Chapter 11

Jill contracts to purchase Kevin's car under the belief that she can sell it at a profit to Linda, but after Jill has bought the car, she finds out that Linda isn't interested in buying it. a. Jill cannot void the contract b. Jill can rescind the agreement c. Jill could rescind the agreement if she was mistaken in her estimate of the value of the auto d. Jill can sue Linda for detrimental reliance

a

Stewart entered into a contract with will to have will build a 10 unit apartment complex on elm street in Randolph county. unknown to both parties, this land had recently been rezoned and only single unit dwellings can be constructed a. this is a mistake of law b. this is a mutual mistake of fact c. Stewart is obligated to buy land elsewhere and have the complex constructed on property zoned for apartments d. will is liable to Stewart since will is a contractor

a

tommy's parents died in a plane crash and he went to live with his guardian aunt rose. rose had a very small house and did not have a separate bedroom and bath for Tommy. she and Tommy decided to use some of his inheritance to pay for an addition to the house. he had some shares of stock transferred into rose's name so that she could sell them when the money was due to be paid. the stock transfers are a. presumed voidable unless rose can show no unfair advantage was taken b. presumed valid unless it can be proven that Tommy was taken advantage of c. null and void because of undue influence d. presumed void because of duress

a

actionable fraud would be likely to be based on falsity of a. a car owner's statement that, ' this car is the Best Buy you will find' b. a realtor's statement that,' the contractor used 25-year warranted shingles on the roof' c. an art dealer's statement that,' this painting will increase in value' d. a stockborker's statement that, ' this stock should double in price within 6 months'

b

contracts induced by threats of _________ are voidable, regardless of whether the coerced party has committed an unlawful act a. civil prosecution b. criminal prosecution c. tortious conduct d. physical force

b

Albert found a stone in his yard and took it to bob, a jeweler, for evaluation. although ob knew what the stone was, he told Albert that he wasn't sure as to the nature of the stone, but that he thought it was a topaz. bob then offered to buy the stone for $25 and Albert agreed. later Albert found out the stone was an uncut diamond worth about $700. a. the sale was a valid contract that should be enforced by the law b. this contract can be voided based upon fraud in the execution c. this contract can be voided based upon fraud in the inducement d. this contract can be voided based upon mistake as to the identity of the subject matter

c

Eliza was an antique expert. she went to a tea party at grandma jones house and saw a magnificent Queen Anne table out on the back porch. she asked grandma about it and was told it was in the way so they were going to store it in the barn. Eliza offered to buy it from her for 200. the next week, grandma saw it in Eliza's store on sale for 3,000. which of the following is true. a. she can get it back because of fraudulent concealment of the value b. she can get the true value, because it would not be fair otherwise c. she cannot rescind the contract because Eliza did not have a duty to tell her the value of the table d. she cannot rescind the contract because she did not rely on Eliza to give her a fair price

c

Alex wants to submit a bid on a city sewer project. he computes the cost, but mistakenly omits the cost of one item. accordingly, he submits a bid of 430,000 to the city. the next highest bid is 675,000 and the rest of the bids are even higher. the city is happy to have such a low bid, so it accepts Alex's bid and awards him the contract for the job, even though the city engineer is of the opinion the job cannot be done for less than 650,000 a. Alex must perform for the agreed upon price because he has made a unilateral mistake b. the city was aware of or should have been aware of Alex's mistake. when it accepted the bid with knowledge for Alex's mistake, the city sought to take an unconscionable advantage of Alex's error c. this case is an example of a palpable unilateral mistake d. both b and c

d

Ralph sold a motel to Steve by stating that he had paid 250,000 for it and that his net average annual profit from the business has been 40,000. in reality he paid 100,000 for it and has earned a net average annual profit of only 30,000. Steve made no attempt to verify the statements until after the transaction was completed. a. Ralph has committed fraudulent misrepresentation b. steve is bound by the contract, because h failed to verify the statements which were made to him c. the contract is voidable at Steve's option d. both a and c

