Deck 17: Legal Assent

Question 1

Intent to deceive may not be inferred when a fraudulent misrepresentation is at issue.

Answer 1

False

Question 2

The active hiding of the truth about a material fact is called nondisclosure.

Answer 2

False

Question 3

Generally, neither the European courts nor the U.S. courts will interfere with a contract just because the value of the item in question has changed since the agreement.

Answer 3

True

Question 4

Without legal assent a contract may be found to be ________ by the courts.

A) illegal
B) void
C) irregular
D) implied
E) voidable

Question 5

Which of the following was the result on appeal in the Case Opener involving the claim that Michael Jordan owed $5 million based on his agreement to pay the plaintiff's mother on the premise that he was the father, although it was later determined that the child was not his?

A) That the agreement to pay $5 million could only be rescinded based on a mutual mistake of fact.
B) That the agreement to pay $5 million could only be rescinded based on the mother's fraud.
C) That the agreement to pay $5 million could be rescinded based on either a mutual mistake of fact or based on the mother's fraud.
D) That the agreement to pay $5 million could not be rescinded because Jordan was aware of a question about his parentage.
E) That the agreement to pay $5 million could not be rescinded because Jordan waited too long in which to complain about the contract.

Question 6

Fraudulent misrepresentation is also referred to as intentional misrepresentation.

Question 7

If both parties are mistaken about a material fact, the mutual mistake does not void the contract.

Question 8

When the party making the statement would have known the truth about the fact had he used reasonable care to discover or reveal it, a negligent misrepresentation results.

Question 9

If the parties have entered into a voidable contract, the contract may be ________.

A) illegal
B) rescinded
C) unallowed
D) assigned
E) rewritten

Question 10

Scienter is present when the party accused of making the fraudulent assertion believed that the assertion was false or made the claim without any regard for whether it was true or false.

Question 11

Threatening physical harm or extortion to gain consent to a contract is classified as duress.

Question 12

The rules about legal assent were developed to show courts which party is at fault in a contract dispute.

Question 13

Gordon, Melinda's long-time attorney, uses his position as her attorney to persuade her to sign over her property to Gordon's best friend Bartholomew. This is undue influence.

Question 14

An erroneous belief about the facts of the contract at the time the contract is concluded is called a mistake of fact.

Question 15

Zara and Wahid have a lot of money invested with a stockbroker named Dion and also with other brokers. Zara and Wahid decided to divorce. Zara was really interested in investments, so the divorce decree provided that Zara would retain "all investment accounts," and Wahid would receive a "cash settlement" from funds the parties had in the bank. Six months after the divorce was final, it was discovered that Dion had absconded to parts unknown with all the money invested with him. Zara could have withdrawn the funds at the time of the divorce, before Dion left town, but she had no reason for concern and left the funds there for investment purposes. After discovering Dion's wrongdoing, Zara asked Wahid to renegotiate the divorce agreement, but he refused. Which of the following is the most likely result of their dispute if the court follows the decision of the court in Simkin v. Blank, discussed in the text?

A) The original divorce agreement will be rescinded, and the parties will be required to renegotiate the agreement because Zara and Wahid were mutually mistaken in regard to investing with Dion.
B) The original divorce agreement will be rescinded, and the parties will be required to renegotiate the agreement because the investment accounts with Dion were a significant basis of the divorce agreement, and Dion's fraud caused termination of that contract.
C) The original divorce agreement will be rescinded, and the parties will be required to renegotiate the agreement because, regardless of whether or not Dion was guilty of fraud, the end result is that Zara did not receive the benefit of her bargain.
D) The original divorce agreement will be enforced only in part because based on their mutual mistake in regard to investing with Dion, the parties will be required to renegotiate the part of the contract involving the investments with Dion.
E) The original divorce agreement will be enforced.

Question 16

Mistakes in contract law result from untrue statements made by one party to the contract.

Question 17

For fraudulent misrepresentation to be the basis for a contract rescission, the statement of fact must in writing.

Question 18

The statement of fact need not be an actual assertion for fraudulent misrepresentation to be the basis for a contract rescission.

Question 19

It is not necessary to show reliance to prove fraudulent misrepresentation.

Question 20

Legal assent involves ________ that the courts will require the parties to obey.

A) a promise
B) a special agreement
C) bilateral assent
D) contractual affirmance
E) legal affirmance

Question 21

Which of the following is true on appeal regarding the case of Mary W. Scott v. Mid-Carolina Homes, Inc., discussed in the "Case Nugget" in which the plaintiff sued to recover damages after a salesperson allegedly mistakenly agreed to sell a mobile home to her for a price that was too low, later told her the mobile home could not be sold because of a bent frame, and then proceeded to sell it for a higher price to other buyers?

A) The court refused to find that the defendant had the right to rescind the contract based on the alleged unilateral mistake.
B) The court refused to find that the defendant had the right to rescind the contract because a mutual mistake was involved.
C) The court found that the defendant had the right to rescind the contract because, even though the salesperson acted questionably, the plaintiff had not made a down payment.
D) The court ruled that the defendant had the right to rescind the contract because a unilateral mistake was involved.
E) The court ruled that the defendant had the right to rescind the contract because a mutual mistake was involved.

Question 22

Regarding European courts, which statement is true?

A) European courts are in total disagreement with the reluctance of American courts to interfere with a contract because the value of the item in question has changed since the agreement.
B) European courts refuse to assume that parties accept the risk when they make a contract that the value might change later.
C) European courts permit rescission of the contract for a mistake of value when the mistake involves more than 10 percent of the value at the time of the contract.
D) European courts permit rescission of the contract for a mistake of value when the mistake involves more than 40 percent of the value at the time of the contract.
E) European courts permit rescission of the contract for a mistake of value when the mistake involves more than 50 percent of the value at the time of the contract.

Question 23

Ida and Kwame are both mistaken as to the content within their contract. This type of mistake that is shared by both parties to an agreement is a[n] ________ mistake.

A) dual
B) unilateral
C) mutual
D) consensual
E) between parties

Question 24

Why is it important to distinguish between unilateral and mutual mistakes?

A) Because it determines which contracts are considered fraudulent.
B) Because it determines which contracts are voidable.
C) Because it determines which contracts lack consideration.
D) Because it determines how much may be awarded in damages under a contract.
E) Because it determines whether punitive damages may be awarded.

