Deck 13: Mistakes and Other Contract Defects

Question 1

Misrepresentation of a material fact can occur through words alone.

Answer 1

True

Question 2

A mistake of fact can only be mutual.

Answer 2

False

Question 3

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

Answer 3

False

Question 4

A price quotation with a mistake in the adding of a number of fig?ures will never render a contract unenforceable.

Question 5

Under contract law,an innocent party need not suffer an injury to recover damages in a case involving a contract with fraudulent terms.

Question 6

A contract is sometimes voidable if one party is aware that the other party made a mistake of fact.

Question 7

For a party to a contract to receive relief from either a unilateral or a bilateral mistake,the mistake must involve a material fact.

Question 8

An innocent party can sometimes enforce a fraudulent con?tract.

Question 9

A false statement by an expert to a naive buyer about a technical detail will usually entitle the buyer to rescind or reform a contract.

Question 10

Words or terms in contracts that are subject to more than one reasonable interpretation can lead to bilateral mistakes.

Question 11

A significant mistake in value will rarely enable a party to a contract to avoid the contract.

Question 12

The identity of one of the parties to a contract is an example of a material fact.

Question 13

A unilateral mistake always gives the mistaken party a right to relief from the contract.

Question 14

If the subject matter of a contract turns out to be more valuable than one of the parties believed it would be,that party can rescind the contract.

Question 15

Overestimating the value of an object is a mistake for which a court will NOT normally provide relief.

Question 16

A general contractor who knows that a subcontractor's bid is a mistake cannot enforce the bid.

Question 17

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

Question 18

An innocent party may NEVER rescind a fraudulent con?tract.

Question 19

Often,when both parties to a contract are mistaken as to the same material fact,either party can rescind the contract.

Question 20

All mistakes of fact are material.

Question 21

Reliance on a misrepresentation is justified if the misrepresentation is an obviously extravagant statement.

Question 22

Shelby wants to sell his Bobcat Skidsteer for $21,000.He emails Dave and offers to sell Dave the Bobcat.Due to a typo,Shelby tells Dave that he wants $20,100 for the Bobcat.Dave accepts the offer and pays Shelby $20,100.Shelby is

A)not bound by the contract due to a unilateral mistake.
B)not bound by the contract due to a bilateral mistake.
C)not bound by the contract due to a mistake of value.
D)bound by the contract.

Question 23

Fact Pattern 13-1 (Questions 5-6 apply)
Moore Properties,Inc.,offers in writing to sell to Lawn Acres Development Corporation a certain half-acre of land for "$112,000." After Lawn Acres signs the offer in acceptance and returns it,Moore discovers that the price should have been stated as "$121,000."
Refer to Fact Pattern 13-1.Moore's misstatement of the price is

A)a bilateral mistake.
B)a fraudulent misrepresentation.
C)a unilateral mistake.
D)unconscionable.

Question 24

A deceived person must have a justifiable reason for relying on a misrepresentation.

Question 25

Joy and Karl contract for the sale of Joy's prize-winning show dog for $1,000.Unknown to either party,the dog has died.Karl is

A)entitled to another dog of equivalent value.
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 dog might die.

Question 26

Economic need is always sufficient to constitute duress.

Question 27

A contract entered into under undue influence is voidable.

Question 28

Misrepresentation can occur through conduct.

Question 29

Intent to deceive is NOT an element of fraud.

Question 30

May is a stockbroker.Due to May's statements,Nora believes that the price of OK Goods,Inc.(OKGI),a widely traded stock,is going to in?crease sub?stantially.Nora buys 500 shares of OKGI at $10 per share,but the price soon drops to $2.Nora can successfully 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 31

Punitive damages are meant to reward the defendant.

Question 32

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

Question 33

Misrepresentation of an opinion is an element of fraud.

Question 34

Forcing someone to enter into a contract through fear created by threats is undue influence.

Question 35

Scienter exists if a party makes a statement that he or she does not be?lieve is true.

Question 36

All parties to a contract have a duty to disclose all facts that might be of interest to the other parties,even if they are not expressly asked to do so.

Question 37

A fact is objective and verifiable.

Question 38

At an auction for the first time,Max bids on an object,believing that the auctioneer requested an amount less than the price actually asked.Max is

A)liable on the bid.
B)not liable on the bid because Max misunderstood the auctioneer.
C)not liable on the bid because the auctioneer misstated the price.
D)not liable on the bid because the object is probably overpriced.

Question 39

A seller's attempt to conceal a fact that is material to a contract can give rise to an action for fraud.

Question 40

A seller's failure to disclose a serious defect about a product for sale may give rise to an action for fraud.

