ACCT 324 - Chapter 17

An untruthful assertion by one of the parties about a material fact of the contract is: _______. a mistake misrepresentation a meeting of the minds grounds for enforcing the contract

misrepresentation

Tiffany went to a jewelry store with her fiance to pick out her engagement ring. The jeweler showed her a tray of diamond engagement rings and Tiffany picked out the one she liked. The jeweler told her that the ring was a genuine diamond ring, but the jeweler knew for a fact that it was really cubic zirconia. The jeweler's statement about the ring being a diamond instead of being cubic zirconia is a(n): _______. seller's puffery or exaggeration mistake of materials mistake of law misrepresentation

misrepresentation

Courts find _______ only when the party making the false statement should have known the truth using the skills and competence required of a person in her position or profession. innocent fraud false assertion of material fact intent to deceive negligent misrepresentation

negligent misrepresentation

Brenda went shopping for a new computer at a nearby computer store. Her salesperson, Alan, had been told by another sales associate that a free printer was to be given to any customer who purchased a new laptop. This was not the case, but Alan believed the sales associate since he had been working at the store for two years. Alan told Brenda about the free printer, and Brenda purchased the laptop. Unfortunately Brenda was charged for the printer. Brenda was very angry and went to court. The judge found that there was innocent misrepresentation, and therefore, Brenda can be given: _______. rescission of the contract, but no damages rescission of the contract, full damages, and punitive damages rescission of the contract and full damages rescission of the contract and punitive damages

rescission of the contract, but no damages

Which of the following is considered a false assertion of fact? (Check all that apply.) An innocent misrepresentation An incorrect assertion A nondisclosure An act of concealment

An incorrect assertion A nondisclosure An act of concealment

In the context of misrepresentation, when can a consumer take legal action against a company? (Check all that apply.) If the product benefits are misrepresented on the packaging If the product benefits are exaggerated in advertisements If the product benefits are misrepresented on labels If the product benefits are exaggerated in customer reviews

If the product benefits are misrepresented on the packaging If the product benefits are exaggerated in advertisements If the product benefits are misrepresented on labels

Which of the following statements is true of mistake of fact? (Check all that apply.) It is caused by the neglect of a legal duty. It is an affirmative defense. It consists of unconscious ignorance of a past or present material event. It includes the guilty-mind element of the crime.

It is an affirmative defense. It consists of unconscious ignorance of a past or present material event.

dentify the major obstacles to legal assent. (Check all that apply.) Misrepresentation Standardization of contracts Duress Handwritten offer

Misrepresentation Duress

______ is a failure to provide pertinent information about the contract. Mutual mistake Fraud Innocent misrepresentation Nondisclosure

Nondisclosure

Factors that are considered by a court in undue influence claims include all of the following: _______. (Check all that apply.) The non-dominant party gained undue enrichment from the agreement. The dominant party tells the other party to take their time in consenting to the agreement. The dominant party rushes the other party to consent. The non-dominant party was isolated from advisers at the time of the agreement. The dominant party gained undue enrichment from the agreement.

The dominant party rushes the other party to consent. The non-dominant party was isolated from advisers at the time of the agreement. The dominant party gained undue enrichment from the agreement.

In the context of justifiable reliance on a false assertion, which of the following is true of the modern contract law? All the assertions must be verified by an independent third party. Parties can claim that they justifiably relied on a false assertion whether or not its falsity was obvious. Increasing responsibility is given to the person who made the erroneous assertion. There is less emphasis on the duty to inspect.

There is less emphasis on the duty to inspect.

Marya had contracted with a tree service to remove a large, dead tree from her yard and to have the resulting debris removed from her property. When the workers arrived, they informed Marya that they would not do the work unless she signed another contract which required a higher amount of money to be paid to the workers. The action of the workers is known as: _______. fraudulent misrepresentation unconscionability duress Innocent misrepresentation

duress

Philip is badgering his elderly Uncle Al to sell Al's house to Philip. Philip gets so aggravated when his uncle refuses to sell that Phillip threatens to beat his uncle if he does not sign the bill of sale for the house. Philip's threat is known as: _______. a meeting of the minds unconscionability duress fraud

duress

When one party is forced into an agreement by the wrongful act of another party, it is known as: _______. duress unconscionability lack of capacity undue influence

duress

In a case of fraudulent or negligent misrepresentation, a victim can _______. either rescind the contract or keep the contract and sue for damages request to keep the contract as is and sue for damages sue for punitive damages and request the rescission of the contract only request rescission of the contract

