Deck 11: Conduct Invalidating Assent

Question 1

Marjorie has been cared for by her family physician for 35 years.She decides to assume the mortgage on his new clinic.The contract is automatically invalid because of undue influence.

Answer 1

False

Question 2

Physical compulsion and improper threats are the two basic types of duress.

Answer 2

True

Question 3

Pat told her friends that her car got 35 miles to the gallon in the city when in reality it only got 20 miles per gallon.If Pat decides to sell the car and one of these friends decides to buy it, Pat is under no duty to tell the correct figure unless asked.

Answer 3

False

Question 4

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

Question 5

Fraud in the inducement will render an agreement void.

Question 6

Harry was told that he had to pay $50 for filing his claim in small claims court.He did.If the fee is really $40, he cannot recover the $10 because it is a unilateral mistake of fact.

Question 7

The law requires that to form a valid contract the agreement must be voluntary and knowing.

Question 8

Threats of resorting to a civil lawsuit to recover a debt does not constitute duress.

Question 9

Undue influence is the taking of unfair advantage of a person by reason of a dominant position based upon a confidential relationship.

Question 10

Acts constituting duress are necessarily crimes or torts in themselves.

Question 11

Hal holds a gun to Irving's head and tells him to sign the contract.Irving signs the contract, because he fears for his personal safety.The contract is void, because it was entered into under duress.

Question 12

A voluntary choice from among perfectly legitimate alternatives may in some instances constitute economic duress.

Question 13

A statement of misleading half-truth is considered the equivalent of a false representation.

Question 14

To sustain a case of fraud in the inducement, the injured party must prove that he actually relied upon the false representation.

Question 15

Matt sells bikes at a local discount store.To encourage Bob to buy a more expensive model than he originally contemplated, Matt tells Bob, "This is the most awesome bike money can buy at this price.You can expect lots of riding pleasure." Based on this statement Bob buys the bike.A week later, before his bike is fully paid for, Bob sees a far superior bike for a lower price at another store.Bob can avoid his contract with Matt because of fraudulent misrepresentation.

Question 16

Economic duress, such as that found in the case of Berardi v.Meadowbrook Mall Company, renders a contract void.

Question 17

At the marriage of her daughter, Lorna is given papers to sign, which the catering company says are the invoices for the food, service, and decorations.Underneath the invoices are a carbon and a contract of sale for a portion of the failing catering business.Lorna signs the papers; her signature is transferred to the sales contract.This is a void contract because it was entered by fraud in the execution.

Question 18

Scienter is the element of fraud that requires that the misrepresentation must have been known by the one making it to be false, although it need not have been made with an intent to deceive.

Question 19

A famous decision involving mutual mistake is Raffles v.Wichelhaus, a case involving two ships with the same name which were confused by the two parties to the contract.

Question 20

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

Question 21

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

Question 22

For a misrepresentation to be material, it must be likely to induce a reasonable person to manifest assent or the maker must know that it would be likely to induce the recipient to do so.

Question 23

James threatens to hit Kenneth in the head with a baseball bat unless Kenneth signs a contract agreeing to pay James $400 for his saw.If, because of the threat, Kenneth signs the contract:

A)this contract is voidable at Kenneth's option.
B)James has committed physical duress against Kenneth.
C)this constitutes economic duress.
D)All of the above.

Question 24

Al owns a farm that he believes is worth $150,000.Betty knows that there is oil under the farm and offers Al $160,000 for it.Al is suspicious and asks her why she wants to buy the place.She says she would like to live in the country.Al then asks her if she thinks there might be valuable minerals under the land.Betty laughs and says she doubts that very much, so Al sells her the farm for $160,000.Al later realizes that the land was worth more than he was paid.Al can have the contract voided based upon fraud.

Question 25

Generally, whether or not the parties deal at arm's length does not affect whether silence alone amounts to fraud.

Question 26

In relation to fraud, scienter is a legal term which means:

A)that a buyer has justifiably relied upon the seller's representation.
B)that the seller had knowledge that his statements are false and had the intention to deceive.
C)sales puffery.
D)All of the above.

