Question 1

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.

Accepted Answer

Fraud in the execution is a misrepresent

Question 2

A famous decision involving mistake in the meaning of contractual terms is Raffles v.Wichelhaus,a case involving two ships with the same name which were confused by the two parties.Neither party was at fault,and the court held that no contract existed.

Accepted Answer

A) True 
 B)False

Question 3

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:

Accepted Answer

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 the above. 
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 the above.

Question 4

The test for duress is objective and the act constituting duress must be a tort or a crime in order to be wrongful.

Accepted Answer

A) True 
 B)False

Question 5

If the act or threat would affect a person of average strength and intelligence,then and only then will the act constitute duress.

Accepted Answer

A) True 
 B)False

Question 6

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 7

For a misrepresentation to be actionable as fraud in the inducement,it must be a misrepresentation of opinion.

Accepted Answer

A) True 
 B)False

Question 8

A misrepresentation is material if:

Accepted Answer

A) it would likely induce a reasonable person to enter into a transaction. 
B) the maker knows it would likely induce the other party to enter into the transaction. 
C) it is made knowingly. 
D) Either (a) or (b). 
A) it would likely induce a reasonable person to enter into a transaction. 
B) the maker knows it would likely induce the other party to enter into the transaction. 
C) it is made knowingly. 
D) Either (a) or (b).

Question 9

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 10

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 of these friends decides to buy the car,Pat is under no duty to tell the correct figure unless asked.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following would be considered to be a misrepresentation of a material fact for purposes of establishing fraud in the inducement?

Accepted Answer

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." 
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."

Question 12

The law will carefully scrutinize contracts between Pete,a trustee,and Mason,a beneficiary of the trust,to make sure there was no undue influence by Pete.

Accepted Answer

A) True 
 B)False

Question 13

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 14

Ty threatened to have Lisa's father prosecuted for embezzlement unless Lisa signed a contract to pay Ty 12 monthly payments of $500 each to purchase his car.Lisa cannot avoid the contract based on duress since the threat was toward Lisa's father rather than Lisa herself.

Accepted Answer

A) True 
 B)False

Question 15

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 16

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."

Accepted Answer

a.This is a statement of opinion because

Question 17

Nonfraudulent representation is made without scienter.

Accepted Answer

A) True 
 B)False

Question 18

Scienter is a legal term which means:

Accepted Answer

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 the above. 
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 the above.

Question 19

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.

Question 20

Bill,a builder,wants to submit a bid on a city sewer project.He computes the cost,but mistakenly omits the cost of one item.Accordingly,he submits a bid of $430,000 to the city.The next highest bid is $675,000,and the rest of the bids are even higher.The city is happy to have such a low bid,so it accepts Bill's bid and awards him the contract for the job,even though the city engineer is of the opinion the job cannot be done for less than $650,000.In this case:

Accepted Answer

A) Bill must perform for the agreed upon price, because he has made a unilateral mistake. 
B) the city was aware of Bill's mistake. When it accepted the bid, with knowledge of Bill's mistake, the city sought to take an unconscionable advantage of Bill's error. 
C) there was a palpable unilateral mistake. 
D) Two of the above, (b) and (c). 
A) Bill must perform for the agreed upon price, because he has made a unilateral mistake. 
B) the city was aware of Bill's mistake. When it accepted the bid, with knowledge of Bill's mistake, the city sought to take an unconscionable advantage of Bill's error. 
C) there was a palpable unilateral mistake. 
D) Two of the above, (b) and (c).

Exam 11: Conduct Invalidating Assent

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.

A famous decision involving mistake in the meaning of contractual terms is Raffles v.Wichelhaus,a case involving two ships with the same name which were confused by the two parties.Neither party was at fault,and the court held that no contract existed.

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:

The test for duress is objective and the act constituting duress must be a tort or a crime in order to be wrongful.

If the act or threat would affect a person of average strength and intelligence,then and only then will the act constitute duress.

For a misrepresentation to be actionable as fraud in the inducement,it must be a misrepresentation of opinion.

A misrepresentation is material if:

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 of these friends decides to buy the car,Pat is under no duty to tell the correct figure unless asked.

Which of the following would be considered to be a misrepresentation of a material fact for purposes of establishing fraud in the inducement?

The law will carefully scrutinize contracts between Pete,a trustee,and Mason,a beneficiary of the trust,to make sure there was no undue influence by Pete.

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

Ty threatened to have Lisa's father prosecuted for embezzlement unless Lisa signed a contract to pay Ty 12 monthly payments of $500 each to purchase his car.Lisa cannot avoid the contract based on duress since the threat was toward Lisa's father rather than Lisa herself.

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.

Nonfraudulent representation is made without scienter.

Scienter is a legal term which means:

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

Introduction to Law

Business Ethics

Civil Dispute Resolution

Constitutional Law

Administrative Law

Criminal Law

Intentional Torts

Negligence and Strict Liability

Introduction to Contracts

Mutual Assent

Consideration

Illegal Bargains

Contractual Capacity

Contracts in Writing

Third Parties to Contracts

Performance, Breach, and Discharge

Contract Remedies

Introduction to Sales and Leases

Performance

Transfer of Title and Risk of Loss

Product Liability: Warranties and Strict Liability

Sales Remedies

Form and Content

Transfer and Holder in Due Course

Liability of Parties

Bank Deposits, Collections, and Funds Transfers

Relationship of Principal and Agent

Relationship With Third Parties

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 Corporations

Secured Transactions and Suretyship

Bankruptcy

Securities Regulation

Intellectual Property

Employment Law

Antitrust

Accountants Legal Liability

Consumer Protection

Environmental Law

International Business Law

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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