Deck 15: Mistakes Fraud and Voluntary Consent

Question 1

An otherwise valid contract is enforceable even if the parties have not genuinely agreed to its terms.

Answer 1

False

Question 2

Generally, a unilateral mistake does not give the mistaken party any right to relief from the contract.

Answer 2

True

Question 3

When both parties to a contract are mistaken about the same material fact, a unilateral mistake has occurred.

Answer 3

False

Question 4

A party who can show that he or she did not genuinely agree to the terms of a contract has a defense against its enforcement.

Question 5

Misrepresentation of law does not ordinarily entitle a party to avoid a contract.

Question 6

One type of bilateral mistake can occur when a word or term in a contract is subject to more than one reasonable interpretation.

Question 7

If a contractor's bid was significantly low because he or she made a mistake in adding up the total estimated costs, any contract resulting from the bid is still normally enforceable.

Question 8

Each party to a contract assumes the risk that the value of the object of the deal will change in the future.

Question 9

Exaggeration is an element of fraud.

Question 10

An innocent party who does not suffer harm as a result of a misrepresentation can nevertheless collect damages.

Question 11

The first element of proving fraud is to show that the innocent party is not easily fooled.

Question 12

The presence of fraud does not affect the authenticity of the innocent party's consent to a contract.

Question 13

If contracting parties attach materially different meanings to a contract word or term subject to more than one reasonable interpretation, the contract is void.

Question 14

A bilateral mistake occurs if one party to a contract is mistaken about a material fact and the other party knew or should have known that a mistake was made.

Question 15

Only a mistake of value or quality makes a contract voidable.

Question 16

In the context of fraudulent misrepresentation, an opinion is objective and verifiable, whereas a fact is subject to debate.

Question 17

Voluntary consent to a contract is not lacking if one of the parties is mistaken about an important fact concerning the subject matter of the bargain.

Question 18

Because value is variable, mistakes of value affect the enforceability of contracts.

Question 19

If a mistake concerns the quality of the object of the contract, the mistake is one of fact.

Question 20

A fact that is important and central to the subject matter of a contract is a material fact.

Question 21

Data Inc. offers to provide certain services to Enterprise LLC, but mistakenly transposes some of the digits in the price so that $15,400 appears in the offer as $14,500. Enterprise accepts the written offer. Enterprise's best argument in favor of enforcement of the contract is

A)a bilateral mistake does not afford relief from a contract.
B)a mistake of value does not afford relief from a contract.
C)a unilateral mistake does not afford relief from a contract.
D)the price was below the prices of comparable services.

Question 22

Ordinarily, every party to a contract has a duty to come forward and disclose facts.

Question 23

Forcing a party to enter into a contract under the fear of threats constitutes undue influence.

Question 24

Reliance on a misrepresentation is justified even if the innocent party knows the true facts.

Question 25

The party on whom duress is exerted can choose to avoid the entire transaction.

Question 26

Undue influence can arise from a confidential relationship or a relationship based on trust.

Question 27

Consent to the terms of a contract is voluntary even if one of the parties is forced into the agreement.

Question 28

For purposes of fraudulent misrepresentation, scienter clearly exists if a party asserting a fact knows it is not as stated.

Question 29

Dana believes that a new phone to be sold by Ear Fruit Inc. will become the most popular phone in the market. Dana enters into a contract to buy 500 shares of Ear Fruit stock, anticipating an increase in its value. The phone does not become popular, and the price of the stock does not rise. Dana can recover

A)nothing.
B)the amount of the purchase price.
C)the amount of the purchase price plus the expected increase.
D)the amount of the purchase price plus the unexpected decrease.

Question 30

The distinction between "seller's talk" and facts allows sellers to tout their products and services, thereby creating potential liability for fraud.

Question 31

A misunderstanding concerning a basic assumption on which a contract is made will support the rescission of the deal if the mistake is

A)bilateral.
B)unilateral.
C)lateral.
D)any of the choices.

Question 32

The party on whom duress is exerted can choose to carry out the contract.

Question 33

In general, a person should not rely on a non-lawyer's statement about a point of law.

Question 34

The essential feature of undue influence is that a party being taken advantage of suffers from a mental or physical impairment.

