BUL3310 Ch13

Mark agrees to buy Dale's one-half-ton truck so that he can pull his trailer. Both Mark and Dale believe that the truck is large enough to do the job. After they complete the deal, Mark hitches the truck to the trailer and attempts to pull the trailer, but without success. The contract between Mark and Dale can be rescinded because of:

A mutual mistake.

Which of the following is not an element of fraudulent misrepresentation?

An innocent party under 21 years of age.

If a party is fraudulently induced to enter into a contract, that party can:

Cancel (resend) the contract.

Division West Chinchilla Ranch began a television advertising campaign encouraging viewers to pay $2,150 for one male and six female chinchillas to start their own chinchilla ranches. The advertisements claimed that anyone could succeed at chinchilla ranching and that it could be easily done in the basement or a spare room. The ads also claimed that chinchilla ranching was a profitable pastime that could "explode into a five-figure income." Based on these representations, Adolph Fischer purchased chinchillas from Division West. It soon became apparent that raising chinchillas required proper training and a carefully controlled environment. In addition, statements made by Division West's sales representatives regarding the value of the pelts were untrue. Fischer lost money over a period of three years. He then filed a lawsuit seeking to rescind the contract and recover his money on the basis of Division West's fraudulent misrepresentations. At the trial, Division West representatives testified that raising chinchillas is "an art." The court most likely held that Fischer:

Could rescind the contract, because Division West knew that its representation about chinchilla ranching were untrue.

Mark Van Wagoner, a real estate investment attorney, and his wife Katherine were interested in buying property from Carol Klas. When the Van Wagoners asked about the appraised value of the property, Klas replied that there were several appraisals, all ranging from $175,000 to $192,000. Without looking at any appraisals in writing, the Van Wagoners agreed to purchase the property for $175,000. Klas then provided a written appraisal listing the value of the property as $165,000. When the Van Wagoners refused to go through with the deal, Klas sued the Van Wagoners to recover the difference between the agreement price and the price for which the house was later sold. The Van Wagoners claimed that the contract should be rescinded on the basis of their mistaken assumption as to the value of the house. The court most likely:

Did not allow the rescission, because a unilateral mistake of value does not provide a basis for avoiding a contract.

Forcing someone to enter into a contract through fear created by threats is known as:

Duress

Sonja buys a tropical bird from Ramon's rare bird store. Sonja asks Ramon about the bird's origins, and Ramon tells her, "It is from the rainforests of Brazil, and it is extremely rare." Sonja asks Ramon if the bird is on the endangered species list. Even though he knows that the bird is on the list, he tells her that it is not. When government officials come and take her bird away, Sonja is told that she has illegally purchased a bird that is on the endangered species list. In order to recover the price of the bird and the fines levied against her for buying an illegal bird, Sonja can file a lawsuit against Ramon for:

Fraudulent misrepresentation.

In 2009, Hardy Salt Co. hired William Schmalz under an employment contract that granted him six months' severance pay if he was laid off, but not if he left voluntarily or was terminated for cause. In mid-2011, Schmalz was asked to resign after having an affair with the chairman's executive secretary. Schmalz was told that if he did not resign he would be fired, but that if he did resign the company would keep him on the payroll for six weeks. Schmalz resigned and signed an agreement releasing Hardy Salt from the terms of the employment contract. Schmalz then claimed that he had signed the release under duress and sued Hardy Salt for the six months' severance pay provided for in his contract. The court most likely held that Schmalz:

Had not signed the release under duress, because he was not threatened with a wrongful act.

Blake is seeking to buy a mare that he can breed. Levi tells Blake about a horse that Levi wants to sell, stating that he (Levi) believes that the horse is extremely healthy and will be able to foal within eighteen months. After two years, the horse still has not foaled. The veterinarian informs Blake that the horse is physically incapable of breeding. In Blake's lawsuit to rescind the contract, it is:

Likely that a court will allow the rescission based on a mistake of fact.

Which of the following makes a contract voidable?

Mutual mistake of fact.

Leonard wants to open a convenience store in a residential neighborhood, as he thinks it would be a great business opportunity. Carly has a piece of property for sale in the ideal location for Leonard's store. Carley has no idea whether the property is zoned for commercial or residential development, but tells Leonard, "according to town law, I'm pretty sure the property is zoned for commercial development." Leonard purchases the property, makes plans to build his store, and then discovers that Carly misstated information to him. Can Leonard avoid the contract?