Question 25

A[n] ________ misrepresentation results from a false statement about a fact material to an agreement that the person making the statement believed to be true.

A) unilateral
B) purposeful
C) innocent
D) wrongful
E) illegal

Question 26

Georgia and Dillard are both confused about a material fact in their current contract. Either party can choose to ________ the contract at this point.

A) rescind
B) realign
C) unilaterally rewrite
D) disclaim
E) discard

Question 27

Which of the following is true regarding the effect of an innocent misrepresentation on a contract?

A) It permits the party that was misled by the false statement to rescind the contract, but damages are not available.
B) It permits the party who made the false statement to rescind the contract.
C) It permits either the party that was misled by the false statement or the party who made the false statement to rescind the contract.
D) The contract is automatically void and of no effect, and the party who was misled may recover damages.
E) It permits either the party that was misled by the false statement or the party who made the false statement to rescind the contract, and it also makes the contract void and of no effect.

Question 28

Pedro intentionally failed to provide Anda with pertinent information that was material to a projected contract they were about to enter into. This is known as ________.

A) manipulation
B) nondisclosure
C) intentional deceitfulness
D) purposeful availment
E) enforcement

Question 29

Which of the following was the result on appeal in the case of Evan Rothberg v. Walt Disney Pictures, the case in the text in which the defendant allegedly used undue influence to obtain a release of employee benefits from a person in the hospital dying of AIDS?

A) The court ruled that the defendant was rightfully entitled to a summary judgment ruling in its favor because there was no direct evidence of legal undue susceptibility on the part of the weaker party.
B) The court ruled that the defendant was rightfully entitled to a summary judgment ruling in its favor because there was no direct evidence of application of excessive pressure by the stronger party.
C) The court ruled that the defendant was subject to summary judgment because the employer/employee relationship was present when the benefits at issue were granted, and no action for undue influence could later be brought against the employer.
D) The court ruled that the plaintiff was entitled to recover as a matter of law because there was sufficient proof of undue influence.
E) The court ruled that a jury question was presented as to whether undue influence was present.

Question 30

Gloria makes a representation about a car on the showroom floor but actually has no knowledge as to whether her claim is false or not. Gloria does not have ________.

A) scienter
B) purpose
C) preformed thoughts
D) premeditation
E) common sense

Question 31

Although there are some exceptions, a[n] ________ mistake does not generally void a contract.

A) Unclear
B) Mutual
C) Unilateral
D) Clear
E) Single

Question 32

Which of the following is true regarding the elements that must be satisfied in order for a mutual mistake to interfere with legal consent?

A) The required elements are: (1) a basic assumption about the subject matter of the contract, and (2) an admission by one of the parties that a misrepresentation occurred.
B) The required elements are: (1) a basic assumption about the subject matter of the contract, and (2) a material effect on the agreement.
C) The required elements are: (1) a basic assumption about the subject matter of the contract, and (2) an adverse effect on a party who did not agree to bear the risk of mistake at the time of the agreement.
D) The required elements are: (1) a basic assumption about the subject matter of the contract, (2) a material effect on the agreement, and (3) an adverse effect on a party who did not agree to bear the risk of mistake at the time of the agreement.
E) The required elements are: (1) a basic assumption about the subject matter of the contract, (2) an adverse effect on a party who did not agree to bear the risk of mistake at the time of the agreement, (3) a material effect on the agreement, and (4) fraud.

Question 33

In China, which of the following is true regarding the treatment of fraudulent misrepresentations by outsiders?

A) Outsiders have been fined but by law are allowed to continue operating in the country because of the country's concern with joint ventures.
B) Outsiders have been prohibited from doing further business with Chinese firms but not fined because of the country's concern with its reputation with foreign investors.
C) Outsiders are jailed for at least 20 years by law.
D) Outsiders are jailed for at least 10 years, fined heavily, and have all property confiscated.
E) Outsiders have been fined heavily and refused permission to enter into more agreements with Chinese firms.

Question 34

Ben says he will sell Catalina a ring that he found in his yard. Ben and Catalina look at the ring and decide that they are not sure what it is, probably just a shiny stone. Catalina pays Ben $10 for the ring. The ring turns out to be a diamond worth much more than $10. Ben wants the ring back, and Catalina refuses. What is the most likely result?

A) The ring will be returned to Ben because of mutual mistake.
B) The ring will be returned to Ben because of unilateral mistake.
C) The ring will be returned to Ben because of equity.
D) The ring will remain with Catalina unless Ben can establish that he was negligent in not recognizing the ring's true value.
E) The ring will remain with Catalina because the parties contracted on the assumption that they did not know the value of the ring.

Question 35

Vivian actively hid a material fact about the condition of the computer she was about to sell Lowell. Which of the following involves the active hiding of the truth about a material fact?

A) Manipulation
B) Condemnation
C) Concealment
D) Realignment
E) Circumstantial

Question 36

In determining whether a mistake of fact occurred, which of the following is true?

A) Courts look to determine whether a mistake of fact occurred at the time the contract was concluded.
B) Courts look to determine whether a mistake of fact occurred during contract negotiations.
C) Courts look to determine whether a mistake of fact occurred when the initial offer was made.
D) Courts look to determine whether a mistake of fact occurred when an advertisement was made.
E) Courts look to determine whether a mistake of fact occurred after the contract was concluded.

Question 37

What was the result in the Peerless case discussed in the text in which there were two ships named Peerless and the parties disagreed over which ship was the subject of the contract?

A) The court rescinded the contract.
B) The court ruled that the older ship would be identified to the contract.
C) The court ruled that the newer ship would be identified to the contract.
D) The court ruled that the defendant would be allowed to choose which ship would be identified to the contract.
E) The court ruled that the plaintiff would be allowed to choose which ship would be identified to the contract.

Question 38

A[n] ________ is a false representation of a material fact that is consciously false and intended to mislead the other party.

A) Negligent misrepresentation
B) Fraudulent misrepresentation
C) Scienter misrepresentation
D) Acknowledged misrepresentation
E) True misrepresentation

Question 39

Renaldo thought that he was buying a car with air conditioning. The car did not have air conditioning. The mistake was the result of Renaldo not properly looking at the car. This is a[n] ________ mistake.

