Ch 17 SB

In order for a mutual mistake to interfere with legal consent, the following must be present. (Check ALL that apply.)

A basic assumption about the subject matter of the contract. A material effect on the agreement. An adverse effect on a party who did not agree to bear the risk of mistake at the time of the agreement.

______ is the active hiding of the truth about a _______ fact.

Concealment Material

______ to deceive occurs when the party making the false statement claims to have _______ of lie's accuracy.

Intent Knowledge

Which of the following are major obstacles to legal assent? (Check all that apply.)

Misrepresentation Undue influence Unconscionability Duress Mistake

Peter contracted with Abe to buy his motorcycle. Peter thought he had bought the 2011 motorcycle, but Abe had intended to sell his 1990 motorcycle. Since both parties were mistaken about a material term of the contract, this is called a(n) ____.

Mutual mistake

Which of the following would allow a court to invalidate a contract on the grounds of unilateral mistake? (Check ALL that apply)

One party made a mistake about a material fact, and the other party 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.

Factors that are considered by a court in undue influence claims include all of the following: _______. (Check ALL that apply.)

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

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.)

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.

Josh 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 all of the required elements are present for mutual mistake

A party's threats to bring _______ cases against a party to a lawsuit do not constitute _______ unless the suit is _______. (Check ALL that apply)

civil duress frivolous

The active hiding of the truth about a material fact is legally known as: _______.

concealment

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: _______.

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: _______.

duress

In a case of fraudulent or negligent misrepresentation, a victim can: _______.

either rescind the contract or keep the contract and sue for 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: _______.

either rescission of the contract or damages

A(n) ______ assertion of fact can be an act of concealment or _______.

false nondisclosure

A _______ does not have to be an actual statement; it may also be an act of concealment or nondisclosure.

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

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

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

If a unilateral mistake has been made about a material fact of the contract, the courts are: _______.

hesitant to void the contract

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

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: _______.

innocent misrepresentation

The duty to _______ is declining in modern contract law, and courts are giving increasing responsibility to the person who made the _______ assertion.

inspect erroneous

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 he should not have relied on Trey's representation

An untruthful assertion by one of the parties about a material fact of the contract is: _______.

misrepresenation

If the marketing materials created by a company are seen as being inaccurate or appear to _______ what a product truly is or what _______ the product offers, consumers may attempt to take legal action. (Choose TWO best answers)

misrepresent benefits

A pharmaceutical company was marketing a new drug which had been tested for its effectiveness in curing headaches. The drug was very good at curing headaches, but that was all it did. However, the executives wanted to raise the sales of the drug by also claiming that it provided a cure for hair loss. There was absolutely no proof of this, but the pharmaceutical company advertised the drug as a headache cure and a hair loss cure. Soon there were complaints that the drug did not work as a hair loss cure. The pharmaceutical company is guilty of: _______.

misrepresentation

The major obstacles to legal assent are: _____, _______, and ______. (Choose THREE correct answers) - says choose 3, is actually 4

mistake duress undue influence unconscionability

Courts will not void a contract for reason of ______ mistake if even one of the conditions for the mistake to interfere with legal _______ is missing.

mutual consent

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.

negligent misrepresentation

In a case of an innocent mistake, a victim can: _______.

only request rescission of the contract

If a contract resulted from duress, the innocent party can: _______.

opt to void the contract

The remedy that is most appropriate when a mutual mistake has occurred is: _____.

recission

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: _______.

rescind the contract

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.

rescinded

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

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

scienter

The Latin term for knowledge is: ______.

scienter

An injured party has no justifiable claim of fraud after relying on assertions whose falsity: _______.

should have been obvious

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 falsity could have been discovered by inspecting the item

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: _______.

undue influence over Aunt Esther

Courts are reluctant to ______ a contract based on a(n) _______ mistake.

unilateral void

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.

value

Your Answer correct Which of the following conditions would permit a court to invalidate a contract on grounds of unilateral mistake? (Check ALL that apply.)

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

Identify the factors that would result in rescission of a contract based on duress. (Check ALL that apply)

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

The essential element of undue influence is the existence of a _________ - _______ relationship. (Check TWO correct answers)

dominant servient

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?

Intent to deceive

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 at least one of the elements of mutual mistake is missing