BUSINESS LAW 277, CHAPTER 17

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Which of the following is an appropriate term for the contract drawn up by Tony? A. Adhesion B. Valid C. Misapplied D. Misdrafted

A. Adhesion p. 398

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. Coercion D. Criminal influence

A. Duress p. 397

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, but damages are not available. 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. The contract is automatically void and of no effect, and the party who was misled may recover damages.

A. It permits the party that was misled by the false statement to rescind the contract, but damages are not available. p. 391

Mary and Jason discuss the fact that a new teacher is being hired for business law at their school. Jason mentions that he does not yet have a book, and Mary agreed to sell Jason a used business law book for $30 for the upcoming semester. When the new semester begins, the new business law teacher announces that a new custom business law text will be used that is only available in the campus bookstore. Jason wants a refund. Which of the following is Mary's best defense? A. That Jason knew of change of teacher and bore the risk of mistake. B. That only a unilateral mistake was involved on Jason's behalf because Mary was aware of the change and that, therefore, Jason is not entitled to a discharge. C. That a mutual mistake was involved and that Jason is, therefore, not entitled to a refund. D. That she did not commit fraud and that, therefore, Jason is not entitled to rescission.

A. That Jason knew of the change of teacher and bore the risk of mistake. p. 388

A[n] ______ 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. Acknowledged misrepresentation

B. Fraudulent misrepresentation p. 392

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

B. Innocent p. 391

A[n] ______ mistake is a mistake that is shared by both parties to an agreement. A. Unclear B. Mutual C. Unilateral D. Clear

B. Mutual p. 387

Which of the following refers to an intentional failure to provide pertinent information about a projected contract? A. Concealment B. Nondisclosure C. Negligence D. Scienter

B. Nondisclosure p. 394

When a contract is voidable, it may be ______. A. Chargeable B. Rescinded C. Destroyed D. Uncharged

B. Rescinded p. 385

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. Relationship dominance

B. Undue influence p. 396

Which of the following involves a promise to buy or sell that the courts will require the parties to obey? A. Bilateral assent B. Legal affirmance C. Legal assent D. Contractual affirmance

C. Legal assent p. 385

Which of the following was the result on appeal in the Case Opener involving the claim that Michael Jordan owed $5 million based on his agreement to pay the plaintiff's mother on the premise that he was the father although it was later determined that the child was not his? A. That the agreement to pay $5 million could be rescinded based on a mutual mistake of fact. B. That the agreement to pay $5 million could be rescinded based on the mother's fraud. C. That the agreement to pay $5 million could be rescinded based on either a mutual mistake of fact or based on the mother's fraud. D. That the agreement to pay $5 million could not be rescinded because Jordan was aware of a question about his parentage.

C. That the agreement to pay $5 million could be rescinded based on either a mutual mistake of fact or based on the mother's fraud. p. 400

Which of the following is true if Tony seeks to rescind the contract for the sale of the Mustang? A. Tony may rescind the contract on grounds of fraud. B. Tony may rescind the contract on grounds of misrepresentation. C. Tony may rescind the contract on grounds of duress. D. Tony may rescind the contract on grounds of defamation.

C. Tony may rescind the contract on grounds of duress. p. 397

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

C. Unilateral p. 387

Although there are some exceptions, a[n] ______ mistake does not generally void a contract. A. Unclear B. Mutual C. Unilateral D. Clear

C. Unilateral p. 387

Which of the following is true regarding the elements that must be satisfied in order for a mutual mistake to interfere with legal consent? A. The required elements are: (1) a basic assumption about the subject matter of the contract, and (2) an admission by one of the parties that a misrepresentation occurred. B. The required elements are: (1) a basic assumption about the subject matter of the contract, and (2) a material effect on the agreement. C. The required elements are: (1) a basic assumption about the subject matter of the contract, and (2) an adverse effect on a party who did not agree to bear the risk of mistake at the time of the agreement. D. The required elements are: (1) a basic assumption about the subject matter of the contract, (2) an adverse effect on a party who did not agree to bear the risk of mistake at the time of the agreement, and (3) a material effect on the agreement.

D. The required elements are: (1) a basic assumption about the subject matter of the contract, (2) an adverse effect on a party who did not agree to bear the risk of mistake at the time of the agreement, and (3) a material effect on the agreement. p. 388

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

D. Unconscionability p. 398

Without legal assent a contract may be ____. A. Unmarketable B. Void C. Illegal D. Voidable

D. Voidable p. 385

________________ is when one party threatens another party with physical harm or extortion to gain consent to a contract.

Duress p. 397

Tony, a health inspector, notices that a business owner, Peter, has a nice motorcycle that is for sale. Peter needs to have his business open on time. Tony tells Peter that he would like to issue a passing grade for Peter's business inspection, 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! Take it or leave it!" Tony proceeds to draw up a contract for the sale of the motorcycle for $100 which Peter signs. Peter does some research and finds that Tony has had several arrests for driving under the influence in a nearby town. As an act of revenge, Peter tells Tony that unless Tony sells Peter his new Mustang convertible for $50, he is publishing the facts about the arrests online. Tony reluctantly agreed to the deal. Which of the following is true if Peter seeks to rescind the contract for the sale of the motorcycle? A. Peter may rescind the contract on grounds of fraud or on grounds of duress. B. Peter may rescind the contract on grounds of duress or on grounds of unconscionability. C. Peter may rescind the contract on grounds of undue influence or on grounds of duress. D. Peter may not rescind the contract.

Peter may rescind the contract on grounds of duress or on grounds of unconscionability. p. 397-398

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 remain with Penelope unless George can establish that he was negligent in not recognizing the ring's true value. D. The ring will remain with Penelope because the parties contracted on the assumption that they did not know the value of the ring.

The ring will remain with Penelope because the parties contracted on the assumption that they did not know the value of the ring. p. 388

A mistake of fact is an erroneous belief about the facts of the contract at the time the contract is made. True False

True p. 386

A negligent 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. True False

True p. 391

For fraudulent misrepresentation to be the basis for a contract rescission, the statement of fact need not be an actual assertion. True False

True p. 394

Scienter is present when the party accused of making the fraudulent assertion believed that the assertion was false or made the claim without any regard for whether it was true or false. True False

True p. 395

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 and interfere with that person's ability to make his or her own decision. True False

True p. 396


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