Question 27

Today, a majority of courts permit a rescission of a contract for negligent or innocent misrepresentation, provided that all the remaining elements of fraud are present and the misrepresentation is material.

Question 28

Nonfraudulent representation is made without scienter.

Question 29

Relationships that may lead to a court's careful scrutinization of contracts between the parties to make sure undue influence was not present include all but:

A)agent and principal.
B)salesperson and customer.
C)parent and child.
D)doctor and patient.

Question 30

Fraud in the execution is a fairly common occurrence and involves defrauding a person as to the very nature of the contract.

Question 31

An act that is contrary to public policy or is morally reprehensible may constitute duress.

Question 32

Predictions, opinions, and promissory statements ordinarily do not constitute bases of fraud.

Question 33

An arm's length transaction is one in which the parties owe each other special duties.

Question 34

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

Question 35

For a misrepresentation to be fraudulent, it need not be material.

Question 36

Al owns a farm that he believes is worth $150,000.Betty knows that there is oil under the farm and offers Al $160,000 for it.Al accepts and sells the farm to Betty.Al later realizes that the land was worth more than $160,000.Al can have the contract avoided based upon fraud.

Question 37

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

Question 38

Ben and Kate had been negotiating Ben's employment contract in conversations over the phone for a couple of weeks.Finally, they agreed on some contract terms.Kate offered to create a draft of the contract for Ben to read over.On the same day Ben was fired from his job.Afraid he would be unemployed, Ben signed Kate's draft without reading it.In this example Ben:

A)can avoid the contract because of mistake by failure to read.
B)can avoid the contract because he was the victim of economic duress.
C)cannot avoid the contract because of economic duress or failure to read.
D)may rescind the contract because of unilateral mistake.

Question 39

A basic element of fraud is a false representation or a misrepresentation.

Question 40

There are two distinct types of fraud.

Question 41

Which of the following, if any, are requisites for fraud in the inducement?

A)False representation of a fact that is material.
B)Representation is made with knowledge of its falsity and the intention to deceive.
C)The representation is justifiably relied on.
D)All of the above.
E)(a) and (b), but not (c).

Question 42

Justifiable reliance:

A)is misrepresentation made without due care.
B)requires that the misrepresentation contribute substantially to the misled party's decision to enter into the contract.
C)involves a misrepresentation made without knowledge of its falsity but with due care.
D)All of the above.

Question 43

Steven has a typed copy of a contract, which he would like to have Thomas sign.Thomas, who needs glasses to read typing, doesn't want to sign until he has read the document, but Steven convinces Thomas to sign it anyway, because it is a "standard" contract for this type of situation.Is the contract which Thomas signed binding upon him?

A)No, because he did not read it.
B)No, because he entered into it based upon fraud in the execution.
C)Yes, because he has made a unilateral mistake of law.
D)Yes, because he was negligent in not ascertaining its contents.

Question 44

A contract was made for 125 bales of cotton to arrive on a ship named "Peerless" from Bombay.Unbeknownst to either party to the contract, there were two ships named "Peerless," both of which were sailing from Bombay.One sailed in October and the other in December.The buyer had in mind the ship sailing in October, but the seller had in mind the ship sailing in December.Each party held his belief in good faith.When the goods failed to arrive on time, the buyer sued for breach of contract.In this case:

A)the seller is in breach and must pay damages.
B)the seller is guilty of fraud in the inducement for failing to disclose to the buyer which ship would contain the goods.
C)no contract exists due to mutual mistake of fact.
D)Two of the above, (a) and (b).

Question 45

An arm's length transaction is one in which:

A)the parties owe each other a special duty of confidentiality.
B)the parties owe each other a fiduciary duty.
C)the parties are acting in their own self-interest.
D)None of the above.

Question 46

Contracts induced by threats of __________ are voidable, regardless of whether the coerced party has committed an unlawful act.