d

a misrepresentation is material if a. it would likely induce a reasonable person to enter into a transaction b. the maker knows it would likely induce the other party to enter into the transaction c. it is made knowingly d. both a and b

d

steven has a typed copy of a contract, which he would like to have Thomas sign. Thomas, who needs glasses to read typing, doesn't want to sign until he has read the document, but Steven convinces Thomas to sign it anyway, because it is a 'standard' contract for this type of situation. is the contract which Thomas signed binding upon him? a. no, because he did not read it b. no, because he entered into it based upon fraud in the execution c. yes, because he has made a unilateral mistake of law d. yes, because he was negligent in not ascertaining its contents

d

the remedies of damages and rescission are available for a. fraudulent misrepresentation b. negligent misrepresentation c. innocent misrepresentation d. all of the above

d

when both parties misunderstand the same set of facts relating to a basic assumption on which a contract is made, it is termed a. rescissionary mistake b. unilateral mistake c. mistake of law d. mutual mistake

d

which of the following can meet the scienter requirement to establish fraud in the inducement? a. actual knowledge b. lack of belief in the statement's truthfulness c. reckless indifference as to a statement's truthfulness d. all of the above meet the requirement

d

Al owns a farm that he believes is worth 150,000. Betty knows there is oil under the farm and offers Al 160,000 for it al is suspicious and asks her why she wants to buy the place. she says she would like to live in the country. al then asks her if she thinks there might be valuable minerals under the land. Betty laughs and says she doubts that very much, so al sells her the farm for 160,000. al later realizes that the land was worth more than he was paid. betty's statement to Al was a misrepresentation requisite for fraud. t or f.

t

a basic element of fraud is false representation or misrepresentation, t or f

t

a famous decision involving mistake as to the meaning of contract terms is raffles v. wichelhaus, a case involving two ships with the same name which were confused by the two parties to the contract. t or f.

t

a party to a contract may be entitled to relief even if he is contributorily negligent in relying on a fraudulent misrepresentation, t or f

t

a seller's promise to service a sewing machine free for the next 90 days when she has no intention of doing so is actionable as a false representation of a fact if the other elements of fraud are present, t or f

t

an act that is contrary to public policy or is morally reprehensible may constitute duress. t or f.

t

at the marriage of her daughter, lorna is given papers to sign which the catering company says are the invoices for the food, service, and decorations. underneath the invoices are a carbon and a contract of sale for a portion of the failing catering business. lorna signs the papers, her signature is transferred to the sales contract. this is a void contract because it was entered by fraud in the execution, t or f

t

economic duress renders a contract voidable, t or f

t

for a misrepresentation to be material, it must be likely to induce a reasonable person to manifest assent or the maker must know that it would be likely to induce the recipient to do so, t or f

t

if a confidential relationship exists between parties to a contract, the law presumes that undue influence exists if it appears that the dominant party has gained at the other party's expense, but the presumption can be rebutted by evidence that it was not exercised, t or f

t

if a seller occupies a fiduciary relationship with the buyer and fails to make full disclosure to the buyer, then the latter will be able to avoid the transaction. t or f.

t

if an agreement is not voluntary and knowing, it will be either void or voidable, t or f

t

non fraudulent representation is made without scienter, t or f

t

physical compulsion and improper threats are two basic types of duress, t or f

t

rescission is usually permitted where the parties to a contract are both mistaken about a material fact, t or f

t

scienter is the element of fraud that requires that the person who makes misrepresentation knows that it is false or has reckless indifference as to its truthfulness, t or f

t

there are two distinct types of fraud, t or f

t

to obtain relief for negligent or innocent misrepresentation all the remaining elements of fraud must be present and the misrepresentation must be material. t or f

t

to sustain a case of fraudulent misrepresentation, the injured party must prove that he actually relied upon the false representation, t or f

t

undue influence is the taking of unfair advantage of a person by reason of a dominate position based upon a confidential relationship, t or f