either rescind the contract or keep the contract and sue for damages

James negligently misrepresented that a baseball card was a highly collectible and rare card. He did not mean to deceive the buyer of the card, but the court found that he was negligent. Therefore, the buyer will receive: _______. neither rescission of the contract nor damages rescission of the contract and nominal damages rescission of the contract and exemplary damages either rescission of the contract or damages

either rescission of the contract or damages

If a unilateral mistake has been made about a material fact of the contract, the courts are: _______. compelled to change the contract forced to void the contract hesitant to void the contract compelled to void the contract

hesitant to void the contract

Intent to deceive occurs when the party making the false statement ______. misrepresents a material fact. does not know whether the statement is accurate. fails to provide pertinent information about a projected contract. implies having personal knowledge of its accuracy.

implies having personal knowledge of its accuracy.

A promise that the courts will require the parties to obey is known as: _______. a voidable contract legal assent rescission revocation

legal assent

A contract that is voidable can be ______, where the person canceling the contract is required to return everything she gave the other party and return anything the other party gave to her. signed under duress affirmed mutually ratified rescinded

rescinded

If a person had no knowledge of a claim's falsity, we say that he or she lacked: ________. intent scienter capacity ability

scienter

Special relationships in which one person takes advantage of a dominant position in a relationship to unfairly persuade the other and interfere with that person's ability to make his or her own decision to enter into a contract is known as: _______. undue influence fraudulent misrepresentation undue manipulation of a material fact undue input into capacity

undue influence

A mistake can be of two types. One is a mistake of fact about the deal. The other is a mistake of the ______ of what is being exchanged. restitution rescission value unilateralism

value

If there is no legal assent, a contract may be: _______. iron-clad voidable good enforced

voidable

Which of the following is true of a contract that has innocent misrepresentation? (Check all that apply.) The misled party cannot sue for damages. The misled party can rescind the contract. The misled party can sue for damages. The misled party cannot rescind the contract.

The misled party cannot sue for damages. The misled party can rescind the contract.

Which of the following are major obstacles to legal assent? (Check all that apply.) Unconscionability Voidability Restitution Rescission Undue influence Mistake Lack of consideration

Unconscionability Undue influence Mistake

A _______ does not have to be an actual statement; it may also be an act of concealment or nondisclosure. contractual alliteration of art false intent of innocent misrepresentation model of deceit and injury false assertion of fact

false assertion of fact

A _______ does not have to be an actual statement; it may also be an act of concealment or nondisclosure. contractual alliteration of art model of deceit and injury false intent of innocent misrepresentation false assertion of fact

false assertion of fact

A false statement about a material fact that was based on an innocent belief that the false statement was true is a(n): _______. innocent misrepresentation mutual mistake intentional misrepresentation of fact mistake of law

innocent misrepresentation

In a case of an innocent mistake, a victim can: _______. sue for punitive damages and request the rescission of the contract request to keep the contract as is and sue for damages only request rescission of the contract either rescind the contract or keep the contract and sue for for damages

only request rescission of the contract

The remedy that is most appropriate when a mutual mistake has occurred is: _____. re-enactment of the contract remedial renumeration reinstatement recission

recission

If a mistake has occurred in the contract, then there is no: _______. consideration problem with the contract voiding of the contract meeting of the minds

meeting of the minds

If a contract resulted from duress, the innocent party can: _______. do nothing; they must comply with the terms of the contract force the court to award punitive damages be required to follow the contract opt to void the contract

opt to void the contract

The courts insist on a "meeting of the minds" to have a valid contract and even if a misrepresentation was innocent and without intent, the court will: _______. enforce the contract, but award damages rescind the contract enforce the contract rescind the contract and grant damages

rescind the contract

A court ordered that a contract was voidable due to the lack of legal assent. The court also ordered that both parties must return what the other party had given to them. This scenario exemplifies the: _______. reformation of a contract consideration in a contract enforcement of a contract rescission of a contract

rescission of a contract

Jeff was shopping for a good used car. He met Seth, the salesperson, and asked Seth many questions about the car. Seth told Jeff that the car Jeff was asking about had very low mileage and that he knew that himself since he had processed the sale of the car from the former owner. In reality, Seth had personally set back the odometer in the car. What kind of scienter did Seth have? Innocent deception No scienter Intent to deceive Negligent misrepresentation

