chapter 12- reality of assent

Marcy wanted to buy Lucy's land and use it to breed small pigs to be kept as pets. Marcy told Lucy that having water on the property was very important. Lucy assured her that a spring ran through one corner of the property. Therefore, Marcy agreed to buy the farm. Although she did not ask Lucy anything about it, Marcy, who loved pigs, assumed that the neighbors would be pleased with the pigs being in the area. Lucy also agreed to sell Marcy a used truck for $5,000. After the contract for the land sale was entered into, it was discovered that actually the spring did not run through the corner of Lucy's property. The area in which the spring ran actually belonged to a neighbor. Additionally, when Lucy brought Marcy the used truck, Marcy said, "That's not the truck!" It was discovered that Lucy, who had two trucks, thought that Marcy had bought the older truck when Marcy thought she had purchased the newer truck. Marcy was also surprised when she received a petition signed by all surrounding landowners objecting to the presence of the pigs and threatening to sue Marcy for nuisance.

50. 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? B. Marcy may rescind the contract, but she may not recover damages. 51. 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? D. Marcy may rescind the contract, and she may also sue for compensatory damages if she can establish injury 52. 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? D. Marcy may not rescind the contract nor may she recover damages because she, Marcy, made a unilateral mistake. 53. 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 A. The contract will be rescinded

CASE STUDY: Tony, a hateful, disgruntled, business law teacher notices that a student, Peter, who is past the age of majority, has bought a new motorcycle. Peter has struggled through school, is in his last semester, and needs to pass business law in order to graduate. Tony tells Peter that he would like to see Peter pass and, in the next sentence, says that he wants to buy the motorcycle for $100, a price far below the value of the motorcycle. Peter asks if Tony is serious about the price, and Tony replies, "I have the power here!" Tony proceeds to draw up a contract for the sale of the motorcycle for $100 with lots of fine print by which he can sue Peter and recover any maintenance costs for the next five years. Seeing that he is at an advantage, Tony also throws into the deal that Peter will mow Tony's one acre yard for $5 all summer long.

54. Which of the following is true if Peter seeks to rescind the contract? B. Peter may rescind the contract on grounds of unconscionability. . 55. Which of the following is an appropriate term for the contract drawn up by Tony? A. Adhesion 56. Which of the following is true regarding the yard mowing agreement? B. It is not enforceable because it is unconscionable.

CASE STUDY: Willy very much wants to rent a basement apartment in Weaver's home. Willy threatens to tell all Weaver's friends that he and Weaver had been arrested for illegally smoking marijuana unless Weaver rents the apartment to him for $100 per month. Weaver reluctantly agrees to rent the apartment to Willy for that amount. Willy also wants to buy Weaver's car. Weaver runs back the odometer on the car before Willy test drives it. Willy is impressed by the low mileage and agrees to buy the car. Weaver also offers to sell Willy a ring for Willy's fiancée. Weaver tells Willy that the ring is a diamond and believes that to be true. After the deal is made, however, a jeweler friend of Weaver's informs him that the ring is a fake. When Willy shows up with the money, Weaver says nothing. He just hands Willy the ring and takes the money. Later, Willy finds out that the odometer was run backwards from another friend to whom Weaver confided. Willy also finds out from his girlfriend that the ring is a fake

57. Of which of the following is Willy guilty in threatening to tell friends about the arrest unless Weaver rents the apartment? A. Duress B. Unconscionability C. Fraud D. All the above E. Duress and unconscionability, but not fraud. 58. Which of the following would be the most likely result of Weaver attempts to rescind the agreement to rent the apartment? A. He will be able to rescind the agreement based upon Willy's threat of extortion. B. He will be able to rescind the agreement based upon the threat to Willy's economic interests. C. He will be able to rescind the contract because of a misrepresentation. D. He will not be able to rescind the contract because he agreed to it. E. He will not be able to rescind the agreement unless he can show that he was not actually convicted of the crime alleged. 59. Which of the following is true regarding Willy's rights in regards to the car purchase? A. He will not be able to rescind the contract because Weaver made no affirmative statements. B. He will not be able to rescind the contract unless he can prove that he expressly asked Weaver if the mileage was run backwards on the car and Weaver failed to reveal that it had been altered. C. He will not be able to rescind the contract because the mileage alteration did not affect the engine of the car. D. He will be able to rescind the contract because of duress practiced by Weaver. E. He will be able to rescind the contract because of the fraudulent misrepresentation of Weaver. 60. Which of the following is true regarding Willy's rights in regards to the ring purchase? A. He will not be able to rescind the contract because Weaver did not make an express false statement regarding the ring. B. He will not be able to rescind the contract because Weaver did not make an express false statement regarding the ring and also because Weaver did not know the ring was a fake when the initial agreement was made. C. He will not be able to rescind the contract unless he can prove that Weaver was at least negligent in not realizing the ring was a fake when the initial agreement was made. D. He will be able to rescind the agreement because Weaver was guilty of duress. E. He will be able to rescind the agreement because Weaver was guilty of fraudulent misrepresentation.