t

James threatens to hit Kenneth on the head with a baseball bat unless Kenneth signs a contract agreeing to pay hames 900 for a motor. because of the threat, Kenneth signs the contract a. the contract is voidable at Kenneth's option b. james has committed physical duress against Kenneth c. this is an example of economic duress d. all of the above

b

Kyle wants to buy a 6 passenger car. the sales person tells him that the two seat sports car Kyle sees on the car lot would be just perfect for 6 people. Kyle test drives the car and then buys it. a. kyle has a valid cause of action for fraud b. kyle was not justified in relying upon the salesperson's representation that the car would seat 6 people c. the element of scienter is missing in this fact situation d. salesperson is a fiduciary

b

a collection agency treated to sue Martha for the unpaid hospital bills from her heart operation. she signed a promissory note at a high but not illegal rate of interest. what is the result? a. it is valid because she signed it b. it is valid because the threat to bring a civil suit to collect money owed is permissible. c. it is invalid because she signed under duress d. it is invalid because the agency put her under undue pressure

b

a fiduciary is a a. person in a subservient position b. person who owes a duty of trust, confidence, and loyalty to another c. form of formal conduct d. person of equal power and control

b

the state of Florida enters into a contract with treasure salvors governing the salvage of a Spanish galleon that sunk in the 1600s. under the terms of the contract, the salvagers agree to relinquish 25% of the items recovered to the state of Florida in return for the right to salvage on state lands. at the time the parties enter into the contract, they both believe that the seabed where the ship lies is state land. subsequently, the US Supreme Court holds that the continental shelf on which the ship rests have never been owned by Florida. the salvagers sue to rescind the contract a. the contract cannot be rescinded b. the parties made a mutual mistake for which the contract should be avoided c. there is a mutual mistake, but because it is not material, the court should enforce the contract d. the United States government will automatically step into the shoes of the state of Florida to make the contract enforceable

b

tome tries to sell his classic car to Vitoria for 12,000. tom tells Victoria, "I paid 12,000 for the car in 1978 and its worth twice that today. tom really paid 8,000 for the car in 1978. if Victoria buys the car, basing her decision on tom's statement, which of the following correctly states the situation? a. toms statements amount to puffing only b. toms statements provide grounds to set the contract aside c. toms statements are actionable only if intentional d. tom's statements amount to fraud in the execution

b

which of the following is not an element of fraud? a. material misrepresentation b. competent parties c. knowledge of falsity d. justifiable reliance

b

which of the following result in a void, rather than voidable, agreement a. duress by improper threat b. fraud in the execution c. fraud in the inducement d. undue influence

b

a contract was made for 125 bales of cotton to arrive on a ship named peerless from Bombay. unbeknownst to either party to the contract, there were two ships named peerless both of which were sailing from Bombay. one sailed in October and the other in December. the buyer had in mind the ship sailing in October, but the seller had in mind the ship sailing in December. each party held his belief in good faith. when the goods failed to arrive on time, the buyer sued for breach of contract. a. the seller is in breach and must pay damages b. the seller is guilty of fraud in the inducement for failing to disclose to the buyer which ship would contain the goods c. no contract exists due to mutual mistake of fact as to the existence or identity of the subject matter of the contract. d. both a ad b

c

a party to a contract may be able to avoid the contract if a. there is a mutual mistake, and the party undertook to bear the risk by conscious allocation b. there is a unilateral mistake, and the party undertook to bear the risk by conscious ignorance c. there was a mistake and the mistaken party was at fault in not discovering the problem before making the contract d. none of the above e. only a and b

c

an intentional misrepresentation of a material fact made with knowledge of the falsity and intention to deceive and which a party justifiably relies upon to his detriment is known as a. duress b. fraud in the execution c. fraud in the inducement d. non-fraudulent misrepresentation

