Deck 13: Capacity and Genuine Assent

Question 1

A factual incapacity may exist when, because of a mental condition caused by medication, drugs, alcohol, illness, or age, a person does not understand that a contract is being made or understand its general nature.

Answer 1

True

Question 2

A unilateral mistake as to a fact does not affect the contract when the mistake is unknown to the other contracting party.

Answer 2

True

Question 3

Fraud requires a misstatement of either a fact or an opinion.

Answer 3

False

Question 4

When a minor avoids contracts, the minor always must return the other contracting parties to their original financial positions.

Question 5

Certain persons cannot make contracts that will bind them.

Question 6

Status incapacities against married women have largely disappeared.

Question 7

A contract made by an incompetent person after a guardian has been appointed is voidable.

Question 8

The "necessaries" of minors are precisely defined by law.

Question 9

Fraud requires intent that the listener rely on the false statement of fact.

Question 10

A party who speaks with a reckless disregard for the truth not knowing of the falsity of his or her words cannot be liable for fraud.

Question 11

When necessary medical care is provided to a minor, a parent is liable at common law for the medical expenses provided the minor child.

Question 12

At common law, a minor cannot be held contractually liable for his or her necessary medical expenses when the parent is unable or unwilling to pay.

Question 13

An incompetent person may ordinarily avoid a contract in the same manner as a minor.

Question 14

Contractual capacity can exist even though a party does not understand every provision of the contract.

Question 15

Ordinarily, every party to a contract is presumed to have contractual capacity until the contrary is shown.

Question 16

A person who has drunk too much alcohol at a party and signs a contract may be able to rescind that contract.

Question 17

Generally, when a person of legal age makes a contract with a minor, the contract is voidable by either party.

Question 18

Ratification consists of any words or conduct of a former minor manifesting an intent to be bound by the terms of a contract made while a minor.

Question 19

The seller of a painting is bound by the sales contract if the painting purchased was considered of little value and only later discovered to be valuable to the surprise of both buyer and seller.

Question 20

Factual incapacity is imposed because of the class or group to which a person belongs.

Question 21

In which of the following cases is a contract between A and B binding?

A) A makes a mistake of material fact, and the mistake is unknown by B.
B) A and B make the same mistake of material fact.
C) A recklessly but honestly misrepresents a material fact.
D) A innocently misrepresents a material fact.

Question 22

The obligation of a cosigner is discharged by:

A) the minority status of one of the parties.
B) the majority status of one of the parties.
C) the court's declaration of the contract's provision of necessaries.
D) the payment of the debt.

Question 23

All of the following statements refer to an element of fraud except:

A) the defendant desired to obtain a financial benefit.
B) the defendant made a false statement.
C) the defendant knew that the statement was false or was recklessly indifferent regarding its truth.
D) the defendant intended for the other party to rely on the false statement.

Question 24

The maximum amount of time that a minor has to disaffirm a contract is:

A) one year from the date of the agreement.
B) 30 days from learning of his or her right to disaffirm.
C) the age of majority.
D) a reasonable period of time after reaching the age of majority.

Question 25

A contract obtained by physical duress is void.

Question 26

In order for fraud liability to arise, the listener must actually rely on the false statement of fact.

Question 27

A minor cannot avoid a contract to purchase a car if the:

A) car has been destroyed.
B) car has been damaged.
C) car is used for non-commercial purposes.
D) minor is able to return the car but does not do so.

Question 28

Ordinarily, a party to a contract has no duty to volunteer information to the other party.

Question 29

Marquez agrees to buy Dale's pickup truck so he can pull his trailer. Both Marquez and Dale believe that the truck is big enough to do the job. After they complete the deal, Marquez finds that the truck is not strong enough to handle the trailer. The contract between Marquez and Dale can be rescinded because of:

A) a unilateral mistake.
B) a defective acceptance.
C) a mutual mistake.
D) negligent misrepresentation.

Question 30

Jack sells Jim a used car that Jack falsely described as having been driven only 12,000 miles. Fraud has occurred if:

A) Jim bought the car solely because of its color.
B) Jim knew that the mileage was more than 12,000 miles.
C) Jim relied upon Jack's statement.
D) Jack is a merchant.

Question 31

A minor cannot avoid a contract that has been:

A) ratified.
B) signed.
C) processed.
D) disallowed by the court.