Question 35

Persuasion that induces a person to act according to the will of a dominant party is undue influence.

Question 36

At an auction, Ben bids on a 1957 Chevy coupe, believing that it is worth more than the price asked. When the car proves to need more repairs than Ben estimated, and thus is worth less as is, Ben is

A)still liable on the bid.
B)not liable on the bid because he underestimated the cost of repairs.
C)not liable on the bid because the auctioneer misrepresented the value.
D)not liable on the bid because the need for repair is not a material fact.

Question 37

Big Dig LLC makes an offer to perform an excavation and related tasks for Commercial Development Corporation, but due to a substantial mathematical mistake, significantly underprices the work. Commercial accepts the offer. Data Big's best defense against enforcement of the contract is that Commercial knew

A)a bilateral mistake supports the cancellation of a contract.
B)a mistake of value supports the cancellation of a contract.
C)a unilateral mistake supports the cancellation of a contract.
D)the price was below the prices of comparable services.

Question 38

Generally, a contract will be set aside because certain pertinent information is not volunteered.

Question 39

Even if the defects on a piece of property are obvious, the buyer can justifiably rely on the seller's misrepresentations concerning those defects.

Question 40

Because of the potential for punitive damages, plaintiffs often include a claim for fraudulent misrepresentation in their contract disputes.

Question 41

Huey, a tennis pro, convinces Ian, who has no athletic ability, that he has considerable skill and induces him to pay $1,000 for tennis lessons. This is most likely

A)fraudulent misrepresentation.
B)undue influence.
C)mistake.
D)none of the choices.

Question 42

Beryl enters into a contract with Clay for a guided tour of Deep Canyon. Clay represents that he is an experienced, knowledgeable guide, when in reality he has never been in the canyon. Most likely, Beryl

A)could exert duress to obtain a new guide.
B)can rescind the deal based on fraudulent misrepresentation.
C)might recover damages for the mistake.
D)must comply with the contract because the representation is an opinion.

Question 43

Fess convinces Gwyn to enter into a contract for the purchase of a Falafel Waffle Food Cart by knowingly misrepresenting a number of material features about the facility and the business. Most likely, Gwyn can rescind the contract on the basis of

A)fraudulent misrepresentation.
B)negligent misrepresentation.
C)innocent misrepresentation.
D)none of the choices.

Question 44

Ray, an employee of Shipping Company, makes a substantial mathematical mistake in totaling estimated transportation costs for Tonnage Inc., which is seeking bids. Consequently, Shipping's bid is substantially low. Any contract with Tonnage that includes the mistake may be rescinded

A)if the mistake was made inadvertently and without gross negligence.
B)if the mistake was intentional.
C)if the mistake was unilateral.
D)under no circumstances.

Question 45

Ked, a real estate agent, assures Lida that a certain parcel of commercial property fronts on the most highly trafficked street in Metro City. Lida buys the property and then discovers that the street has no more traffic than any other in its vicinity. Lida may recover damages for

A)the city's undue influence.
B)the agent's fraudulent misrepresentation.
C)the buyer's mistake.
D)none of the choices.

Question 46

A contract that includes a bilateral mistake may be rescinded if the mistake involves

A)a material fact.
B)any fact.
C)an opinion.
D)none of the choices.

Question 47

County Title Company processes information furnished by others to transfer title to real estate from Dali to Ezra. The furnished information is mistaken. The contract between Dali and Ezra may be rescinded because the mistake

A)may be rescinded because the mistake is about a material fact.
B)may be rescinded if the mistake is subject to only one interpretation.
C)none of the choices
D)may be rescinded because the mistake affects a third party.

Question 48

Alvin induces Beth to enter into a contract for the purchase of a Chef's Burger restaurant. Alvin knowingly misrepresents a number of material features about the restaurant and the business. When Beth discovers the truth, she can rescind the contract on the basis of

A)fraudulent misrepresentation.
B)undue influence.
C)mistake.
D)none of the choices.

Question 49

Denis sells a motorcycle to Elton without disclosing that the odometer, which reads 10,000 miles, was disconnected 100,000 miles ago. Denis is most likely liable for

A)fraudulent misrepresentation.
B)none of the choices.
C)mistake.
D)puffery.

