Chapter 11 Blaw Study Guide

A misrepresentation is material if: A) it would likely induce a reasonable person to enter into a transaction. B) the maker does not know it would likely induce the other party to enter into the transaction. C) it is made knowingly. D) All of these.

A

Albert found a stone in his yard and took it to Bob, a jeweler, for evaluation. Bob wasn't sure as to the nature of the stone, but told Albert 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. The sales contract: A) is a valid contract that should be enforced by the law, because neither party knew the exact nature of the stone at the time of the sale. B) can be voided based upon fraud in the execution. C) can be voided based upon fraudulent misrepresentation. D) can be voided based upon mistake as to the identity of the subject matter.

A

By holding a knife to his back, Ed compelled Sean to sign a contract advantageous to Ed. This contract was entered under: A) physical duress. B) improper threats. C) undue influence. D) false representation.

A

Jill contracts to purchase Kevin's automobile 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. Jill: A) cannot void the contract. B) can rescind the agreement. C) could rescind the agreement if she was mistaken in her estimate of the value of the auto. D) can sue Linda for detrimental reliance.

A

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 the motel 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. In this case: A) Ralph has committed fraudulent misrepresentation. B) Steve is bound by the contract, because he failed to verify the statements which were made to him. C) Ralph has used economic duress to compel the sale. D) All of these.

A

A voidable contract results when the contract arises from: A) physical duress. B) undue influence. C) fraud in the execution. D) a mutual mistake in the meaning of contractual terms and neither party is to blame.

B

Adam wants to buy a six-passenger car. The salesman tells him that the two-seat sports car Adam sees on the car lot would be just perfect for six people. Adam test drives the car and then buys it. A) Adam has a valid cause of action for fraud. B) Adam is not entitled to relief based on fraud because he was not justified in relying upon the salesman's representation that the car would seat six people. C) The element of scienter is missing in this fact situation. D) The salesman is in a confidential relationship with Adam.

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) a lawsuit to recover a debt

B

James threatens to hit Kenneth in the head with a baseball bat unless Kenneth signs a contract agreeing to pay James $400 for his saw. Because of the threat, Kenneth signs the contract. A) This 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 these.

B

Relationships that may lead to a court's careful scrutinization of contracts between the parties to make sure undue influence was not present include all but: A) agent and principal. B) salesperson and customer. C) parent and child. D) doctor and patient.

B

Scienter is a legal term which means: A) that a buyer has justifiably relied upon the seller's representation. B) that the seller had knowledge that his statements were false and the statements were made with the intention to deceive. C) sales puffery. D) All of these.

B

The law would most likely impose a duty of disclosure in a transaction between: A) a salesperson and customer. B) business partners. C) a contractor and a homeowner seeking bids on repairing a roof. D) a seller of real property and a potential buyer who knows the property has greater value than the seller realizes.

B

Tom tries to sell his Aston-Martin to Victoria for $12,000. Tom tells Victoria, "I paid $12,000 for the car in 1978 and it's 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) Tom's statements amount to puffing only. B) Tom's statements provide grounds to set the contract aside. C) Tom's 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 is correct with regard to duress? A) It always renders a contract void. B) Duress by improper threats or acts is the more common form of duress. C) The wrongful act must be either a crime or a tort in order to be considered wrongful. D) All of these.

B

Which of the following results in a void contract? A) Duress by improper threat. B) Duress by physical force. C) Undue influence on a party. D) Fraud in the inducement. E) Duress by physical force and also undue influence on a party.

B

Which of the following results 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

An arm's length transaction is one in which: A) the parties owe each other a special duty of confidentiality. B) the parties owe each other a fiduciary duty. C) the parties are acting in their own self-interest. D) None of these.

C

Ben and Kate had been negotiating Ben's employment contract in conversations over the phone for a couple of weeks. Finally, they agreed on some contract terms. Kate offered to create a draft of the contract for Ben to read over. On the same day Ben was fired from his job. Afraid he would be unemployed, Ben signed Kate's draft without reading it. In this example Ben: A) can avoid the contract because of mistake by failure to read. B) can avoid the contract because he was the victim of economic duress. C) cannot avoid the contract because of economic duress or failure to read. D) may rescind the contract because of unilateral mistake.

C

If incorrect, which of the following would probably be considered a misrepresentation of a 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

In the Berardi v. Meadowbrook Mall Company case, the court found: A) plaintiffs must produce subjective evidence of their duress to win a case of economic duress. B) duress is readily accepted by the courts as a reason to avoid a contract. C) economic duress must leave the plaintiff no reasonable alternative but to acquiesce to the terms of the contract. D) plaintiffs who prove economic duress may void the transaction, and this is their complete remedy.

C

Sam wants to sell his golden retriever to Al. Sam tells Al that the dog is three years old and that he will point, back, and retrieve. Al relies on these statements and purchases the bird dog. Although the dog is three years old and will point at birds, he will not back (honor another dog's point). The buyer has most 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 need NOT be proved in order to establish the defense of economic duress? A) That one side involuntarily accepted the terms of another. B) That circumstances permitted no other alternative. C) That one party explicitly made the economic threat. D) That the circumstances leading up to the contract were the result of coercive 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 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

Fred 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 for a Stradivarius. He later learns the violin is an imitation, although it is a good imitation, which fooled even the dealer. In this case: A) Fred has made a unilateral mistake and cannot void 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 may be rescinded, because the dealer has made a nonfraudulent misrepresentation.

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) material fraudulent misrepresentation. B) negligent misrepresentation. C) innocent misrepresentation D) All of these.

D

Under the Restatement, if the parties to a contract attach materially different meanings to their manifestations and neither party knows or has reason to know the meaning attached by the other: A) and neither party is to blame, there is no contract at all. B) and both parties are to blame, there is no contract at all. C) and one party is to blame, that party will be held responsible, but the contract is not void. D) All of these.

D

Which of the following, if any, are requisites for fraud in the inducement? A) False representation of a fact that is material. B) Representation is made with knowledge of its falsity and the intention to deceive. C) The representation is justifiably relied on. D) All of these. E) Two, but not all of these.

D

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. In this case: A) there is a mistake of law, which in some states is treated no differently than a mistake of fact. In such states, since this mistake relates to a basic assumption on which the parties made their contract and it has a material effect on their agreement, the contract is voidable. B) since everyone should know the law, Stewart is liable to Will for any losses he may incur. 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