Question 41

Gina induces Hugh to enter into a contract for the purchase of a condominium about which Gina knowingly misrepresents its size.When Hugh discovers the truth,he can

A)not rescind the contract.
B)rescind the contract on the basis of fraud.
C)rescind the contract on the basis of mistake.
D)rescind the contract on the basis of undue influence.

Question 42

Hank,a salesperson for Ideal Autos,promises Jennie a certain car will give her a "smooth ride." Hank offers a test drive,which Jennie de?clines.She buys the car but soon realizes its suspension is in poor condi?tion.Jennie

A)can rescind the contract on the ground of fraud.
B)can rescind the contract on the ground of misrepresentation.
C)can rescind the contract on the ground of mistake.
D)was not defrauded.

Question 43

Fact Pattern 13-2 (Questions 13-14 apply)
Grover contracts to sell two tracts of land to Hank.Both parties believe that the two tracts are adjacent,but in fact they are not.Grover is still willing to sell the land,but under these circumstances the deal would adversely affect Hank.
Refer to Fact Pattern 13-2.The parties' belief about the adjacency of the property is

A)a bilateral mistake.
B)a fraudulent misrepresentation.
C)a unilateral mistake.
D)unconscionable.

Question 44

Katie and Linda enter into a contract for Katie to buy Linda's house in which there are several terms that are subject to more than one reasonable interpretation.If Katie and Linda attach materially different meanings to a term

A)only Katie will be able to void the contract.
B)only Linda will be able to void the contract.
C)neither Katie nor Linda will be able to void the contract.
D)either Katie or Linda will be able to void the contract.

Question 45

James is in an art gallery when Will,who has no special art expertise,points to a painting and says "That artist is so good.That piece will be worth a fortune in a few years!" James buys the painting,which does not turn out to be valuable.James tries to return the painting and recover his purchase price.A court will

A)order the art gallery to pay James the full purchase price.
B)order Will to pay James the full purchase price.
C)enforce the contract between James and the art gallery.
D)enforce the contract between James and the art gallery,but order Will to pay James the full purchase price.

Question 46

Fact Pattern 13-1 (Questions 5-6 apply)
Moore Properties,Inc.,offers in writing to sell to Lawn Acres Development Corporation a certain half-acre of land for "$112,000." After Lawn Acres signs the offer in acceptance and returns it,Moore discovers that the price should have been stated as "$121,000."
Refer to Fact Pattern 13-1.The effect of Moore's misstatement of the price will most likely fall on

A)Moore and Lawn Acres,who must split the difference.
B)Moore only.
C)Lawn Acres only.
D)neither Moore nor Lawn Acres.

Question 47

Wilma,who lives in New York,enters into a contract to buy a painting from Fred,who lives in France.The contract includes all the costs of insuring and shipping the painting from France to New York.The agent that made the shipping estimate make a mistake when adding up the costs and,as a result,the shipping cost listed in the contract is $1,000 less than the shipping actually costs.A court will most likely

A)allow the parties to rescind the contract.
B)award damages to Wilma for the mistakes.
C)award damages to Fred for the mistakes.
D)enforce the contract without requiring changes.

Question 48

Byron agrees to sell to Charity,for $1,500,a remote parcel of land.They be?lieve the land to be worthless,but beneath it is a gold mine.A court would

A)cancel the contract due to Byron's failure to know the land's value.
B)cancel the contract due to Charity's failure to know the land's price.
C)cancel the contract due to the difference between the contract price and the market price.
D)enforce the contract.

Question 49

Olin,an art instructor,convinces Pia,who has no artistic ability,that Pia has considerable talent and induces Pia to pay Olin $10,000 for art lessons.When Pia realizes the truth,she files a suit against Olin.Pia is most likely to recover on the basis of

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

Question 50

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

A)Garth is entitled to $750 for the $500 ATV.
B)Helen is entitled to the $1,000 ATV for $750.
C)Helen must buy both ATVs for $1,500.
D)there is no contract.

Question 51

Andy knows nothing about horses.Peter,an expert horse trainer,knows that the horse has no talent and is not likely to win any competitions.Peter convinces Andy to buy a horse for $500,000 by assuring him that the horse has great talent.The horse turns out to have no talent and never wins any competitions.Andy can most likely recover damages based on

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

Question 52

Dina,an employee of Excavation Associates,is injured in a work-related acci?dent.Based on the diagnosis of Filbert,a doctor,Dina accepts $50,000 from her employer and waives the right to future claims.Filbert's diagnosis later proves to have been wrong.This misdiagnosis is,in terms of its im?pact on Dina's agreement with her employer,

A)a bilateral mistake of fact.
B)a unilateral mistake of fact.
C)fraudulent misrepresentation.
D)nonfraudulent misrepresentation.

