Business Law Ch. 12

1. An ambiguity in a contract may constitute a mutual mistake of a material fact.

true

10. Predictions about the future generally do not form the basis for fraud.

true

11. Scienter means knowledge that a representation is false or that it was made without sufficient knowledge of the truth.

true

50. Contracts involving fraud in inducement are ________.

voidable

49. ________ is a mistake made by both parties concerning an object that is important to the subject matter of a contract.

Mutual mistake of material fact

12. Duress is said to have occurred only where a threat involved a physical harm.

false

18. A misrepresentation of law is actionable as fraud as the innocent party cannot know every legal detail that applies to the situation.

false

19. An action to undo a contract is called restitution.

false

2. If there has been a mutual mistake, the contract cannot be rescinded.

false

20. A material fact is a fact that is irrelevant to the subject matter of a contract but pertains to the conduct of the parties.

false

23. If an innocent misrepresentation has been made, the aggrieved party may sue for damages.

false

24. When Stella Finman found out that she was terminally ill, she drafted a will leaving all her property to her son. During her period of illness, Stella was financially and emotionally supported by her lawyer as her son was mostly away. When the will was read upon her death, it said that her lawyer would get a 20 percent stake in Finman Corp., a company Stella owned. Upon investigation, it was revealed that Stella's lawyer took advantage of Stella's weakness and persuaded her to change the contractual terms. This is an instance of ________.

undue influence

25. Which of the following is true of undue influence in entering contracts?

A fiduciary or confidential relationship must have existed between the parties for undue influence to be proven.

26. Which of the following is true of duress?

It is a threat issued to make another person sign a contract.

28. Which of the following is true of misrepresentation of a material fact?

It is actionable as fraud if the misrepresentation is of a past or existing material fact.

47. Kevin goes to the store to purchase a fully-automatic washing machine. He browses through several models of washing machines, but does not let the salesperson know that he wants a fully-automatic model. While signing the sales contract, he does not notice that the model he is purchasing is a semi-automatic machine. After purchase, which of the following options does Kyle have?

Keep the semi-automatic washing machine as he made a unilateral mistake.

37. Which of the following is true of a unilateral mistake?

Only one party is mistaken about a material fact regarding the subject matter of a contract.

40. John buys a watch for $100 at a vintage store. Later, the store learns that the watch was worn by Sean Connery in a James Bond movie and wishes to rescind the sales contract they have with John. Which of the following statements is true in this scenario?

The store cannot rescind or void the contract.

38. To prove fraud, which of the following elements must be shown?

The wrongdoer intended to deceive the innocent party.

29. Which of the following scenarios makes Tim liable for undue influence?

Tim takes advantage of his grandmother's illness and persuades her to sign a will leaving all her property to him.

42. Which of the following constitutes duress?

a plaintiff threatening the defendant that he will not drop the lawsuit until the defendant pays him a certain amount of money

45. Which of the following constitutes duress?

a threat to commit extortion unless someone enters into a contract

41. ________ is a situation in which one party threatens to do a wrongful act unless the other party enters into a contract.

duress

46. Lucy wants a divorce from her husband but he wants to stay in the marriage. She threatens to bring a false criminal lawsuit claiming physical abuse from him if he does not sign the divorce papers. This is an instance of ________.

duress

13. A misrepresentation is considered fraud even if it is made without intent to deceive another party.

false

14. When one party takes specific action to cover a material fact from another party, fraud by enticement occurs.

false

16. Innocent misrepresentation is treated as a unilateral mistake.

false

17. A unilateral mistake occurs if both parties know the object of the contract but are mistaken as to its value.

false

22. Physical duress occurs when there is physical harm to the contractual document, such as complete or partial destruction or manipulation of content.

false

3. A threat to bring a civil lawsuit unless someone enters into a contract constitutes duress.

false

7. Misrepresentation of law is a fraud that occurs when a person makes a statement of fact that he or she honestly and reasonably believes to be true even though it is not.

false

44. Intentional misrepresentation is commonly referred to as ________.

fraud

31. Alice offers Richard a chance to work in her affiliate marketing program which, she claims, will make him a millionaire in three months. Richard makes the "mandatory investment" of $12,000 and becomes an affiliate. Soon, he realizes that such a program does not exist and that Alice has disappeared with the money. This is an instance of ________.

fraud in inducement

34. ________ occurs if a person is deceived as to the nature of his or her act and does not know what he or she is signing.

fraud in the factum

32. Millie receives a parcel from her aunt in Indonesia. The delivery man asks her to sign an authorization document to receive the parcel. Millie signs without reading the document, as she is in a hurry. However, on the other side of the document are contract terms that transfer all of Millie's property to the delivery man. This is an instance of ________.

fraud in the inception

43. ________ is an event that occurs when one person consciously decides to induce another person to rely and act on a misrepresentation.

fraudulent misrepresentation

27. What is scienter?

knowledge that a representation is false

48.Which of the following is not actionable as fraud?

misrepresentation of law

39.In which of the following cases of assent is the rescission of a contract unenforceable?

mutual mistake of value

36. A contract in which both parties are mistaken about the value of the object of the contract is considered ________.

non-rescindable

30. ________ is an action to undo a contract.

rescission

33. The measure of damages from a misrepresentation is ________.

the difference between the value of the property as represented and the actual value of the property

15. For a situation to be considered "undue influence," the persuasion by the wrongdoer must overcome the free will of the innocent party.

true

21. Duress is a situation in which one party threatens to do a wrongful act unless the other party enters into a contract.

true

4. Assent of a party to a contract may be manifested in any manner sufficient to show agreement, including conduct.

true

5. The measure of damages awarded to the innocent party for fraud is the difference between the value of the property as represented and the actual value of the property.

true

6. If there is a confidential relationship between two people, any contract made by the servient party that benefits the dominant party is presumed to be entered into under undue influence.

true

8. Unilateral mistake is a mistake in which only one party is mistaken about a material fact regarding the subject matter of a contract.

true

9. Intentional misrepresentation is considered fraud.

true

35. Heather chooses to buy a scarf at Macy's and reads the price on the tag as $50. She uses her credit card to pay for the scarf, but post-purchase, she notices that the price tag actually says $500. This is an instance of a(n) ________.

unilateral mistake