No, Because Carly made a misrepresentation of law.

Davis, a rare coin dealer and expert collector, buys a coin from Ellen's coin shop. Ellen tells Davis that it is a rare coin, one of only eight like it known to still be in existence. Ellen knows that this coin was actually minted one year after the rare variety and is worth little more than face value. This information is printed in many widely available coin guidebooks. Davis thinks this opportunity is almost too good to be true, but he doesn't want to pass it up, so he purchases the coin for a very high price. Later, Davis does some research and discovers that the coin is not worth what he paid for it. If he sues Ellen for fraudulent misrepresentation, is he likely to win?

No, because he could not justifiably rely on Ellen's misrepresentation.

A salesman convinced Juan to purchase a product on the terms that all sales are final. Juan found that the product did not live up to his expectations. In addition, it is clear that the salesman made a misrepresentation about the product, he intended to deceive Juan, and Juan justifiably relied on the salesman's statements. Juan now wants to rescind the contract--return the product and get his money back. In order to do so, a court would probably:

Not require a showing of injury.

Misrepresentation of the law generally does not allow a party to cancel a contract because:

People are assumed to know the law.

The Kindle family moved across country and could not take all of their belongings with them. They did not have the time to sell them, so they transferred the ownership of these items to their friend Sam. Sam kept some of the items, but he did not need the car, so he sold it to Marissa. She later discovered that it had been in a serious accident and was not as road-worthy as she believed when she purchased it. If Marissa sues Sam for fraud, will she likely be successful?

Probably not, as there is no indication that Sam intended to deceive.

Peggy offers to sell Shelby a purebred Scottish terrier puppy for $800. Shelby and Peggy do not discuss the dog's ancestry, but Shelby believes that the dog came from champion lines and agrees to the price. Shelby later discovers that the puppy is worth only $200. Can Shelby rescind the contract based on her mistake?

Probably not, because Shelby made a mistake about the dog's value, not a mistake about a material fact.

The element of fraud that stated there is guilty knowledge on the part of the misrepresenting party; and an intent to deceive, is called:

Scienter

Nancy's stepson Jarred tells Nancy that he is going to lock her in a closet for a week unless she gives him a check for $20,000. Nancy is old and feeble. If she gives Jarred the check and then has second thoughts about having done so, she can:

Seek to avoid the contract on the basis of duress.

A 75-year-old widower with a diagnosis of dementia became increasingly forgetful. His son, who lived in another state, made arrangements for his care. One of the resources he arranged was a housekeeper he found through the Internet. He became unhappy with the housekeeper and tried to fire her, but his father would not allow it. The son later learning that his father had married the housekeeper and had added her name on his accounts as a joint tenant. The housekeeper drained the man's accounts and then left him. Further investigation revealed that the housekeeper used secrecy, a romantic relationship, and manipulation to get added to the man's accounts. In addition, she created dependency by feeding and bathing the client even though he did not need that level of care. She isolated him from his family and other professionals who were hired to help him, and convinced him that she was the only one who cared about him. The son used this information to sue the housekeeper to retrieve his father's funds. The court most likely ruled in favor of:

The son on the basis of undue influence.

Taking advantage of someone based on the relationship with that party to the extent they lack free will to make a decision is known as:

Undue Influence.

Judy is a widow who has just sold a valuable parcel of commercial real estate. The proceeds of the sale will keep her from being impoverished during her retirement. Judy dotes on her only son, Chris. Chris asks his mother to invest the proceeds in his restaurant, which is faltering, and lets his mother know that if she does not do so she will probably never see Chris again. Judy is unsure, but because she wants to please Chris, she agrees to his request. That evening, she has a change of heart and demands that Chris return the funds to her. Chris claims that they have formed a binding contract and will not return the funds. The contract may be voidable, though, because it was formed as a result of:

Undue influence.

The two forms mistakes of fact can take are:

Unilateral and Bilateral.

If a mistake concerns the future market value or quality of the object of the contract, the mistake is one of

Value

Misrepresentation of material fact can be made by

Words or actions.