A)civil prosecution
B)criminal prosecution
C)tortious conduct
D)a lawsuit to recover a debt

Question 47

Sam wants to sell his Golden Retriever to Al.Sam tells Al that the dog is three years old and that he will point, back, and retrieve.Although the dog is three years old and will point at birds, he will not back (honor another dog's point).Al relies on these statements and purchases the bird dog.The buyer has probably been a victim of:

A)duress.
B)undue influence.
C)fraud in the inducement.
D)fraud in the execution.

Question 48

An intentional misrepresentation of a material fact made with knowledge of the falsity and intention to deceive and which a party justifiably relies upon to his detriment is known as:

A)duress
B)fraud in the execution
C)fraud in the inducement
D)non-fraudulent misrepresentation

Question 49

Tom tries to sell his classic car to Victoria for $12,000.Tom tells Victoria, "I paid $12,000 for the car in 1978 and it's worth twice that today." Tom really paid $8,000 for the car in 1978.If Victoria buys the car, basing her decision on Tom's statement, which of the following correctly states the situation?

A)Tom's statements amount to puffing only.
B)Tom's statements provide grounds to set the contract aside.
C)Tom's statements are actionable only if intentional.
D)Tom's statements amount to fraud in the execution.

Question 50

In the Lesher v.Strid case, the court held that:

A)a representation is material if it is likely to influence a reasonable person.
B)for a misrepresentation to be actionable, it must be one of fact rather than of opinion.
C)a mutual mistake of fact renders a contract voidable by the adversely affected party if the mistake is so fundamental that it frustrates the purpose of the contract.
D)the contract's "as is" clause expressly excluded reliance on extrinsic representations such as the defendant's representation about the four-acre water rights.

Question 51

Which of the following results in a void contract?

A)Duress by improper threat.
B)Duress by physical force.
C)Undue influence on a party.
D)Fraud in the inducement.
E)Both (b) and (d).

Question 52

Albert found a stone in his yard and took it to Bob, a jeweler, for evaluation.Bob wasn't sure as to the nature of the stone, but told Albert he thought it was a topaz.Bob then offered to buy the stone for $25 and Albert agreed.Later Albert found out the stone was an uncut diamond worth about $700.This:

A)is a valid contract that should be enforced by the law, because neither party knew the exact nature of the stone at the time of the sale.
B)contract can be voided based upon fraud in the execution.
C)contract can be voided based upon fraudulent misrepresentation.
D)contract can be voided based upon mistake as to the identity of the subject matter.

Question 53

A fiduciary:

A)is a person in a confidential relationship who owes a duty of trust and loyalty to another.
B)must deal at arm's length with the other party to the relationship.
C)has the same duty of disclosure to the other party to the relationship as one who is not a fiduciary.
D)Both (a) and (b).

Question 54

If incorrect, which of the following would probably be considered a misrepresentation of a material fact?

A)"This is the one that I think is the best buy."
B)"This is the best computer on the market."
C)"This car has new brakes."
D)"These tires will wear like iron."

Question 55

By holding a knife to his back, Ed compelled Sean to sign a contract advantageous to Ed.This contract was entered under:

A)physical duress.
B)improper threats.
C)undue influence.
D)false representation.

Question 56

Which of the following is NOT an element of fraud?

A)Material misrepresentation.
B)Competent parties.
C)Knowledge of falsity.
D)Justifiable reliance.

Question 57

A misrepresentation is material if:

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

Question 58

Which of the following is correct with regard to duress?

A)It always renders a contract void.
B)Duress by improper threats is the most common form of duress.
C)The wrongful act must be either a crime or a tort in order to be considered wrongful.
D)All of the above.

Question 59

Stewart entered into a contract with Will to have Will build a 10-unit apartment complex on Elm Street in Randolph County.Unknown to both parties, this land had recently been rezoned and only single-unit dwellings can be constructed.

A)This is a mistake in law, which is treated no differently than a mistake in facts.
B)Since everyone should know the law, Stewart is liable to Will for any losses he may incur.
C)Stewart is obligated to buy land elsewhere and have the complex constructed on property zoned for apartments.
D)Will is liable to Stewart since Will is a contractor.