A) unfortunate
B) minimal
C) unilateral
D) bilateral
E) singular

Question 40

Kellen and Thomas are mistaken as to the facts surrounding their contract. What is absent when a mistake of fact occurs?

A) Legal analysis
B) Mutual understanding
C) Joint participation
D) Contractual concurrence
E) Legal assent

Question 41

In the case of Fantastic Sams Salons Corp. v. PSTEVO, LLC and Jeremy Baker, the court dismissed the defendant's fraudulent misrepresentation counterclaim because the defendant affirmed, in response to the plaintiff's ________, that certain representations were not made.

A) special places clause
B) legal assent clause
C) disclaimer
D) consideration clause
E) disruption clause

Question 42

When ________ is at issue, the free will needed for legal consent has been removed by the specifics of a threat.

A) duress
B) master manipulation
C) fraud
D) undue influence
E) stealing

Question 43

[Cheap Motorcycle] Jack, an unpleasant, disagreeable, business law teacher, notices that a student, Liam, who is past the age of majority, has a nice motorcycle for sale. Liam has struggled through school, is in his last semester, and needs to pass business law in order to graduate. Jack tells Liam that he would like to see Liam pass and, in the next sentence, says that he wants to buy the motorcycle for $100, a price far below the value of the motorcycle. Liam asks if Jack is serious about the price, and Jack replies, "I have the power here! Take it or leave it!" Jack proceeds to draw up a contract for the sale of the motorcycle for $100 which Liam signs. Liam does some research and finds that Jack has had several arrests for driving under the influence in a nearby town. As an act of revenge, Liam tells Jack that unless Jack sells Liam his new Mustang convertible for $50, he will send a letter about the arrests to the school newspaper. Jack reluctantly agrees to the deal.
Which statement is true if Jack seeks to rescind the contract for the sale of the Mustang?

A) Jack may rescind the contract on grounds of fraud.
B) Jack may rescind the contract on grounds of misappropriation of name or likeness.
C) Jack may rescind the contract on grounds of duress.
D) Jack may rescind the contract on grounds of defamation.
E) Jack may not rescind the contract because truth is involved.

Question 44

[Pet Pig Farm] Jen was interested in buying Monique's land in order to breed small pet pigs. Jen told Monique that having water on the property was very important although she did not mention to Monique her plan to breed small pigs. Monique assured her that a spring ran through one corner of the property. Therefore, Jen agreed to buy the farm. Jen, who loved pigs, assumed that the neighbors would be pleased with the pigs being in the area. Monique also agreed to sell Jen a used truck for $5,000. After the contract for the land sale was entered into, Jen had a land survey done, and it was discovered that the spring did not actually run through the corner of Monique's property. The area in which the spring ran belonged to a neighbor. Additionally, when Monique brought Jen the used truck, Jen said, "That's not the truck!" It was discovered that Monique, who had two trucks, thought that Jen had bought the older truck although Jen thought she had purchased the newer truck. Jen was also surprised when she received a petition signed by all surrounding landowners objecting to the presence of the pigs and threatening to sue Jen for nuisance. It will cost Jen more than she had agreed to pay Monique in order for Jen to obtain a similar farm that has a spring within its legal boundaries.
Which statement would be the result if Jen attempts to rescind the contract and recover damages only on the basis of the neighbors' objection to a pig farm?

A) Jen may rescind the contract and recover damages because Monique made an implied misrepresentation.
B) Jen may rescind the contract but may not recover damages because Monique made an implied misrepresentation.
C) Jen may recover damages but may not rescind the contract because Monique made an implied misrepresentation.
D) Jen may not rescind the contract nor may she recover damages because she, Jen, made a unilateral mistake.
E) Jen may rescind the contract but may not recover damages because she, Jen, made a unilateral mistake.

Question 45

[Cheap Motorcycle] Jack, an unpleasant, disagreeable, business law teacher, notices that a student, Liam, who is past the age of majority, has a nice motorcycle for sale. Liam has struggled through school, is in his last semester, and needs to pass business law in order to graduate. Jack tells Liam that he would like to see Liam pass and, in the next sentence, says that he wants to buy the motorcycle for $100, a price far below the value of the motorcycle. Liam asks if Jack is serious about the price, and Jack replies, "I have the power here! Take it or leave it!" Jack proceeds to draw up a contract for the sale of the motorcycle for $100 which Liam signs. Liam does some research and finds that Jack has had several arrests for driving under the influence in a nearby town. As an act of revenge, Liam tells Jack that unless Jack sells Liam his new Mustang convertible for $50, he will send a letter about the arrests to the school newspaper. Jack reluctantly agrees to the deal.
Liam could seek to rescind the contract for the sale of the motorcycle under the theory of ________.

A) fraud.
B) duress.
C) undue influence.
D) fraud or undue influence but not duress.
E) Liam may not rescind the contract.

Question 46

[Pet Pig Farm] Jen was interested in buying Monique's land in order to breed small pet pigs. Jen told Monique that having water on the property was very important although she did not mention to Monique her plan to breed small pigs. Monique assured her that a spring ran through one corner of the property. Therefore, Jen agreed to buy the farm. Jen, who loved pigs, assumed that the neighbors would be pleased with the pigs being in the area. Monique also agreed to sell Jen a used truck for $5,000. After the contract for the land sale was entered into, Jen had a land survey done, and it was discovered that the spring did not actually run through the corner of Monique's property. The area in which the spring ran belonged to a neighbor. Additionally, when Monique brought Jen the used truck, Jen said, "That's not the truck!" It was discovered that Monique, who had two trucks, thought that Jen had bought the older truck although Jen thought she had purchased the newer truck. Jen was also surprised when she received a petition signed by all surrounding landowners objecting to the presence of the pigs and threatening to sue Jen for nuisance. It will cost Jen more than she had agreed to pay Monique in order for Jen to obtain a similar farm that has a spring within its legal boundaries.
Assuming that Monique made a fraudulent misrepresentation regarding the spring running through the corner of the farm knowing the statement was not correct, which of the following is true, considering only the lack of a spring issue, if Jen does not want to go through with the sale?

