Exam 11: Conduct Invalidating Assent

A misrepresentation is material if:

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:

Identify whether the following statements could result in actionable fraud and why or why not. a. A statement by an art dealer to a potential buyer, "I think this painting is underpriced because the artist is now gaining national recognition." b. A vacuum cleaner salesperson's statement, "This machine is the best available for the cost." c. A city councilman's statement to a fellow councilman that, "If we vote for that action, the resulting consolidation will be illegal."

Fraud in the inducement will render an agreement void.

Define undue influence and name some of the relationships that would be affected.

In the Berardi v. Meadowbrook Mall Company case, the court found:

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.

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:

For a misrepresentation to be material, it must be likely to induce a reasonable person to manifest assent or the maker must know that it would be likely to induce the recipient to do so.

Which of the following results in a void, rather than voidable, agreement?

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:

Marjorie has been cared for by her family physician for 35 years. She decides to assume the mortgage on his new clinic. The contract is automatically invalid because of undue influence.

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?

There are two distinct types of fraud.

Which of the following results in a void contract?

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

What are the two types of fraud and what is the effect of each on the contract involved? Give an example of each type of fraud.

An arm's length transaction is one in which:

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:

Pat told her friends that her car got 35 miles to the gallon in the city when in reality it only got 20 miles per gallon. When Pat decides to sell and one these friends decides to buy the car, Pat is under no duty to tell the correct figure unless asked.