Chapter 13 & 14 BLAW

Which of the following is the meaning of the term "caveat emptor"? Let the buyer beware Divide and conquer (more specifically, proof of one contractual flaw resulting in the unenforceability of the entire agreement) To the victor go the spoils An empty cavity (more specifically, a gap in a contract resulting from a missing term)

A Caveat emptor means "let the buyer beware". The original common law position on fraud by silence was caveat emptor. Today, however, many courts recognize that caveat emptor often produces unfair results.

Which of the following is considered an actionable misrepresentation? A statement concerning a present fact A statement of opinion A statement about the future A statement that amounts to puffery

A In addition to being material, an actionable misrepresentation must concern a present or past fact. This is another way of saying that the subject of the misrepresentation must be knowable.

Jodie put $5,000 worth of stocks and bonds into an asset management account at Pyramid Investments. One month later, due to an accounting error, his account statement indicated that he had a balance of $5 million. Jodie quickly withdrew this amount from his account and put it into a Swiss bank account. Can Pyramid rescind its payment of $5 million to Jodie on the grounds of mistake?? Yes, because even though Pyramid was at fault, Jody was well aware of Pyramid's mistake in crediting the extra amount to his account. No, because Pyramid should have exercised reasonable care while crediting the amount to Jodie's account. No, because Jody and Pyramid made a mutual mistake. Yes, because Pyramid was a victim of fraud in the execution.

A The courts are inclined to impose the loss on the mistaken party unless it appears that the other party should have known of the mistake. In such a case, the courts are likely to grant rescission rather than allow one party to take advantage of the other's mistake..

Which of the following is true of misrepresentation in contracts? A victim has to show detriment from misrepresentation to cancel a contract. Misrepresentation cannot result from an honest mistake or negligence. Statements of opinion serve as a basis for rescission. A mere untrue assertion is sufficient for proving misrepresentation.

A The 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.

If a contract is entered into as a result of misrepresentation, fraud, duress, and undue influence, the injured party may __________ the contract. counteroffer rescind modify mitigate

B Contracts entered into as a result of misrepresentation, fraud, duress, undue influence, and certain kinds of mistake are voidable. The injured party (or parties) may rescind (cancel) the contract. The injured party returns what he or she has received and recovers what he or she has given under the contract.

Which of the following best defines scienter? It pertains to an actionable misrepresentation that concerns a present or past fact. It refers to the defendant's mental state. It refers to scientific information accessible via the computer (i.e., the internet). It is a causal connection between a misrepresentation and the complaining party's entry into the contract.

B Scienter refers to the mental state of the defendant. Taking action to conceal a fact also indicates scienter.

Which of the following is true regarding a unilateral mistake? The court does not grant rescission even if the mistaken party is slightly negligent. The basic rule is that it is grounds for rescission only if both parties to the agreement are acting under a mistaken belief. The plaintiff needs to promptly notify the defendant when a mistake is discovered. The court will grant relief even if the person's own negligence is the cause of his or her mistake.

C For unilateral mistakes, the courts often grant rescission if they are convinced that a person was truly mistaken and that a serious injustice would result from enforcing the agreement. This is sometimes true even when the mistaken party was slightly negligent. The plaintiff needs to promptly notify the defendant when a mistake is discovered.

Which of the following refers to misstatements about the content or legal effect of something usually contained in a form or preprinted contract? Ex post facto fraud Libel Fraud in the execution Fraud in the inducement

C Fraud in the execution involves misstatements about the content or legal effect of something usually contained in a form or preprinted contract. This type of fraud generally prevents a contract from being created.

The intent to deceive is technically called __________. frustration of purpose commercial impracticability scienter caveat emptor

C Fraud is intentional misrepresentation. To prove fraud, one must prove all the elements of misrepresentation plus two additional elements: that the misrepresentation was (1) knowingly made with the (2) intent to deceive (technically called scienter).

Which of the following is true of justifiable reliance? It is an important element of unilateral mistakes. There should not be any causal connection between a misrepresentation and the complaining party's entry into the contract. It cannot lead to rescission of a contract if the complaining party was aware of the truth. Misrepresentation of public facts amounts to justifiable reliance.

C One of the ideas behind justifiable reliance is that there should be some causal connection between a misrepresentation and the complaining party's entry into the contract. It cannot lead to rescission of a contract if the complaining party was aware of the truth.

Jewel buys a laptop from Francisco for $1,000. Francisco knew that the laptop had hardware problems. However, he told Jewel that it was in excellent condition. In this scenario, which of the following is most likely to be true? Francisco does not owe Jewel anything because it was Jewel's duty to determine if Francisco was lying. Jewel can recover 20 percent of the repair costs if she returns the laptop to Francisco. Jewel can sue for the difference between purchase price and actual value of the laptop with hardware problems. Francisco can successfully defend against any fraud accusations because the facts demonstrate a mutual misunderstanding.

C The buyer who can prove fraudulent misstatements or failure to disclose on the part of the seller has a choice of remedies. He or she may rescind the contract, like the buyer who can prove only misrepresentation. A defrauded buyer also has the option of affirming the contract and suing in tort for damages resulting from the fraud. Jewel can therefore rescind the contract, return the laptop, or sue for the difference between purchase price and true value of the laptop that has hardware problems.

In a case of duress, there is no voluntary consent if __________. a material fact has been intentionally misrepresented either party ratifies the contract the consideration exchanged between the parties is not comparable in value the plaintiff's free will was overcome

D The basic idea of duress is that one of the parties, by making some threat of harm, forced the other party to enter an agreement he or she would not otherwise have entered. In a case of duress, there is no voluntary consent if the plaintiff's free will was overcome.

T/F Duress exists only when parties entered into a contract at a time when they had a relationship where one party was dependent on and subject to the control of the other party.

False

T/F Contract law is based on the idea that a contract is a voluntary agreement between parties.

True

T/F Even if a party consents to a contract, the contract will not be enforceable if the party did not give his or her consent knowingly and voluntarily.

True

T/F Mutual mistake is always a basis for granting rescission of the contract at the request of either party.

True

T/F The 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 injury as a result of the misrepresentation.

True

T/F The elements of misrepresentation are ordinarily given as misrepresentation of a material fact justifiably relied on to the detriment of the person relying.

True

T/F To prove fraud, one must establish that a misrepresentation was knowingly made with the intent to deceive.

True

T/F The term mistake is used in contract law to describe the situation in which one or both of the parties to an agreement acted under an untrue belief about the existence or nonexistence of a material fact.

True