A) Jen may rescind the contract and recover compensatory damages.
B) Jen may rescind the contract, but she may not recover damages.
C) Jen may sue for damages, but she may not rescind the contract.
D) Jen may rescind the contract, or she may keep the contract and sue for damages.
E) Jen must allow Monique an opportunity to cure, or fix, the problem; and in the event that is not done, she may not rescind the contract although she can sue for damages.

Question 47

Valerie promised to buy Nicole's car for $2,000. Nicole drew up the contract providing that the exchange would occur the next week. Unfortunately, Nicole was not very good with the keyboard and typed in $1,200 as the price of the car. Valerie noticed that the contract said $1,200, not $2,000, and was very pleased. She signed it without saying anything. When it was time to make the exchange, Valerie gave Nicole $1,200. In response to Nicole's inquiry regarding the additional $800, Valerie pulled out the contract and showed her that it said $1,200. Nicole immediately responded that she had made a typographical error. Valerie said that there was no mistake on her part because she knew exactly what she was doing and that she thought that Nicole had decided to give her a deal on the car. Which of the following is Nicole's best argument for a rescission of the contract?

A) That a unilateral mistake was involved and that courts typically allow relief in situations involving unilateral mistakes as opposed to mutual mistakes.
B) That the mistake resulted from a sale of goods, as opposed to the provision of services, and that courts are more likely to grant relief for a mistake when actual physical work is not involved.
C) That because a bilateral contract, as well as a unilateral mistake, was involved, most courts would grant relief.
D) That the mistake resulted from an accidental clerical error and that it would be unconscionable to enforce the contract.
E) That duress was involved because of Valerie's wrongful behavior.

Question 48

Abraham told Linda that if she did not sign over her stock options to him he would inflict bodily harm on her and her family. Linda quickly signs over all of her stock options. This is known as ________.

A) breach of duty
B) negligence
C) duress
D) coercion
E) manipulation

Question 49

As described in the text, which statement is true regarding consumers and Japanese law?

A) A special Consumer Contracts Law was developed to place consumers and businesses on a more equal footing in transactions.
B) The Civil Code has more lax requirements regarding fraud than the country's Consumer Contracts law.
C) The goal in regard to consumers is to form the law so that in litigation businesses are at a distinct disadvantage in regard to consumers.
D) In order to encourage economic advancement and international investment, the goal is to form the law so that in litigation consumers are at a distinct disadvantage in comparison to businesses.
E) Japanese law does not recognize rights of consumers as the buyer must beware.

Question 50

Which of the following refers to special relationships in which one person has taken advantage of his or her dominant position in a relationship to unduly persuade the other person?

A) Duress
B) Master manipulation
C) Undue influence
D) Special relationship
E) Dominating influence

Question 51

Dalynda and Phillip have a contract that Phillip will play at Dalynda's opening night reception. The night of the concert, Phillip refuses to go on stage unless Dalynda agrees to pay an additional $5,000 for him to perform. This is known as ________.

A) fraudulent duress
B) manipulative duress
C) intentional duress
D) economic duress
E) negligent duress

Question 52

[Scheming 'Friends'] Richard wants to rent a basement apartment in Eric's home. Richard threatens to tell Eric's parents that Eric had been arrested for illegally smoking marijuana unless Eric rents the apartment to him for $100 per month. (The information regarding the arrest is true.) Eric reluctantly agrees to rent the apartment to Richard for $100 per month. Richard also wants to buy Eric's car. Eric runs back the odometer on the car before Richard looks at it. Richard is impressed by the low mileage and agrees to buy the car. Eric offers to sell Richard a ring for Richard's fiancée. Eric tells Richard that the ring is a diamond and believes that to be true. After the deal is made, however, a jeweler friend of Eric informs him that the ring is a fake. When Richard shows up with the money, Eric says nothing. He just hands Richard the ring and takes the money. Later, Richard finds out that the odometer was run backwards from another friend in whom Eric confided. Richard also finds out from his girlfriend that the ring is a fake.
Which of the following is Richard guilty of in threatening to tell Eric's parents about the arrest unless Eric rents the apartment?

A) Duress
B) Unconscionability
C) Fraud
D) Undue influence
E) Consumer misbehavior

Question 53

[Pet Pig Farm] Jen was interested in buying Monique's land in order to breed small pet pigs. Jen told Monique that having water on the property was very important although she did not mention to Monique her plan to breed small pigs. Monique assured her that a spring ran through one corner of the property. Therefore, Jen agreed to buy the farm. Jen, who loved pigs, assumed that the neighbors would be pleased with the pigs being in the area. Monique also agreed to sell Jen a used truck for $5,000. After the contract for the land sale was entered into, Jen had a land survey done, and it was discovered that the spring did not actually run through the corner of Monique's property. The area in which the spring ran belonged to a neighbor. Additionally, when Monique brought Jen the used truck, Jen said, "That's not the truck!" It was discovered that Monique, who had two trucks, thought that Jen had bought the older truck although Jen thought she had purchased the newer truck. Jen was also surprised when she received a petition signed by all surrounding landowners objecting to the presence of the pigs and threatening to sue Jen for nuisance. It will cost Jen more than she had agreed to pay Monique in order for Jen to obtain a similar farm that has a spring within its legal boundaries.
Assuming that Monique made an innocent misrepresentation regarding the spring running through the corner of the farm with no reason to believe that this item was incorrect, which of the following is true, considering only the lack of a spring issue, if Jen does not want to go through with the sale?

A) Jen may rescind the contract and recover compensatory damages.
B) Jen may rescind the contract, but she may not recover damages.
C) Jen may sue for damages, but she may not rescind the contract.
D) Jen may rescind the contract, or she may keep the contract and sue for damages.
E) Jen has no remedy based on an innocent misrepresentation based on the theory that she should have checked more closely before entering into the contract.

