daniel's father, is concerned about Daniel's study habits, given that Daniel spends most of his evenings at the campus pub instead of the library. Brian promises Daniel that he will send him on an expense-paid trip to Europe after his graduation if Daniel spends at least five evenings a week studying in the campus library for the remainder of his senior year. After returning home from his graduation, Daniel asks Brian about the European trip. Brian replies, "Your education was your reward. I don't owe you a trip to Europe." Brian is:

incorrect; Brian owes Daniel a trip to Europe because Daniel's acts are consideration.

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:

influenced the purchaser to assent as there were no reasonable alternatives.

The general common law rule on contract modifications holds that an agreement to modify an existing contract requires a(n):

new and independent consideration.

Consideration can be a(n) _____ in the case of a bilateral contract.

promise

David entered into a contract to sell Ruth a parcel of land fully aware that Ruth's intention of purchase was to construct a high-rise commercial building. David was also aware that the subsurface soil condition of the property would prevent such construction. The soil condition was not readily discoverable in the course of normal inspections or soil evaluations. David did not disclose the existence of the condition to Ruth, nor did Ruth make any inquiry of David as to the suitability of the land for the intended development. David's silence as to the soil condition:

renders the contract voidable at Ruth's discretion.

In deciding whether consideration necessary to form a contract exists, a court must determine whether:

there is mutuality of consideration.

Joe and Jack have a written contract whereby Joe agrees to sell Jack a plot of land for $100,000. Later, without terminating the first contract, the parties modify the deal so that Joe sells Jack the same plot of land for $125,000. The second agreement is not a contract because:

there is no consideration for Jack's promise.

Dan, President of BAZ Co., is happy with the extraordinary performance of Naomi, a BAZ Co. senior accountant. Dan informs Naomi that because of her superlative work in the past fiscal year, he is going to give her a 5 percent raise effective next month. Naomi, who has never heard of anyone at BAZ Co. getting a raise, is thrilled and thanks Dan. Later that day, Dan realizes that giving Naomi this raise might cause all senior accountants to demand salary increases. Dan decides not to give Naomi a raise after all. He believes that his promise to give her a raise is not legally binding. Dan is correct because:

there was no bargained-for exchange for the raise.

Hally took advantage of a confidential, trusting relationship with Gwyn when they entered into a contract. Now, Gwyn can seek remedy based on:

undue influence.

Contracts that are induced by misrepresentation are considered:

voidable.