Question 1

Which of the following need NOT be proved in order to establish the defense of economic duress?

Accepted Answer

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. 
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

Question 2

Silence may constitute fraud if the transaction involves a person with fiduciary duty to the other party.

Accepted Answer

A) True 
 B)False  True

Question 3

A misrepresentation is material if:

Accepted Answer

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)  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

Question 4

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

Accepted Answer

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." 
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."

Question 5

At the marriage of her daughter, Lorna is given papers to sign, which the catering company says are the invoices for the food, service, and decorations.Underneath the invoices are a carbon and a contract of sale for a portion of the failing catering business.Lorna signs the papers; her signature is transferred to the sales contract.This is a void contract because it was entered by fraud in the execution.

Accepted Answer

A) True 
 B)False

Question 6

An act that is contrary to public policy or is morally reprehensible may constitute duress.

Accepted Answer

A) True 
 B)False

Question 7

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.

Accepted Answer

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. 
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.

Question 8

Matt sells bikes at a local discount store.To encourage Bob to buy a more expensive model than he originally contemplated, Matt tells Bob, "This is the most awesome bike money can buy at this price.You can expect lots of riding pleasure." Based on this statement Bob buys the bike.A week later, before his bike is fully paid for, Bob sees a far superior bike for a lower price at another store.Bob can avoid his contract with Matt because of fraudulent misrepresentation.

Accepted Answer

A) True 
 B)False

Question 9

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:

Accepted Answer

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)  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.

Question 10

A contract was made for 125 bales of cotton to arrive on a ship named "Peerless" from Bombay.Unbeknownst to either party to the contract, there were two ships named "Peerless," both of which were sailing from Bombay.One sailed in October and the other in December.The buyer had in mind the ship sailing in October, but the seller had in mind the ship sailing in December.Each party held his belief in good faith.When the goods failed to arrive on time, the buyer sued for breach of contract.The court found:

Accepted Answer

A)  the seller was in breach and must pay damages. 
B)  the seller was guilty of fraud in the inducement for failing to disclose to the buyer which ship would contain the goods. 
C)  no contract existed due to mistake in meaning of terms. 
D)  none of these. 
A)  the seller was in breach and must pay damages. 
B)  the seller was guilty of fraud in the inducement for failing to disclose to the buyer which ship would contain the goods. 
C)  no contract existed due to mistake in meaning of terms. 
D)  none of these.

Question 11

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:

Accepted Answer

A)  agent and principal. 
B)  salesperson and customer. 
C)  parent and child. 
D)  doctor and patient. 
A)  agent and principal. 
B)  salesperson and customer. 
C)  parent and child. 
D)  doctor and patient.

Question 12

Marcus is a salesman for Outdoor Life.  He is telling a potential customer the virtues of a particular tent, by making the claim that "It's tougher than bears!"  If this customer buys the tent, only to find it destroyed by bears in the campground,

Accepted Answer

A)  she has a valid claim because she has justifiably relied upon the Marcus' representation. 
B)  she has a valid claim because  Marcus had knowledge that his statements were false and the statements were made with the intention to deceive. 
C)  she does not have a valid claim because Marcus' talk was just sales puffery. 
D)  she does not have a valid claim because Marcus is not an expert in bears or tents. 
A)  she has a valid claim because she has justifiably relied upon the Marcus' representation. 
B)  she has a valid claim because  Marcus had knowledge that his statements were false and the statements were made with the intention to deceive. 
C)  she does not have a valid claim because Marcus' talk was just sales puffery. 
D)  she does not have a valid claim because Marcus is not an expert in bears or tents.

Question 13

Al owns a farm that he believes is worth $150,000.Betty knows that there is oil under the farm and offers Al $160,000 for it.Al is suspicious and asks her why she wants to buy the place.She says she would like to live in the country.Al then asks her if she thinks there might be valuable minerals under the land.Betty laughs and says she doubts that very much, so Al sells her the farm for $160,000.Al later realizes that the land was worth more than he was paid.Al can have the contract voided based upon fraud.

Accepted Answer

A) True 
 B)False

Question 14

An arm's length transaction is one in which the parties owe each other no special duties and each is acting in his or her self-interest.

Accepted Answer

A) True 
 B)False

Question 15

There are two distinct types of fraud.

Accepted Answer

A) True 
 B)False

Question 16

For rescission to be available as a remedy for a false statement, a misrepresentation must have been made with scienter.

Accepted Answer

A) True 
 B)False

Question 17

Predictions, opinions, and promissory statements ordinarily do not constitute bases of fraud.

Accepted Answer

A) True 
 B)False

Question 18

Nonfraudulent representation is made without scienter.

Accepted Answer

A) True 
 B)False

Question 19

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:

Accepted Answer

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)  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.

Question 20

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:

Accepted Answer

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)  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.

Exam 11: Conduct Invalidating Assent

Which of the following need NOT be proved in order to establish the defense of economic duress?

Silence may constitute fraud if the transaction involves a person with fiduciary duty to the other party.

A misrepresentation is material if:

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

An act that is contrary to public policy or is morally reprehensible may constitute duress.

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.

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:

Marcus is a salesman for Outdoor Life. He is telling a potential customer the virtues of a particular tent, by making the claim that "It's tougher than bears!" If this customer buys the tent, only to find it destroyed by bears in the campground,

An arm's length transaction is one in which the parties owe each other no special duties and each is acting in his or her self-interest.

There are two distinct types of fraud.

For rescission to be available as a remedy for a false statement, a misrepresentation must have been made with scienter.

Predictions, opinions, and promissory statements ordinarily do not constitute bases of fraud.

Nonfraudulent representation is made without scienter.

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:

Introduction to Law

Business Ethicspart Ii: the Legal Environment of Business

Civil Dispute Resolution

Constitutional Law

Administrative Law

Criminal Law

Negligence and Strict Liabilitypart Iii: Contracts

Introduction to Contracts

Mutual Assent

Consideration

Illegal Bargains

Contractual Capacity

Contracts in Writing

Third Parties to Contracts

Performance, Breach, and Discharge

Contract Remediespart Iv: Sales

Introduction to Sales and Leases

Performance

Transfer of Title and Risk of Loss

Product Liability: Warranties and Strict Liability

Sales Remediespart V: Negotiable Instruments

Form and Content

Transfer and Holder in Due Course

Liability of Parties

Bank Deposits, Collections, and Funds Transferspart Vi: Agency

Relationship of Principal and Agent

Relationship With Third Partiespart Vii: Business Associations

Formation and Internal Relations of General Partnerships

Operation and Dissolution of General Partnerships

Limited Partnerships and Limited Liability Companies

Nature and Formation of Corporations

Financial Structure of Corporations

Management Structure of Corporations

Fundamental Changes of Corporationspart Viii: Debtor and Creditor Relations

Secured Transactions and Suretyship

Bankruptcypart Ix: Regulation of Business

Securities Regulation

Intellectual Property

Employment Law

Antitrust

Accountants Legal Liability

Consumer Protection

International Business Lawpart X: Property

Introduction to Property, Property Insurance, Bailments, and Documents of Title

Interests in Real Property

Transfer and Control of Real Property

Trusts and Wills

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