Question 54

[Pet Pig Farm] Jen was interested in buying Monique's land in order to breed small pet pigs. Jen told Monique that having water on the property was very important although she did not mention to Monique her plan to breed small pigs. Monique assured her that a spring ran through one corner of the property. Therefore, Jen agreed to buy the farm. Jen, who loved pigs, assumed that the neighbors would be pleased with the pigs being in the area. Monique also agreed to sell Jen a used truck for $5,000. After the contract for the land sale was entered into, Jen had a land survey done, and it was discovered that the spring did not actually run through the corner of Monique's property. The area in which the spring ran belonged to a neighbor. Additionally, when Monique brought Jen the used truck, Jen said, "That's not the truck!" It was discovered that Monique, who had two trucks, thought that Jen had bought the older truck although Jen thought she had purchased the newer truck. Jen was also surprised when she received a petition signed by all surrounding landowners objecting to the presence of the pigs and threatening to sue Jen for nuisance. It will cost Jen more than she had agreed to pay Monique in order for Jen to obtain a similar farm that has a spring within its legal boundaries.
Which result is most likely in the dispute between Jen and Monique regarding which used truck was sold, assuming that both Jen and Monique were innocently mistaken and did not intend to defraud the other?

A) The contract will be rescinded.
B) Jen will be allowed to pick the truck she wants to buy because she is the buyer, and she may also recover damages.
C) Monique will be allowed to pick the truck she wants to sell because she is the seller.
D) Jen will be allowed to pick the truck she wants to buy because she also had a contract on the ancillary farm.
E) Jen will be allowed to pick the truck she wants to buy because she is the buyer, but she may not recover damages.

Question 55

The reasoning in innocent misrepresentation cases resembles the reasoning in a[n] ________ case.

A) Duress
B) Unilateral mistake
C) Mutual mistake
D) Fraudulent misrepresentation
E) Negligent misrepresentation

Question 56

Which of the following was the result in the case in the text, Fantastic Sams Salons Corp. v. PSTEVO, LLC and Jeremy Baker, in which the court considered PSTEVO's counterclaim for fraudulent misrepresentation with regard to a franchise agreement?

A) It is illegal to force a party to sign a disclaimer about representations made, and thus defendants were allowed to proceed with their counterclaim.
B) The disclaimer was invalid and thus defendants were allowed to proceed with their counterclaim.
C) The counterclaim was dismissed because the disclaimer in the contract prohibited defendants from filing a claim.
D) The counterclaim was dismissed even though the disclaimer was invalid.
E) The counterclaim was dismissed because, in response to a disclaimer in the contract, defendant affirmed that certain representations were not made.

Question 57

[Scheming 'Friends'] Richard wants to rent a basement apartment in Eric's home. Richard threatens to tell Eric's parents that Eric had been arrested for illegally smoking marijuana unless Eric rents the apartment to him for $100 per month. (The information regarding the arrest is true.) Eric reluctantly agrees to rent the apartment to Richard for $100 per month. Richard also wants to buy Eric's car. Eric runs back the odometer on the car before Richard looks at it. Richard is impressed by the low mileage and agrees to buy the car. Eric offers to sell Richard a ring for Richard's fiancée. Eric tells Richard that the ring is a diamond and believes that to be true. After the deal is made, however, a jeweler friend of Eric informs him that the ring is a fake. When Richard shows up with the money, Eric says nothing. He just hands Richard the ring and takes the money. Later, Richard finds out that the odometer was run backwards from another friend in whom Eric confided. Richard also finds out from his girlfriend that the ring is a fake.
What would be the most likely result if Eric attempts to rescind the agreement to rent the apartment?

A) He will be able to rescind the agreement based upon Richard's threat of extortion.
B) He will be able to rescind the agreement based upon the threat to Richard's economic interests.
C) He will be able to rescind the contract because of undue influence.
D) He will not be able to rescind the contract because he agreed to it.
E) He will not be able to rescind the agreement unless he can show that he was not actually convicted of the crime alleged.

Question 58

Duress of goods occurs in ________ whenever an illegitimate threat is made to hold on to goods unless a payment is made or an agreement is entered into.

A) China
B) Australia
C) Portugal
D) India
E) Russia

Question 59

Marco threatens to file a criminal lawsuit against Nadine unless she agrees to the terms of a contract that Nadine knows to be ethically and morally against the company's policy. This is a situation involving ________.

A) undue influence
B) persuasive influence
C) demonstrable fraud
D) duress
E) manipulation

Question 60

Monica and Omar talk about the fact that a new teacher is being hired for business law at their school. Omar mentions that he does not yet have a book, and Monica agrees to sell Omar a used business law book for $30 for the upcoming semester. When the new semester begins, the new business law teacher announces that a new custom business law text will be used that is only available in the campus bookstore. Omar wants a refund. Which of the following is Monica's best defense?

A) That Omar knew of the change of teacher and bore the risk of mistake.
B) That only a unilateral mistake was involved on Omar's behalf because Monica was aware of the change and, therefore, Omar is not entitled to a discharge.
C) That a mutual mistake was involved and that Omar is, therefore, not entitled to a refund.
D) That transactions involving goods are not subject to the defense of mistake.
E) That she did not commit fraud and, therefore, Omar is not entitled to rescission.

Question 61

For a valid contract, courts insist on a ________.

A) meeting of the parties
B) meeting of the minds
C) mutual meeting
D) contractual meeting
E) meeting of assent

Question 62

[Scheming 'Friends'] Richard wants to rent a basement apartment in Eric's home. Richard threatens to tell Eric's parents that Eric had been arrested for illegally smoking marijuana unless Eric rents the apartment to him for $100 per month. (The information regarding the arrest is true.) Eric reluctantly agrees to rent the apartment to Richard for $100 per month. Richard also wants to buy Eric's car. Eric runs back the odometer on the car before Richard looks at it. Richard is impressed by the low mileage and agrees to buy the car. Eric offers to sell Richard a ring for Richard's fiancée. Eric tells Richard that the ring is a diamond and believes that to be true. After the deal is made, however, a jeweler friend of Eric informs him that the ring is a fake. When Richard shows up with the money, Eric says nothing. He just hands Richard the ring and takes the money. Later, Richard finds out that the odometer was run backwards from another friend in whom Eric confided. Richard also finds out from his girlfriend that the ring is a fake.
Which statement is true regarding Richard's rights in regards to the car purchase?

A) He will not be able to rescind the contract because Eric made no affirmative statements.
B) He will not be able to rescind the contract unless he can prove that he expressly asked Eric if the mileage was run backwards on the car, and Eric failed to reveal that the odometer had been altered.
C) He will not be able to rescind the contract because the mileage alteration did not affect the engine of the car.
D) He will be able to rescind the contract because of duress practiced by Eric.
E) He will be able to rescind the contract because of the fraudulent misrepresentation on the part of Eric.