Intent to deceive

A mistake of a material fact by one party is known as a(n): _______. bilateral mistake mistake of law mistake of assent unilateral mistake

unilateral mistake

An error by one party about a material fact, that is, a fact that is important in the context of the particular contract is called a(n) ______. unilateral mistake unconscionable mistake mutual mistake bilateral mistake

unilateral mistake

Which of the following is considered a false assertion of fact? (Check all that apply.) A nondisclosure An act of concealment An innocent misrepresentation An incorrect assertion

A nondisclosure An act of concealment An incorrect assertion

______ refers to the active hiding of the truth about a material fact. Concealment Fraud Misrepresenation Nondisclosure

Concealment

Identify a true statement about contracts with unilateral mistakes. Either party can void them. Neither party has a clear understanding of the material facts of the agreement. It cannot be cancelled if the mistake was caused by a clerical error. Courts are hesitant to void them.

Courts are hesitant to void them.

Identify the factors that would result in rescission of a contract based on duress. (Check ALL that apply) One party threatens to bring civil cases against a party to a lawsuit, which is not frivolous. One party emotionally upsets the other party by embarrassing them into signing the contract. One party threatens the other's economic interests, i.e., economic duress. One party threatens physical harm or extortion to gain consent to a contract. One party threatens to file a criminal lawsuit unless consent is given to the terms of the contract.

One party threatens the other's economic interests, i.e., economic duress. One party threatens physical harm or extortion to gain consent to a contract. One party threatens to file a criminal lawsuit unless consent is given to the terms of the contract.

Which of the following conditions would permit a court to invalidate a contract on grounds of unilateral mistake? (Check ALL that apply.) The mistake was caused by an accidental clerical error. One party made a mistake about a material fact, and the other party knew about the mistake. The mistake resulted from gross negligence. One of the parties made a mistake that was so trivial that the contract is conscionable.

The mistake was caused by an accidental clerical error. One party made a mistake about a material fact, and the other party knew about the mistake.

The essential element of undue influence is the existence of a ______. lack of legal assent misrepresentation of facts equal entrepreneurial relationship dominant-subservient relationship

dominant-subservient relationship

A _______ does not have to be an actual statement; it may also be an act of concealment or nondisclosure. false assertion of fact false intent of innocent misrepresentation contractual alliteration of art model of deceit and injury

false assertion of fact

An intentional and knowing false representation of a material act that is intended to mislead the other party is known as a(n): _______. fraudulent misrepresentation lack of assent innocent misrepresentation unilateral mistake

fraudulent misrepresentation

Barry was interested in buying a house. He has worked with his real estate agent, Rita, for two years now. His real estate agent found the exact type of house that he was looking for except that she failed to disclose that the house had a severe infestation of termites that had left the structure of the house compromised and in danger of collapse. The state required both the agent and the owners to disclose any apparent or latent defect in the house, but both parties failed to tell Barry about the damage. Barry entered a bid and the owners accepted his bid. Barry had a house inspector inspect the house and when he was told of the termite infestation, he sued to rescind the contract based on nondisclosure. The court will find that this nondisclosure: _______. has the same effect as a false assertion and will act to rescind the contract was not that important, and thus Barry will not be able to have the contract rescinded was not the same as a false insertion and so no remedy is available for Barry did not rise to the level of a false assertion and so only damages will be awarded

has the same effect as a false assertion and will act to rescind the contract

Jonathan was a sales person at a hardware store. The store had run a promotion for the past week which would give any customer who bought a lawnmower a free leaf blower. The promotion had ended the previous day, but Jonathan thought the promotion ran through the next day. Jonathan's customer had agreed to buy a lawnmower and Jonathan put a leaf blower in his cart thinking that it would be free due to the promotion. However, the check-out person rang it up as a charge against the customer. Jonathan's assertion that the customer would get a free leaf-blower with the purchase of the lawnmower is an example of: _______. mutual mistake innocent misrepresentation intentional misrepresentation intentional fraudulent misrepresentation

innocent misrepresentation

Gabe and Nelson entered into a contract where Gabe agreed to buy a sword owned by Nelson for $300. Gabe thought he was buying the Japanese sword owned by Nelson, but Nelson intended to sell the French rapier. Obviously, the two parties committed a mistake of fact which results in a(n): _______. meeting of the minds enforcement of the contract lack of assent executed contract

lack of assent

Gabe and Nelson entered into a contract where Gabe agreed to buy a sword owned by Nelson for $300. Gabe thought he was buying the Japanese sword owned by Nelson, but Nelson intended to sell the French rapier. Obviously, the two parties committed a mistake of fact which results in a(n): _______. meeting of the minds executed contract lack of assent enforcement of the contract

lack of assent

osh contracted with a railroad company to have his order of lumber delivered by the train the company called Westward. Actually, there were two trains that were named Westward. They were identical trains, but had different delivery times. Josh thought his goods were being delivered by Westward I which delivered goods at the end of October. Westward II had a delivery date of February. Josh thought he was contracting for Westward I and the railroad company thought he wanted Westward II. Will the court void or rescind the contract due to mutual mistake? Yes, since only one element - a material effect on the agreement - is missing. Yes, since all of the required elements are present for mutual mistake. No, because one of the elements - a material effect on the agreement - is missing. No, because there was no mutual mistake in this example.

