Exam 15: Mistakes, Fraud, and Voluntary Consent

Because fraud actions necessarily involve wrongful conduct, courts may award punitive damages.

Nora enters into a contract with Oceanic Transport, Inc., to insure and ship a painting from France to the United States for a certain price. But Oceanic makes a mistake in adding the costs, which results in a contract price that is $1,000 less than the true cost. Most likely, a court would

In some states, the courts prefer to rely on traditional notions of fraud, undue influence, and duress rather than the concept of unconscionability.

ApartmentsRUs, a property management firm, presents a standard-form lease for an apartment to Barnaby, a potential tenant. ApartmentsRUs does not pressure Barnaby to sign the lease, but offers it on a take-it-or-leave-it basis. Barnaby signs the lease, but later wants to withdraw from the contract. He is most likely to avoid enforcement of the lease on the ground of

Scienter clearly exists if a party knows a fact is not as stated.

Fact Pattern 15-B2 (Questions B3-B4 apply) Organic Farms Company contracts to buy two tracts of land from Prime Bottomland, Inc. Both parties believe that the two tracts are adjacent, but in fact they are not. Prime Bottomland is still willing to sell the land, but under these circumstances the deal would adversely affect Organic Farms. -Refer to Fact Pattern 15-B2. The parties' belief about the adjacency of the property is

Niles, an accountant, certifies several audit reports on Optimal Operational Processes, Inc., Niles's client, knowing that the company intends to use the reports to borrow money from Prime Business Lending Company to buy new equipment. Niles believes that the reports are true and does not intend to deceive Prime Business, but does not check the re?ports before certifying them. Can Niles be held liable to Prime Business?

Drake enters into a contract with Eve, who claims to have access to a stock-trading algorithm that will multiply an investment many times over. When the results do not match this promise, Drake learns that Eve does not have access to any unique software and files a suit against her, alleging fraud. Proof of an injury is required to

Fact Pattern 15-B1 (Questions B1-B2 apply) Digital Storage, Inc., offers to sell provide cloud-computing services to Entrepreneur Enterprises, Inc., but mistakenly transposes some of the digits in the price so that $15,400 appears in the offer as $14,500. Entrepreneur Enterprises accepts the written offer. -Refer to Fact Pattern 15-B1. Entrepreneur Enterprises' best argument in favor of enforcement of the contract is that

A unilateral mistake is a mistake made by both parties to a contract.

Seth offers to buy a house from Tia for less than Tia paid for it, stating that he would "hate to see anything bad happen to Tia or her house." Tia agrees to sell. Regarding this agreement, a court would likely

Many courts have broadened the concept of unconscionability to apply it in situations other than sales of goods.

A negligent misrepresentation is not a basis for rescinding a contract.

Voluntary consent may be lacking because of misrepresentation but not because of a mistake.

Garth owns two all-terrain vehicles (ATVs), worth $1,000 and $500, re?spec?tively. Helen agrees to buy "Garth's ATV" for $750. Garth believes, in good faith, that he is selling the $500 ATV. Helen believes, in good faith, that she is buying the $1,000 ATV. In this situation

The element of justifiable reliance requires the misrepresentation to be the sole factor in inducing the deceived party to enter into the contract.

Duress is a defense to the enforcement of a contract, but not a ground for rescission of a contract.

To recover for fraud, a plaintiff must be twenty-one or more years of age.

Misrepresentation can occur by words or actions, but not by silence.

In a bike shop, Barrie, who is not knowledgeable about bikes, overhears Cullen say, "This bike could win any race!" Barrie buys the bike, but does not win any races with it. Cullen's statement is