Question 63

[Sale of KyRo's Toys] Ky and Roland owned KyRo's Toy Distributors together for many years. After years of arguing about sharing an office, they decided they no longer wanted to work together, even though each wanted to remain in the toy distribution business. They asked their accountant, Delia, to separate the accounts equitably, and she prepared a spreadsheet showing the value of KyRo's accounts, and an equitable division of those accounts. Ky and Roland reviewed the division of accounts and signed a separation agreement that included a phrase that the accounts would be divided 50-50 as per Delia's spreadsheet attached to the agreement. Both Ky and Roland signed a disclaimer that stated that they had reviewed the attachment. Six months later, when commissions arrived for the two separate companies, Ky noticed that he was making substantially less than one-half of what he made with KyRo, and upon investigation, realized that some of the financial information on which Delia had relied in preparing the spreadsheet had been outdated, and the accounts, were in fact, not divided equally. Ky now wants to rescind the separation agreement, claiming that all three elements of mutual mistake are present, and that the mistake about the division of accounts had a material effect on the agreement because it was not what was intended.
What effect might the disclaimer have on Ky's claim?

A) The disclaimer would prevent Ky's claim because he signed it.
B) The disclaimer would prevent Ky's claim because Ky affirmed that he had reviewed the spreadsheet.
C) The disclaimer would likely not prevent Ky's claim because the spreadsheet was based on erroneous information and Ky did not affirm that the information in the spreadsheet was correct.
D) The disclaimer would have no effect since disclaimers in contracts are against public policy.
E) The disclaimer would likely prevent Ky's claim but only if the disclaimer was mutual.

Question 64

Is the impact of negligent misrepresentation the same as that for fraudulent misrepresentation?

A) Yes, they are identical. The contract is void as a matter of law.
B) Yes, they are identical. The contract can be rescinded.
C) Yes, they are identical. The contract can be rescinded, but the misled party cannot sue for damages.
D) No, in negligent misrepresentation, the contract is void. In a case of fraudulent misrepresentation, the contract can be rescinded.
E) No, in fraudulent misrepresentation, the contract is void. In a case of negligent misrepresentation, the contract can be rescinded.

Question 65

Which of the following theories involve scienter?

A) Innocent misrepresentation, mutual mistake.
B) Innocent misrepresentation, fraudulent misrepresentation.
C) Mutual mistake only.
D) Fraudulent misrepresentation, intentional misrepresentation.
E) Fraudulent misrepresentation only.

Question 66

[Scheming 'Friends'] Richard wants to rent a basement apartment in Eric's home. Richard threatens to tell Eric's parents that Eric had been arrested for illegally smoking marijuana unless Eric rents the apartment to him for $100 per month. (The information regarding the arrest is true.) Eric reluctantly agrees to rent the apartment to Richard for $100 per month. Richard also wants to buy Eric's car. Eric runs back the odometer on the car before Richard looks at it. Richard is impressed by the low mileage and agrees to buy the car. Eric offers to sell Richard a ring for Richard's fiancée. Eric tells Richard that the ring is a diamond and believes that to be true. After the deal is made, however, a jeweler friend of Eric informs him that the ring is a fake. When Richard shows up with the money, Eric says nothing. He just hands Richard the ring and takes the money. Later, Richard finds out that the odometer was run backwards from another friend in whom Eric confided. Richard also finds out from his girlfriend that the ring is a fake.
Madison purchased a three-year-old computer from Kami for $300. Kami told her the price seemed fair but she really had no idea what it was worth and just wanted to get rid of it. Madison, who knew little about computers, thought she had a great deal. After Madison returned home, she discovered from a computer expert friend of hers that the computer was not worth as much as she believed. Madison wanted to return the computer claiming that they were both mistaken about value, but Kami said, "No way!" Who should win in the dispute between Madison and Kami and why?

A) Kami should win because Madison's unilateral mistake does not void the contract.
B) Madison should win because there was a mistake of fact at the time the contract was entered.
C) Madison should win because mistaken beliefs about the subjective value of an item can affect the validity of a contract.
D) Madison should win because there was a unilateral mistake of fact.
E) Kami should win because mistaken beliefs about the subjective value of an item do not affect the validity of a contract.

Question 67

[Everlasting roses] Wanda's gardener claims that if she will pay him to apply a special treatment to her roses each week, the roses will never die. Wanda pays the gardener $25 each week for the special treatment. After a year, her favorite rosebush dies.
Does Wanda have a valid claim for fraudulent misrepresentation?

A) Yes, but only if she relied on the false statement.
B) Yes, because she relied on the false statement and the gardener intended to deceive her.
C) Yes, but only if the false statement is material to the contract.
D) No, unless she can prove the gardener intended to deceive her.
E) No, because Wanda knew or should have known by the extravagance of the claim that the statement about the roses never dying was false.

Question 68

Can consumers take legal action against a company for misrepresentation of their products?

A) Yes, if marketing materials, such as advertising, product labels, and packaging, are seen as misrepresenting what a product truly is or what benefits the product offers.
B) Yes, but only if the product labels misrepresent what the product offers.
C) Yes, but one cannot sue for inaccurate packaging or product labels.
D) Consumers cannot sue companies for misrepresentation of their products.
E) Consumers can only sue companies for misrepresentation of their products when there is a statute or public policy in place.

Question 69

[Elton's Electronics] Elton's Electronics sells electronic housewares. Elton is looking for a new supplier to produce the standard-sized switchplate for its best-selling blender. He contacts Porter and provides Porter with specifications for where the switches on the switchplate should be placed. Porter provides excellent pricing and delivery terms, which would save Elton a lot of money. Elton and Porter sign a contract for Porter to produce 10,000 standard-sized switchplates according to Elton's specifications. When the completed switchplates arrive, Elton's employees attach them to the blenders, however, the standard-sized switchplates are two millimeters too long. Elton is furious and calls Porter, who says Elton can send back the switchplates and Porter's company can rework them, but there will be a fee because the switchplates he shipped were "standard-size" switchplates, as specified in the contract. Elton disagrees and hangs up the phone. Elton's technician measures both the switchplates and the blender and discovers that the blender face where the switchplate is attached is two millimeters shorter than the well-known "standard-size" switchplate. The technician suggests they could shave off two millimeters from Porter's boards to make them fit on the blenders, however, it would be a lot of work.
Which of the following best describes Elton's situation?