Which of the following involves the active hiding of the truth about a material fact? A. Concealment B. Nondisclosure C. Negligence D. All the above E. Concealment and nondisclosure, but not negligence

A. Concealment

Which of the following is found when one party was forced into an agreement by the wrongful act of another? A. Duress B. Negligence C. Fraud D. All the above E. Duress and fraud, but not negligence

A. Duress

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

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

Which of the following occurs when one party threatens physical harm or extortion to gain consent to a contract? A. Duress B. Undue influence C. Durable fraud D. Criminal influence E. Duress and undue influence, but not durable fraud

A. Duress

When duress is at issue, the _____ needed for legal consent has been removed by the specifics of the threat. A. Free will B. Knowledge C. Specifics D. Consideration E. Realization

A. Free will

Which of the following is true regarding the application of the concept of unconscionability? A. It may be the basis for rescinding a contract. B. It may not be the basis for rescinding a contract. C. It may be the basis for rescinding a contract only if a service is involved. D. It may be the basis for rescinding a contract only if a sale of goods in an amount over $500 is involved. E. It may be the basis for rescinding a contract only if a sale of goods in an amount over $1,000 is involved

A. It may be the basis for rescinding a contract.

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

What was the result in the Peerless case discussed in the text in which there were two ships named Peerless and the parties disagreed over which ship was the subject of the contract? A. The court rescinded the contract. B. The court ruled that the older ship would be identified to the contract. C. The court ruled that the newer ship would be identified to the contract. D. The court ruled that the defendant would be allowed to choose which ship would be identified to the contract. E. The court ruled that the plaintiff would be allowed to choose which ship would be identified to the contract.

A. The court rescinded the contract.

In the area of mistake, distinguishing between unilateral and mutual mistakes is important because the classification bears on which contracts _______. A. Are void B. Are voidable C. Lack consideration D. Lack legality E. Establish an entitlement to punitive damages

B. Are voidable

Which of the following occurs in Australia whenever an illegitimate threat is made to hold on to goods unless a payment is made or an agreement is entered into? A. Unconscionable duress B. Duress of goods C. Duress of merchandise D. Duress of trade E. Unreasonable duress

B. Duress of goods

A ______ is a false representation of a material fact that is consciously false and intended to mislead the other party. A. Negligent misrepresentation B. Fraudulent misrepresentation C. Scienter misrepresentation D. All the above E. Negligent or fraudulent misrepresentation, but not a scienter misrepresentation

B. Fraudulent misrepresentation

A[n] ______ misrepresentation results from a false statement about a fact material to an agreement that the person making the statement believed to be true. A. Wrongful B. Innocent C. False D. Misleading E. Illegal

B. Innocent

Which of the following is present when a party making a false statement claims or implies that he or she has personal knowledge of the accuracy of the assertion? A. Scienter B. Intent to deceive C. Solicitation D. All the above E. Scienter and intent to deceive, but not solicitation

B. Intent to deceive

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

Which of the following refers to a failure to provide pertinent information about a projected contract? A. Concealment B. Nondisclosure C. Negligence D. All the above E. Concealment and nondisclosure, but not negligence

B. Nondisclosure

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

B. Rescinded

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

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

. 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

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.

C. The seller was allowed to rescind the contract because the mistake involved a price differential of over 25%.

A relationship in which one party has an unusual degree of _____ in the other can trigger concern about undue influence in gaining the assent of the more dependent party. A. Interest B. Investment C. Trust D. Involvement E. Both investment and involvement

C. Trust

A[n] ______ mistake is the result of an error by one party about a material fact. A. Unclear B. Mutual C. Unilateral D. Clear E. Single

C. Unilateral

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

. 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.

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.

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

Which of the following is false regarding European courts? A. In general, European courts agree with the reluctance of American courts to interfere with a contract just because the value of the item in question has changed since the agreement. B. The European courts assume parties have accepted the risk when they made the contract that the value might change later. C. European courts take a different approach to mistakes about the value of performance of the contract. D. European courts permit rescission of the contract for a mistake of value when the mistake involves more than 60 percent of the value at the time of the contract. E. None are false. All the above are true.

D. European courts permit rescission of the contract for a mistake of value when the mistake involves more than 60 percent of the value at the time of the contract.

Parties may think they consented to exchange a particular thing only to find out later that no ______ occurred. A. Value B. Joint reasoning C. Bilateral concurrence D. Meeting of the minds E. Contractual concurrence

D. Meeting of the minds

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

Which of the following occurs when one of the parties to a contract has so much more bargaining power than the other that he or she dictates the terms of the agreement? A. Unfairness B. Cohesiveness C. Disconnection D. Unconscionability E. Unprovable

D. Unconscionability

As discussed in the text, which of the following is true in China when fraud is involved? A. Because of the governmental interest in increasing international business, it is very difficult to prove fraud when an international business is involved. B. Because of the governmental interest in increasing international business, few penalties are imposed on international businesses that are guilty of fraud. C. Because of the governmental interest in increasing international business, it is very difficult to prove fraud when an international business is involved; and few penalties are imposed on international businesses that are guilty of fraud. D. Chinese law does not recognize the concept of fraud. E. Fraudulent misrepresentations have resulted in heavy fines and refusals to allow any more agreements with Chinese firms

E. Fraudulent misrepresentations have resulted in heavy fines and refusals to allow any more agreements with Chinese firms

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.

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.

When a legal mistake occurs, ______ is absent. A. Legal coherence B. Bilateral understanding C. Joint reasoning D. Contractual concurrence E. Legal assent

E. Legal assent

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

E. Mistake

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

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

Which of the following is present when a party accused of making a fraudulent assertion believed that the assertion was false or made the claim without any regard for whether it was true or false? A. Scienter B. Intent to deceive C. Solicitation D. All the above E. Scienter and intent to deceive, but not solicitation

E. Scienter and intent to deceive, but not solicitation

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.