Question 50

Analytics LLC processes misinterpreted data furnished by Botch Services to propose a marketing plan for Clientele Inc. Analytics and Clientele are both ignorant of the mistaken data. Their contract can be rescinded on the basis of

A)a bilateral mistake.
B)a mistake of quality.
C)a unilateral mistake.
D)none of the choices.

Question 51

Mary owns two all-terrain vehicles (ATVs), worth $1,000 and $500, respectively. Neil enters into a contract to buy "Mary's ATV" for $750. Mary believes, in good faith, that she is selling the $500 ATV. Neil believes, in good faith, that he is buying the $1,000 ATV. In this situation

A)Mary is entitled to $750 for the $500 ATV.
B)Neil is entitled to the $1,000 ATV for $750.
C)Neil must buy both ATVs for $1,500.
D)the contract is not enforceable.

Question 52

Open Range agrees to sell Pinewood Ranch a remote parcel of land for $15,000. Both parties believe the land to be worthless, but beneath it is shale rock containing oil. A court would

A)not rescind the contract.
B)rescind the contract on the basis of a mistake of quality.
C)rescind the contract on the basis of a mistake of value.
D)rescind the contract on the basis of a mistake of opinion.

Question 53

Car Lot's salesperson Dirk offers to sell Espy, who is twenty years old, a car. Dirk intentionally misrepresents the vehicle's use and repairs. In reliance, Espy buys the car. To prove fraud, Espy does not have to show that

A)Dirk intentionally deceived Espy.
B)Dirk misrepresented material facts.
C)Espy is under twenty-one.
D)Espy justifiably relied on Dirk's misrepresentation.

Question 54

Bram, a salesperson for Cruisin' Motors, promises Dot a certain car will give her a "smooth ride." Bram offers a test drive, which Dot declines. She buys the car but soon realizes its suspension is in poor condition. Dot can rescind the contract on the ground of

A)the salesperson's fraudulent misrepresentation.
B)the car maker's undue influence.
C)the buyer's mistake.
D)none of the choices.

Question 55

Orin, an employee of Plumbing LLC, makes a substantial mathematical mistake in totaling the estimated costs for a project for which Quality Built Inc. is seeking bids. Consequently, Plumbing's bid is significantly low. Any contract with Quality Built that includes the mistake may be rescinded

A)if Quality Built knew or should have known of the mistake.
B)if Orin's supervisor did not know of the mistake.
C)if Plumbing knew or should have known of the mistake.
D)under no circumstances.

Question 56

Restaurant Food Inc. intends to sell a certain quantity of beef for $1,100. In e-mail, however, the firm's sales representative mistakenly offers to sell the beef to Steak House for $1,000, Steak's manager immediately accepts. The seller

A)is bound to the deal at the offered price.
B)can rescind the deal.
C)is bound to the deal but can charge the intended price.
D)can rescind the deal and recover damages for the mistake.

Question 57

Carlos and David contract for the sale of five hundred head of Carlos's cattle for $195 per head. Unknown to either party, an unforeseen storm has struck the herd and many of the cattle have died. David is

A)entitled to recover the value of the lost cattle.
B)not required to pay due to the bilateral mistake.
C)not required to pay due to the unilateral mistake.
D)required to pay because he assumed the risk the cattle might die.

Question 58

Fra enters into a contract with Global Shipping Ltd. to insure and ship a painting from Holland to the United States for a certain price. Global 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

A)allow the parties to rescind the contract.
B)award damages to Fra for the mistake.
C)award damages to Global for the mistake.
D)enforce the contract as is.

Question 59

Ralph enters into a contract with Skye to buy her land based on her assertion that the land is open to development. After the sale, Ralph learns that only a small section of the land can be built on. A local law prohibits construction on the rest of the property. Ralph can

A)not avoid the contract because persons are assumed to know the law.
B)avoid the contract due to a bilateral mistake.
C)avoid the contract due to undue influence.
D)avoid the contract due to fraud.