A) Fraudulent misrepresentation, because Elton justifiably relied on a false statement by Porter.
B) Mutual mistake, because both parties were mistaken about the standard-size switchplates to be delivered under the contract.
C) Unilateral mistake, because Elton was mistaken about the size of the switchplates he needed for his blenders.
D) Duress, because Porter knows much more about the standard size for switchplates in the industry than Elton.
E) Negligent misrepresentation, because Porter should have known that the standard-size may not work for everyone.

Question 70

[Elton's Electronics] Elton's Electronics sells electronic housewares. Elton is looking for a new supplier to produce the standard-sized switchplate for its best-selling blender. He contacts Porter and provides Porter with specifications for where the switches on the switchplate should be placed. Porter provides excellent pricing and delivery terms, which would save Elton a lot of money. Elton and Porter sign a contract for Porter to produce 10,000 standard-sized switchplates according to Elton's specifications. When the completed switchplates arrive, Elton's employees attach them to the blenders, however, the standard-sized switchplates are two millimeters too long. Elton is furious and calls Porter, who says Elton can send back the switchplates and Porter's company can rework them, but there will be a fee because the switchplates he shipped were "standard-size" switchplates, as specified in the contract. Elton disagrees and hangs up the phone. Elton's technician measures both the switchplates and the blender and discovers that the blender face where the switchplate is attached is two millimeters shorter than the well-known "standard-size" switchplate. The technician suggests they could shave off two millimeters from Porter's boards to make them fit on the blenders, however, it would be a lot of work.
Which of the following statements is least likely to support the suggestion of Elton's technician about shaving down the switchplates and using them, instead of rescinding the contract?

A) If the contract is rescinded, we (Elton Electronics) would "win" against Porter.
B) If the contract is rescinded, Elton's Electronics would not have any switchplates for the blenders.
C) If the contract is rescinded, Porter will probably not want to do business with Elton again.
D) A rescinded contract is expensive.
E) A rescinded contract is time-consuming.

Question 71

[Scheming 'Friends'] Richard wants to rent a basement apartment in Eric's home. Richard threatens to tell Eric's parents that Eric had been arrested for illegally smoking marijuana unless Eric rents the apartment to him for $100 per month. (The information regarding the arrest is true.) Eric reluctantly agrees to rent the apartment to Richard for $100 per month. Richard also wants to buy Eric's car. Eric runs back the odometer on the car before Richard looks at it. Richard is impressed by the low mileage and agrees to buy the car. Eric offers to sell Richard a ring for Richard's fiancée. Eric tells Richard that the ring is a diamond and believes that to be true. After the deal is made, however, a jeweler friend of Eric informs him that the ring is a fake. When Richard shows up with the money, Eric says nothing. He just hands Richard the ring and takes the money. Later, Richard finds out that the odometer was run backwards from another friend in whom Eric confided. Richard also finds out from his girlfriend that the ring is a fake.
Which is the correct legal term, if any, for Eric's action in regard to running back the odometer?

A) Concealment.
B) Nondisclosure.
C) Active duress.
D) Conscious disregard.
E) There is no legal term because although he acted illegally, Richard had no duty to disclose his action and incriminate himself.

Question 72

[Elton's Electronics] Elton's Electronics sells electronic housewares. Elton is looking for a new supplier to produce the standard-sized switchplate for its best-selling blender. He contacts Porter and provides Porter with specifications for where the switches on the switchplate should be placed. Porter provides excellent pricing and delivery terms, which would save Elton a lot of money. Elton and Porter sign a contract for Porter to produce 10,000 standard-sized switchplates according to Elton's specifications. When the completed switchplates arrive, Elton's employees attach them to the blenders, however, the standard-sized switchplates are two millimeters too long. Elton is furious and calls Porter, who says Elton can send back the switchplates and Porter's company can rework them, but there will be a fee because the switchplates he shipped were "standard-size" switchplates, as specified in the contract. Elton disagrees and hangs up the phone. Elton's technician measures both the switchplates and the blender and discovers that the blender face where the switchplate is attached is two millimeters shorter than the well-known "standard-size" switchplate. The technician suggests they could shave off two millimeters from Porter's boards to make them fit on the blenders, however, it would be a lot of work.
Under which of the following scenarios would a court most likely invalidate the contract with Porter?

A) If Porter knew the "standard-size" switchplates were not the proper size for Elton's blenders, and Elton's mistake in calculating the size needed was a clerical error.
B) If Elton's technician "eyeballed" the size needed for the blender.
C) If Elton wrote the wrong switchplate size in an email to Porter and that size was the same as the standard size.
D) If Elton's mistake in measuring the size of the switchplate needed was a clerical error.
E) If Elton assumed the switchplate was the standard size.

Question 73

Courts find negligent misrepresentation only when the party making the false statement ________.

A) should have known he or she was committing negligence
B) should have known the truth using the skills and competence required of a regular person
C) verified the truth and negligently continued with the false statement
D) should have known the truth
E) should have known the truth using the skills and competence required of a person in his position or profession

Question 74

In which of the following examples would a court be least likely to find that nondisclosure has the same legal effect as an actual false assertion?

A) One of the parties to the contract is the other's doctor.
B) The contract involves a sale of a car with bad brakes.
C) Caroline fails to inform Vito of the recent outbreak of rust on her "rust-free" car that Vito had already agreed to purchase.
D) Despite the state's mandatory disclosure law, Vito fails to mention the mold in his basement.
E) Vito permits an order to ship that did not pass quality testing.

Question 75

Which of the following is an example of nondisclosure?

A) Justin removes 25,000 miles from his odometer.
B) Justin checks the "no" box on a form asking if the house being sold had ever flooded.
C) Justin permits a shipment of hair dryers which did not pass quality control testing.
D) Justin changes quality control paperwork to show a shipment has passed inspection.
E) Justin places a carpet over mold in his basement.