Yes, since all of the required elements are present for mutual mistake.

When both parties are mistaken about a current or past material fact, it is known as a(n): ____. fraud unilateral mistake meeting of the minds mutual mistake

mutual mistake

If Ron makes a statement that he believes is true, but Ron could have known the truth about a material fact if he used reasonable care to find the truth, then the statement that was made is known as: _______. negligent misrepresentation fraudulent misrepresentation intentional mistake intentional misrepresentation

negligent misrepresentation

The failure to provide pertinent information about the projected contract is known as: _______. a nominal injury an express misrepresentation carelessness defense nondisclosure

nondisclosure

In false misrepresentation, the party knows that the misrepresentation is false, yet still makes the representation to another party. This indicates that the party making the misrepresentation has: _______. recidivism absence of scienter scienter rescission

scienter

The Latin term for knowledge is: ______. scienter pax vobiscum duresso quid pro quo

scienter

A weight loss product was advertised on TV as being a safe way to lose weight. The advertisements did not indicate that the consumer of the product would probably be likely to have dangerously high blood pressure and an increased likelihood of heart attack. The consumer can: _______. take legal action against the advertiser due to misrepresentation take legal action against the advertiser due to the accuracy of the representation only formally protest the misrepresentation with a local government agency do nothing. Advertisements are not subject to contract law

take legal action against the advertiser due to misrepresentation

The injured party has two responsibilities in a case of false assertion. The first is that there is no claim of false assertion if the falsity is obvious, and the other is that there is no claim of false assertion if: _______. the person stating the falsehood is an expert in the field the falsity could have been discovered by inspecting the item the falsity involves a good, not a service the falsity involves a service rather than a sale of goods

the falsity could have been discovered by inspecting the item

In order for the courts to find a nondisclosure of a material fact to be equated with and have the same legal effect as a false assertion, the following elements must be present. (Check all that apply.) A relationship of trust exists between the parties to the contract. The parties must not know each other for purposes of the contract. There is a statute that requires disclosure. There is a failure of one party to inquire about the condition of the object of the contract. There is a failure to correct assertions of fact that are no longer true.

A relationship of trust exists between the parties to the contract. There is a statute that requires disclosure. There is a failure to correct assertions of fact that are no longer true.

Abigail was shopping in an antique store and was drawn to what appeared to be an antique plate. The antique dealer said the plate was created in the 1800s in England. In reality, the plate was made in China in 2000. The plate was stamped with this information on the bottom. Abigail bought the plate, but then later sued for fraudulent misrepresentation. The court will not rescind the contract because: _______. Abigail should have known that "buyer beware" the seller was just exaggerating his claims, and this is not grounds for rescission the seller and Abigail were mistaken about the value of the plate Abigail did not have justifiable reliance since she could have easily discovered the falsity of the seller's claims

Abigail did not have justifiable reliance since she could have easily discovered the falsity of the seller's claims

Abigail was shopping in an antique store and was drawn to what appeared to be an antique plate. The antique dealer said the plate was created in the 1800s in England. In reality, the plate was made in China in 2000. The plate was stamped with this information on the bottom. Abigail bought the plate, but then later sued for fraudulent misrepresentation. The court will not rescind the contract because: _______. the seller and Abigail were mistaken about the value of the plate the seller was just exaggerating his claims, and this is not grounds for rescission Abigail should have known that "buyer beware" Abigail did not have justifiable reliance since she could have easily discovered the falsity of the seller's claims

Abigail did not have justifiable reliance since she could have easily discovered the falsity of the seller's claims

Before a contract can be voided for a mutual mistake, which of the following conditions must be met? (Check all that apply. The mistake must have a material effect on the agreement. The enforcement of the contract will have an adverse effect on the party who did not agree to bear the risk of the mistake at the time of the agreement. The mistake must be about a basic assumption that affects the subject matter of the contract. The misled party must claim that the item to be exchanged is not the one that was intended.