Question 60

In selling a 300-acre tract to Organic Farm, Peyton tells the buyer that the land "will be worth twice as much by next year." This statement is not likely to support rescission of the contract because it is

A)a material fact.
B)a misrepresentation.
C)a mistake.
D)an opinion.

Question 61

Eugene, an accountant, convinces his client Faye to enter into a contract to invest her savings in Gathering, a non-existent social media site. There is clear and convincing evidence that Faye did not act out of her free will. This is

A)fraudulent misrepresentation.
B)undue influence.
C)mistake.
D)duress.

Question 62

Raoul, who is Stef's guardian, convinces her to buy a certain parcel of land from Tyrone at a greatly inflated price. Raoul may be liable for

A)duress.
B)fraudulent misrepresentation.
C)mistake.
D)undue influence.

Question 63

In entering into a contract with Marc for the sale of a cold storage warehouse, Nan fails to reveal the fact that the freezers do not consistently maintain a proper temperature. Most likely, this is fraudulent misrepresentation if

A)Nan is not aware of the fact.
B)the fact concerns the value or quality of the freezers.
C)the fact is a serious defect known to Nan but not to Marc.
D)any of the choices.

Question 64

In selling a vacant building, Riley, a real estate broker, tells Saki that the property has a certain capacity, making it suitable for a nightclub. Riley knows nothing about the capacity of the building, but it is not as he specifies. Saki buys the building. Saki's best course of action is most likely to

A)scam Riley.
B)induce Riley to remit to Saki the commission on Riley's next sale.
C)recover damages or rescind the contract to buy the building.
D)sabotage Riley's career with bad publicity.

Question 65

Ned threatens physical harm to force Omar to pay for "protecting" Omar's restaurant, Pasta Plates, from vandalism. Most likely, Omar may

A)rescind the contract or refuse to comply with its terms.
B)do nothing once he has agreed to pay.
C)recover from his insurer for the cost.
D)recover from the local police for their failure to protect his restaurant.

Question 66

Health Source Inc. offers to buy Medico Supplies Corporation. On June 1, Medico gives Health Source copies of Medico's financial statements for the previous year. The statements show an inventory of $10 million. On June 15, Medico discovers that the previous year's inventory is overstated by $500,000, but does not inform Health Source. On July 1, Health Source, relying on the financial statements, buys Medico. On July 10, Health Source discovers the inventory overstatement. Can Health Source succeed in a suit against Medico? Explain.

Question 67

Nero is an elderly man who lives with his nephew Mervyn. Nero is dependent on Mervyn for support. Mervyn advises Nero to "invest" in Mervyn's "professional gambling" venture, or Mervyn will no longer support him. Nero liquidates his other investments and signs a contract with Mervyn, to whom Nero gives the funds. Can Nero set aside this contract?

Question 68

Hua applies to Inventory Corporation for a position as a coder. Hua has no training in coding. After Hua is hired, Inventory learns the truth. The employer can rescind the contract on the basis of

A)none of the choices.
B)fraudulent misrepresentation.
C)mistake.
D)undue influence.

Question 69

Luc, a vehicle dealer, offers to sell Mel a truck and trailer, which Luc claims can haul a certain weight. He knows nothing about the capability of the truck, but it is not as he asserts. Mel buys the truck. On learning the truth, Mel confronts Luc, who says he was not trying to fool Mel-he was only trying to make a sale. This is

A)a mistake of value.
B)a valid defense to a charge of fraud.
C)fraudulent misrepresentation.
D)puffery.

Question 70

Dyan enters into a contract with Eli, 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 claim, Dyan learns that Eli does not have access to the algorithm and files a suit, alleging fraud. Dyan must show harm to

A)recover damages.
B)rescind the contract.
C)undo Eli's influence.
D)punish the defendant.

Question 71

Dim threatens physical harm to force Eb to sell his Flower Shop to Dim for a below-market price. This is

A)duress.
B)fraudulent misrepresentation.
C)mistake.
D)undue influence.

Question 72

Ewa is induced by her guardian Filo to sign a contract to invest funds in Gold Inc. through Filo's investment firm. Unknown to Ewa, Filo realizes a commission from the investment. Most likely, Ewa can rescind the contract on the basis of

A)duress.
B)fraud.
C)mistake.
D)undue influence.