Business law chp 14

What was the original common law position regarding whether a party to a contract has a duty to disclose to the other party all of the material facts she knows about the subject of the contract?

Caveat emptor

True or false: Fraud is negligent misrepresentation.

False Reason: Fraud is intentional misrepresentation.

If one party to an agreement is acting under a mistaken belief, this is ______.

a unilateral mistake and therefore not grounds for rescission

Mutual mistake is ______.

always a basis for granting rescission of a contract at the request of either party

Ambiguous terms in an agreement are those that _____.

are capable of being honestly understood in two different ways

Duress or undue influence must exist ______ for the contract to be ______.

at the time the contract is created; voidable

Which of the following are terms used to describe situations in which one party to an agreement has interfered with the other party's ability to resist entering into the agreement?

Duress and undue influence

True or false: A victim of misrepresentation need not show a detriment in order to be able to cancel the contract.

False Reason: Courts do not allow a person who claims to have been victimized by a misrepresentation to cancel the contract unless he or she can show some detriment (injury) as a result of the misrepresentation.

Which of the following is correct regarding misrepresentation?

It can result from an honest mistake or negligence on the part of the misrepresenter.

Which of the following is correct regarding scienter?

It is inferred if the defendant knowingly made a misstatement to a plaintiff who was likely to rely on it.

What are the general elements of misrepresentation?

Misrepresentation of a material fact justifiably relied on to the detriment of the person relying

Which of the following is correct regarding the legal effect of a unilateral mistake?

Relief will not be granted if a person's own negligence is the cause of his or her mistake.

Which of the following is a remedy available to a buyer who can prove fraudulent misstatements or failure to disclose on the part of the seller?

Rescind the contract

To prove fraud, one must prove all the elements of misrepresentation plus which of the following additional elements?

The misrepresentation was knowingly made with scienter

What is the modern position regarding whether a party to a contract has a duty to disclose to the other party all of the material facts he knows about the subject of the contract?

There are some situations where a person has a duty to disclose information to the other party in a contract negotiation.

Suppose that Odessa turns back the odometer from 100,000 to 40,000 miles on a car she is selling to Mason but says nothing about the mileage to him. Mason purchases the car and later discovers the odometer "rollback." Which of the following is correct regarding this scenario?

This indicates Odessa's scienter, and she has committed fraud.

James lost his job recently, and his next-door neighbor Alyson convinced James to sell her his car for $5,000. The car was actually worth $12,000, but James sold it to Alyson because he needed the money. Which of the following is correct regarding this scenario?

This is not duress, since it is not wrongful to take advantage of someone's difficult financial condition to drive a hard bargain.

True or false: Misrepresentation does not require proof that persons guilty of the misrepresentation knew that their statement was untrue.

True Reason: None of the elements of misrepresentation requires any proof that persons guilty of the misrepresentation knew that their statement was untrue.

Which of the following best describes the legally-defined relationship between undue influence and duress?

Undue influence is closely related to duress.

If a party to a contract acts under an untrue belief about a material fact and the belief is not the product of a misstatement by the other party, ______ has likely occurred.

a mistake

In additional to being material, an actionable misrepresentation must concern ______.

a present or a past fact

The "knowingly made" element of fraud may be satisfied by ______.

a reckless misrepresentation

A mistake in contract law is a situation in which one or both parties ______.

acted under an untrue belief about a material fact

Fraud in the execution involves misstatements about the ______ of something usually ______ a form or preprinted contract.

content or legal effect; contained within

A defrauded buyer has the option of affirming the contract and suing for damages under tort law because the elements of fraud are the same as the elements for the tort of ______.

deceit

Courts do not allow a person who claims to have been victimized by a misrepresentation to cancel the contract unless he or she can show some ______ as a result of the misrepresentation.

detriment

The basic idea of ______ is that one of the parties, by making some ______, forced the other party to enter an agreement she would not otherwise have entered.

duress; threat of harm

The rules related to consent are not designed to protect a party from her own ______.

failure to use reasonable care

If a party doesn't read the terms of her contract, she ______.

has given voluntary consent because she is responsible for her own behavior

Victims of undue influence must ______.

have the mental capacity to contract but lack the ability to adequately protect themselves against a party who might take advantage of them

The rules requiring voluntary consent are meant to protect a party from ______.

his own innocent errors

Taking action to conceal a fact ______.

indicates scienter

Fraud is ______.

intentional misrepresentation

If a party recklessly but honestly misrepresents a fact in contract negotiations, the contract _______.

is binding unless the fact was material

For actionable misrepresentation, the subject of the misrepresentation must be ______.

knowable

Even if a party consents to a contract, the contract will not be enforceable if the party did not give his or her consent ______ and ______.

knowingly; voluntarily

A(n) ______ fact is one that would contribute to a reasonable person's decision to enter into a contract.

material

The reason behind the idea of mistake is that mistake may prevent the ______ required by contract law.

meeting of the minds

Scienter refers to the defendant's ______.

mental state

If a person waits too long to complain after learning that she has been the victim of fraud or duress, that person ______ the contract.

might have ratified

The basic idea of misrepresentation is that one of the parties to a contract created in the mind of the other party a ______ impression about ______ about the contract.

mistaken; an important fact

The test for determining the existence of a mutual mistake is a(n) ______ one.

objective

A customer has a claim of misrepresentation if a salesperson gave the customer misinformation about a product and the customer ______.

purchased the product

A customer has a claim of misrepresentation if a salesperson gave the customer misinformation about a product and the customer ______.

purchased the product without doing an inspection and the inspection would not have revealed the misrepresentation

The idea behind the doctrine of ______ is simple: One who waits too long to complain has indicated satisfaction with an agreement despite the initial lack of ______.

ratification; true consent

If a contract is entered into as a result of duress or undue influence, the injured party may ______ the contract.

rescind

Under the traditional rule for fraud in the execution, if a seller presents a form contract to a buyer and summarizes for the buyer the terms of the contract

the buyer will be liable for the terms in the form contract because he or she should have read them personally and not relied on the seller.

Undue influence occurs when ______.

the dominant person in a dependent relationship takes contractual advantage of the other party

Courts originally required a ______ before they would find duress.

threat of physical injury

The basic idea of ______ is to protect the old, the timid, and the physically or mentally weak from those who gain their confidence and attempt to take advantage of them.

undue influence

A defendant "knowingly makes" a misstatement if the defendant knew that what he said was ______.

untrue

Contracts entered into as a result of misrepresentation, fraud, duress, undue influence, and certain kinds of mistake are ______.

voidable

Contracts made under duress and undue influence are ______ because the injured party has been deprived of ______.

voidable; the ability to make a free choice

Contract law is based on the idea that a contract is a(n) ______ agreement between parties.

voluntary

In order to find duress, modern courts require a ______ threat.

wrongful