Question 60

Adam wants to buy a six-passenger car.The salesman tells him that the two-seat sports car Adam sees on the car lot would be just perfect for six people.Adam test drives the car and then buys it.In this case:

A)Adam has a valid cause of action for fraud.
B)Adam was not justified in relying upon the salesman's representation that the car would seat six people.
C)the element of scienter is missing.
D)the salesman is in a confidential relationship with Adam.

Question 61

Which of the following can meet the scienter requirement to establish fraud in the inducement?

A)Actual knowledge.
B)Lack of belief in the statement's truthfulness.
C)Reckless indifference as to a statement's truthfulness.
D)All of the above meet the requirement.

Question 62

What are the two types of fraud and what is the effect of each on the contract involved? Give an example of each type of fraud.

Question 63

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

A)That one side involuntarily accepted the terms of another.
B)That circumstances permitted no other alternative.
C)That one party explicitly made the economic threat.
D)That the circumstances leading up to the contract were the result of coercive acts of the opposite party.

Question 64

What elements need to be proved to establish each type of fraud?

Question 65

Which of the following results in a void, rather than voidable, agreement?

A)Duress by improper threat.
B)Fraud in the execution.
C)Fraud in the inducement.
D)Undue influence.

Question 66

Give an example of each of the following:
a.Unilateral mistake
b.Mistake in the meaning of a contract term.

Question 67

When both parties are mistaken as to the same set of facts, it is termed:

A)negligent misrepresentation.
B)unilateral mistake.
C)subjective concealment.
D)mutual mistake.

Question 68

Fred is a concert violinist who is scheduled to perform at Carnegie Hall for the first time.He buys what he is told is a Stradivarius violin from a well-known, reputable dealer in quality violins, and he pays the going rate for a Stradivarius.He later learns the violin is an imitation, although it is a good imitation, which fooled even the dealer.In this case:

A)Fred has made a unilateral mistake and cannot avoid the contract.
B)the dealer has committed fraud in the inducement.
C)the sale is voidable by the purchaser for mutual mistake.
D)the sale may be rescinded, because the dealer has made a nonfraudulent misrepresentation.

Question 69

Ralph sold a motel to Steve by stating that he had paid $250,000 for it and that his net average annual profit from the business has been $40,000.In reality he paid $100,000 for the motel and has earned a net average annual profit of only $28,000.Steve made no attempt to verify the statements until after the transaction was completed.In this case:

A)Ralph has committed fraudulent misrepresentation.
B)Steve is bound by the contract, because he failed to verify the statements which were made to him.
C)the contract is voidable at Steve's option.
D)Two of the above, (a) and (c).

Question 70

Define and discuss the concept of materiality in relation to misrepresentation

Question 71

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

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

Question 72

The remedies of damages and rescission are available for:

A)fraudulent misrepresentation.
B)negligent misrepresentation.
C)innocent misrepresentation.
D)All of the above.

Question 73

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

A)A statement of value, such as "This is the best car in town for the money."
B)"This style of jacket is going to be the most popular style next year."
C)"This car has a new radiator."
D)"In my opinion, this is the best buy for the money."

Question 74

Jill contracts to purchase Kevin's automobile under the belief that she can sell it at a profit to Linda, but after Jill has bought the car, she finds out that Linda isn't interested in buying it.Jill:

A)cannot avoid the contract.
B)can rescind the agreement.
C)could rescind the agreement if she was mistaken in her estimate of the value of the auto.
D)can sue Linda for detrimental reliance.

Question 75

A fraudulent misrepresentation:

A)must be material to obtain rescission.
B)must be material to recover damages.
C)may be innocent, meaning the representation was made without knowledge of its falsity but with due care.
D)need not have the element of scienter.

Question 76

Identify two situations in which silence or nondisclosure constitutes a misrepresentation.

Question 77

Define undue influence and name some of the relationships that would be affected.