The mistake must have a material effect on the agreement. The enforcement of the contract will have an adverse effect on the party who did not agree to bear the risk of the mistake at the time of the agreement. The mistake must be about a basic assumption that affects the subject matter of the contract.

Which of the following would allow a court to invalidate a contract on the grounds of unilateral mistake? (Check ALL that apply) The mistake was caused by a clerical error that was accidental and did not result from gross negligence. The mistake was so serious that the contract is unconscionable, that is, so unreasonable that it is outrageous. One party made a mistake about a material fact, and the other party knew or had reason to know about the mistake. Both parties made a mistake about a material fact, and they knew or had reason to know about the mistake.

The mistake was caused by a clerical error that was accidental and did not result from gross negligence. The mistake was so serious that the contract is unconscionable, that is, so unreasonable that it is outrageous. One party made a mistake about a material fact, and the other party knew or had reason to know about the mistake.

In order to receive damages as a result of fraudulent misrepresentation, the plaintiff must demonstrate that: _______. he or she was injured or harmed by the misrepresentation the plaintiff should have known by the extravagance of the claim it was false the defendant negligently made a false representation the misrepresentation involved a non-material fact of the contract

he or she was injured or harmed by the misrepresentation

If there is a misrepresentation in a contract, the court allows the parties to rescind the contract because the contract lacks ______. legal capacity consideration agreement legal assent

legal assent

Trey was a pilot for a large airline. He also spent his spare time selling his homemade vitamins. These vitamins were capsules filled with cod liver oil, but Trey told his customers that these vitamins were a cure for cancer. Trey knew that the cod liver oil in the vitamins would never cure cancer, but he made the claim anyway. He promised that if his customers would invest in a month-to-month delivery plan for these vitamins that the purchaser would never be plagued with cancer again. Suppose that Paul bought the vitamins and then got cancer. If Paul sues Trey for fraudulent misrepresentation, Paul will: _______. lose, because vitamins are not federally regulated so it is buyer beware win, because Trey fraudulently misrepresented a material fact win, because Trey intentionally misled Paul about the vitamins as a cancer cure lose, because he should not have relied on Trey's representation

lose, because he should not have relied on Trey's representation

Jacqueline was at an antique book store. She was interested in purchasing a very old edition of Dickens' Great Expectations. Jacqueline remarked that the price was quite high, but Mark, the sales clerk, told her that it was a first edition. Mark was not sure the book was actually a first edition. He could have easily verified this because the owner of the shop, Mr. Sykes, was an expert on Dickens and antique books. Mr.Sykes was in his office a few steps from the counter. Mark was rather lazy, and he thought it was too much bother to check with Mr.Sykes, so he sold Jacqueline the book at a very high price. Jacqueline had the book appraised and learned later that it was not a first edition. She tried to return the book, but Mark said all sales were final. Jacqueline sued saying that Mark had misrepresented the fact that the book was a first edition. The judge is most likely to find: _______. fraudulent misrepresentation innocent misrepresentation negligent misrepresentation duress

negligent misrepresentation

A court was asked to void a contract based on mutual mistake. The parties had entered into an agreement where the seller of goods believed that he was to deliver the goods on the truck which was designated as Route 1. However, the buyer thought he was contracting for the truck designated as Route 2. The only difference between the two trucks was the delivery date -- the Route 1 shipment would be delivered one day sooner than goods shipped on Route 2. The later delivery did not really affect the buyer in any negative way. The buyer was so furious about the late delivery that he wished to teach the trucking company a lesson and requested the court to void the contract. The court will: _______. not void the contract, since the buyer is interested in getting revenge, not justice void the contract, since there was a mutual mistake not void the contract, since at least one of the elements of mutual mistake is missing void the contract because the terms of the contract were violated

not void the contract, since at least one of the elements of mutual mistake is missing

Carol was the favorite niece of her aunt Esther. Esther had always loved to pamper her niece and usually indulged her in almost anything. Carol had a lot of sway over her aunt and convinced her to invest in a land development project. If Carol persuaded her aunt to sign a contract for the land deal, Carol would be given a $50,000 bonus. Carol pressured her aunt to come to a decision about the contract and prevented her aunt from consulting her attorney. Aunt Esther would normally never have engaged in such a contract, but her judgment was affected by her relationship with Carol. Carol had: _______. merely presented her aunt with the possibility of entering into a potentially lucrative contract the effect of causing her aunt to experience duress in entering into the contract no effect on her Aunt Esther in forming the contract undue influence over Aunt Esther

undue influence over Aunt Esther