c

freds is a concert violinist who is scheduled to perform at Carnegie hall for the first time. he buys what he is told is a Stradivarius violin from a well-known, reputable dealer in quality violins, and he pays the going rate or a Stradivarius. he later learns the violin is an imitation, although it is such. good imitation that even the dealer thought it was authentic. a. fred has made a unilateral mistake and cannot avoid the contract b. the dealer has committed fraud in the inducement c. the sale is voidable by the purchaser for mutual mistake d. the sale is voidable, because the dealer has made a fraudulent misrepresentation

c

if untrue, which of the following would probably be considered a misrepresentation of material fact? a. 'this is the one that I think is the best buy' b. 'this is the best computer on the market' c. 'this car has new brakes' d. 'these tires will wear like iron'

c

sam wants to sell his golden retriever to Jordan. sam tells Jordan that the dog is t3 and that he will point, back, and retrieve. although the dog is 3, and will point at birds, he will not back. Jordan relies on these statements and purchases the bird dog. the buyer has probably been a victim of a. duress b. undue influence c. fraud in the inducement d. fraud in the execution

c

which of the following does not exemplify a relationship that typically leads to scrutiny of a contract for undue influence? a. wife and husband b. clergy and parishioner c. brother and sister d. parent and child

c

which of the following need NOT be proved in order to establish the defense of economic duress? a. the one side involuntarily accepted the terms of another b. that circumstances permitted no other alternative c. the one party explicitly made no economic threat d. that the circumstances leading up to the contract were the result of coercive threats or acts of the opposite party

c

which of the following would be considered to be a misrepresentation of a material fact for purposes of establishing fraud in the inducement? a. a statement of judgement of value, such as 'this is the best car in town for the money' b. 'this style of jacket is going to be the most popular style next year' c. 'this car has a new radiator' d. in my opinion, this is the Best Buy for the money'

c

Al owns a farm that he believes is worth 150,00. Betty nknows that there is oil under the farm and offers al 160,000 for it. Al accepts and sells the farm to Betty. al latter realizes that the land was worth more than 160,000. al can have the contract avoided based upon fraud. t or f.

f

Majorie has been cared for by her family physician for 35 years. she decides to assume the mortgage on his new clinic. the contract is automatically invalid because of undue influence, t or f.

f

a unilateral mistake of fact is ordinary grounds for avoiding a contract, t or f

f

an arm's length transaction is one in which the parties owe each other special duties, t or f

f

for a misrepresentation to be fraud in the inducement, it need not be material. t or f

f

for misrepresentation to be actionable as fraud in the inducement, it must be misrepresentation of opinion, t or f

f

fraud in the inducement will render an agreement void, t or f

f

generally, whether or not the parties deal at arm's length does not affect whether silence alone amounts to fraud, t or f

f

historically, courts held the representations of law were statements of fact, but the present trend is to recognize that they have only the effect of statements of opinion. t or f

f

if the act or threat would affect a person of average strength and intelligence then and only then will the act constitute duress, t or f

f

matt sells bikes at a local discount store. to encourage bob to buy a more expensive model than he originally contemplated, Matt tells bob,' this is the most awesome bike money can buy at this price. you can expect lots of riding pleasure.' based on this statement bob buys the bike. a wet later, before his bike is fully paid for, bob sees a far superior bike for a lower price at another store. bob can avoid his contract with Matt because of fraudulent misrepresentation. t or f

f

mistake by failure to read a document is grounds to void a contract, t or f

f

pat told her friends that her car got 35 miles to the gallon in the city when in reality it only got 20 miles per gallon. when pat decides to sell and one of these friends decides to buy the car, pat is under no duty to tell the correct figure unless asked. t or f

f

the difference between fraud and misrepresentation is that fraud involves malice while non fraudulent misrepresentation is always innocent, t or f

f

the most uncommon type of duress involves the use of economic and social coercion. t or f.

f

the test for duress is objective and the act must be classified as a tort or a crime in order to be wrongful, t or f

f

the trustee of a trust does not owe a fiduciary duty to the beneficiary of that trust, t or f

f