Question 32

An agreement is not binding when:

A) one party makes a mistake regarding a material fact but the mistake is unknown to the other contracting party.
B) both parties make a mistake regarding a material fact.
C) one party makes a mistake of law.
D) both parties make a mistake in judgment.

Question 33

Judy, a widow, just sold a piece of property. She will live off that money during her retirement. Judy dotes on her son, Chris, who asks her to invest her money in his restaurant, which is faltering. He tells her that if she does not lend him the money she will never see him again. She is afraid of being alone and agrees to his request, but soon changes her mind and asks for her money back. Chris claims they have formed a binding contract. What is your conclusion?

A) The contract is voidable based on duress.
B) The contract is valid because it was a unilateral mistake.
C) The contract is voidable based on undue influence.
D) The contract is voidable based on fraud.

Question 34

A claim of undue influence will be unsuccessful unless the contracting parties have a close relationship of trust.

Question 35

Assume Harvey buys a bull from Mike for the purpose of breeding, and Mike was aware of Harvey's purpose in purchasing the bull. Later, the bull was discovered to be sterile, although at the time of sale both Harvey and Mike believed the bull was not sterile. The contract is:

A) voidable based on fraud.
B) voidable based on misrepresentation.
C) voidable based on bilateral mistake.
D) voidable based on economic duress.

Question 36

A person lacks contractual capacity if:

A) the person is a chronic alcoholic.
B) the person is a drug addict.
C) because of mental impairment, the person does not comprehend that a contract is being made or understand its consequences.
D) the person is a minor.

Question 37

A finding of undue influence would most likely not occur in a contract between:

A) parent and child.
B) attorney and client.
C) neighbor and neighbor.
D) guardian and ward.

Question 38

As a general rule, the nondisclosure of information that is not asked for does not impose fraud liability or impair the validity of a contract.

Question 39

Contractual capacity is the ability to:

A) read and write.
B) sign a written contract.
C) understand that a contract is being made and to understand its general nature.
D) understand the legal meaning of the contract being made.

Question 40

Jose visited a garage sale and found a baseball card collection which he believed was worth over $1,000. He bought the collection for $50.00 from Wanda. Later Jose discovered the collection was essentially worthless and demands his money back from Wanda. Must Wanda refund Jose's money?

A) No, the contract is enforceable because Jose was operating under a unilateral mistake and Wanda did not know the value of the cards.
B) Yes, the contract is enforceable because Jose made a unilateral mistake of fact.
C) Yes, the contract is enforceable because of mutual mistake of fact.
D) No, the contract is enforceable because of mutual mistake of value.

Question 41

A young stockbroker was rather overwhelmed by a flood of new clients. Assunta, one of his clients, had purchased XYZ Corp. stock through the broker at a price of $35 per share. The price had gone down to $29 by the time Assunta telephoned the broker. Assunta told the broker that she wanted to sell the stock if it went below $30 and inquired as to the price. The broker did not check the price, but thinking it could not have fallen below the $30 threshold, simply reassured Assunta that it was still "in the low 30s."
Marta, Assunta's cousin, also had purchased XYZ stock at $35 per share and made a similar call to the broker and received the same response. Marta, however, coincidentally saw the price on a stock ticker tape when she hung up and realized the broker had made an error. Both Assunta and Marta held the stock and did not sell.?Later that same day, the stock price fell an additional $7 per share. Facing sizable losses, both Assunta and Martha decided to sue for fraud when Marta told Assunta of the broker's misstatement. Discuss the probable outcome of the lawsuits.

Question 42

An apparently voluntary agreement may in fact not be voluntary if:

A) undue influence is present.
B) physical duress is present.
C) economic duress is present.
D) all of these.

Question 43

Roberta, an educated person, purchased real estate from Maurice. Roberta did not read entirely the contract that she signed. As a result, she did not notice the provision in the contract about the interest imposed on the unpaid portion of the purchase price. She refused to pay the interest specified in the contract. Maurice sued her. Could he recover?

Question 44

John, a 17-year-old, purchased a ping-pong table and four new ping-pong paddles. A week after he turned 18, John tried to return the ping-pong paddles. He told the seller that he had decided to keep the table. Can John avoid the contract in this way?