Question 76

[Sale of KyRo's Toys] Ky and Roland owned KyRo's Toy Distributors together for many years. After years of arguing about sharing an office, they decided they no longer wanted to work together, even though each wanted to remain in the toy distribution business. They asked their accountant, Delia, to separate the accounts equitably, and she prepared a spreadsheet showing the value of KyRo's accounts, and an equitable division of those accounts. Ky and Roland reviewed the division of accounts and signed a separation agreement that included a phrase that the accounts would be divided 50-50 as per Delia's spreadsheet attached to the agreement. Both Ky and Roland signed a disclaimer that stated that they had reviewed the attachment. Six months later, when commissions arrived for the two separate companies, Ky noticed that he was making substantially less than one-half of what he made with KyRo, and upon investigation, realized that some of the financial information on which Delia had relied in preparing the spreadsheet had been outdated, and the accounts, were in fact, not divided equally. Ky now wants to rescind the separation agreement, claiming that all three elements of mutual mistake are present, and that the mistake about the division of accounts had a material effect on the agreement because it was not what was intended.
What must Ky show in order to meet the third requirement necessary to prove mutual mistake?

A) That enforcement of the contract would have an adverse effect on the party who did not agree to bear the risk of mistake.
B) That enforcement of the contract would not have an adverse effect on either party.
C) That enforcement of the contract would have an adverse effect on both parties.
D) That failure to enforce the contract would have an adverse effect on both parties.
E) That failure to enforce the contract would have an adverse effect on only one party.

Question 77

[Sale of KyRo's Toys] Ky and Roland owned KyRo's Toy Distributors together for many years. After years of arguing about sharing an office, they decided they no longer wanted to work together, even though each wanted to remain in the toy distribution business. They asked their accountant, Delia, to separate the accounts equitably, and she prepared a spreadsheet showing the value of KyRo's accounts, and an equitable division of those accounts. Ky and Roland reviewed the division of accounts and signed a separation agreement that included a phrase that the accounts would be divided 50-50 as per Delia's spreadsheet attached to the agreement. Both Ky and Roland signed a disclaimer that stated that they had reviewed the attachment. Six months later, when commissions arrived for the two separate companies, Ky noticed that he was making substantially less than one-half of what he made with KyRo, and upon investigation, realized that some of the financial information on which Delia had relied in preparing the spreadsheet had been outdated, and the accounts, were in fact, not divided equally. Ky now wants to rescind the separation agreement, claiming that all three elements of mutual mistake are present, and that the mistake about the division of accounts had a material effect on the agreement because it was not what was intended.
Is Ky correct in claiming that the mistake in the division of the accounts is material?

A) Yes, if it was a basis for Ky's agreeing to enter into the contract.
B) No, because the mistake was in the financial information.
C) Yes, because only one party must show that the mistake was not what was intended.
D) Yes, because Ky made a mutual mistake.
E) No, because the mistake is not mutual since only Ky, and not Roland, was adversely affected.

Question 78

Which of the following is false about the concepts of mistake and misrepresentation?

A) Unlike misrepresentation, in mistake, only one party is in error about a material fact.
B) Unlike mistake, in misrepresentation, only one party is in error about a material fact.
C) Both mistake and misrepresentation scenarios can be unilateral or mutual.
D) Unlike mistake, misrepresentation involves an untruthful assertion of material fact by one of the parties.
E) Unlike misrepresentation, mistake involves an untruthful assertion of material fact by one of the parties.

Question 79

[Scheming 'Friends'] Richard wants to rent a basement apartment in Eric's home. Richard threatens to tell Eric's parents that Eric had been arrested for illegally smoking marijuana unless Eric rents the apartment to him for $100 per month. (The information regarding the arrest is true.) Eric reluctantly agrees to rent the apartment to Richard for $100 per month. Richard also wants to buy Eric's car. Eric runs back the odometer on the car before Richard looks at it. Richard is impressed by the low mileage and agrees to buy the car. Eric offers to sell Richard a ring for Richard's fiancée. Eric tells Richard that the ring is a diamond and believes that to be true. After the deal is made, however, a jeweler friend of Eric informs him that the ring is a fake. When Richard shows up with the money, Eric says nothing. He just hands Richard the ring and takes the money. Later, Richard finds out that the odometer was run backwards from another friend in whom Eric confided. Richard also finds out from his girlfriend that the ring is a fake.
Which statement is true regarding Richard's rights in regards to the ring purchase?

A) He will not be able to rescind the contract because Eric did not make an express false statement regarding the ring.
B) He will not be able to rescind the contract because Eric did not know the ring was a fake when the initial agreement was made.
C) He will not be able to rescind the contract unless he can prove that Eric was at least negligent in not realizing the ring was a fake when the initial agreement was made.
D) He will be able to rescind the agreement because Eric was guilty of duress.
E) He will be able to rescind the agreement because Eric was guilty of fraudulent misrepresentation.

Question 80

[Elton's Electronics] Elton's Electronics sells electronic housewares. Elton is looking for a new supplier to produce the standard-sized switchplate for its best-selling blender. He contacts Porter and provides Porter with specifications for where the switches on the switchplate should be placed. Porter provides excellent pricing and delivery terms, which would save Elton a lot of money. Elton and Porter sign a contract for Porter to produce 10,000 standard-sized switchplates according to Elton's specifications. When the completed switchplates arrive, Elton's employees attach them to the blenders, however, the standard-sized switchplates are two millimeters too long. Elton is furious and calls Porter, who says Elton can send back the switchplates and Porter's company can rework them, but there will be a fee because the switchplates he shipped were "standard-size" switchplates, as specified in the contract. Elton disagrees and hangs up the phone. Elton's technician measures both the switchplates and the blender and discovers that the blender face where the switchplate is attached is two millimeters shorter than the well-known "standard-size" switchplate. The technician suggests they could shave off two millimeters from Porter's boards to make them fit on the blenders, however, it would be a lot of work.
Is Elton likely to be successful in a lawsuit that seeks to void or rescind the contract?

A) Yes, because it was a mistake of fact.
B) Yes, because both parties were mistaken about what constitutes a "standard-size" switchplate, and where there was a mutual mistake, either party may choose to rescind the contract.
C) No, because only Elton, not Porter, was mistaken about what constitutes a "standard-size" switchplate, and a unilateral mistake generally does not void a contract.
D) Yes, because a unilateral mistake voids a contract.
E) No, because courts rarely allow rescission in cases of a mutual mistake.