Question 53

Jane and Phil enter into a contract,but make a bilateral mistake.In order for the contract to be rescinded by either party,the bilateral mistake must be about a(n)

A)material fact.
B)value.
C)opinion.
D)prediction.

Question 54

Fact Pattern 13-2 (Questions 13-14 apply)
Grover contracts to sell two tracts of land to Hank.Both parties believe that the two tracts are adjacent,but in fact they are not.Grover is still willing to sell the land,but under these circumstances the deal would adversely affect Hank.
Refer to Fact Pattern 13-2.Because of the parties' belief about the adjacency of the property,their contract is

A)unavoidable.
B)unconscionable.
C)unenforceable.
D)voidable.

Question 55

Kayla wants to rent an apartment from QualityLiving,Inc.The QualityLiving agent knows that many of the QualityLiving apartments have leaky roofs.When Kayla asks the QualityLiving agent if roof of the apartment ever leaks,the agent assures her that there have never been any leaks in any of the apartments.When Kayla moves in,she discovers a large leak in the kitchen and water stains on all the ceilings.Kayla

A)can rescind the contract on the ground of unilateral mistake.
B)can rescind the contract on the ground of misrepresentation.
C)can rescind the contract on the ground of bilateral mistake.
D)was not defrauded.

Question 56

Kathleen sells Richard a race horse for $1,000.Both Kathleen and Richard think that the horse is too slow to win any races.Richard then enters the horse in a race,and it wins easily.He enters it in more races,and the horse soon wins more than $1 million.Kathleen tries to rescind the contract to sell the horse,claiming that it was worth more than $1,000.A court will

A)cancel the contract due to Kathleen's failure to know the horse's value.
B)cancel the contract due to Richard's failure to know the horse's price.
C)cancel the contract due to the difference between the contract price and the horse's true value.
D)enforce the contract.

Question 57

Used Car Lot's salesperson Vic offers to sell Will,who is twenty years of age,a car about which Vic intentionally misrepresents its past use and repairs.In reliance on the misrepresentations,Will buys the car.To prove fraud in this transaction,Will does not have to show that

A)Vic intentionally deceived Will.
B)Vic misrepresented several material facts.
C)Will is under twenty-one years of age.
D)Will justifiably relied on Vic's misrepresentations.

Question 58

Pete,an accountant,convinces his client Kasey to invest her savings in a nonexistent social-networking Web site.When Kasey learns the truth,she can

A)impose her own scam on Pete without liability.
B)induce Pete to give her his other clients' funds without recourse.
C)rescind the contract to invest in the Web site.
D)sabotage Pete's career in any way possible.

Question 59

Barb,a real estate agent,is showing John a house.She tells him that this is a house where "his family can live happily ever after." John buys the house,but his wife does not like it.John

A)can rescind the contract on the ground of fraud.
B)can rescind the contract on the ground of misrepresentation.
C)can rescind the contract on the ground of mistake.
D)was not defrauded.

Question 60

July induces Kelli to enter into a contract for the purchase of a condominium about which July knowingly misrepresents its need for repair.When Kelli discovers the truth,Kelli can

A)enforce the contract and seek damages.
B)enforce the contract but not seek damages.
C)neither enforce the contract nor seek damages.
D)seek damages but not enforce the contract.

Question 61

Raylene,who is Seth's guardian,convinces him to buy a certain parcel of land from Trevor at a greatly inflated price.Raylene may be liable for

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

Question 62

Multi Investments,Inc.,offers to buy Nano Toy Corporation.On May 1,Nano provides copies of its financial statements for the pre?vious year,showing an inventory of $10 million.On May 15,Nano discovers that the previous year's inventory is overstated by $5 million,but does not inform Multi.On June 1,Multi,relying on the fi?nancial statements,buys Nano.On June 10,the buyer discovers the inven?tory over?statement.Can Multi succeed in a suit against Nano for fraud?

Question 63

Harley induces Gene to sign a contract by placing a gun to Gene's head.The contract is void

A)only if the contract has an illegal purpose.
B)only if the terms are unfair to Gene.
C)under any circumstances.
D)only if the gun was loaded.

Question 64

Scienter exists in which of the following cases?

A)Martin knows that the transmission on his truck is defective,but does not tell this fact to potential buyers.
B)The racehorse that Karen is trying to sell has a genetic defect,but Karen does not know about the defect,and so she does not warn potential buyers.
C)Jake,a real estate agent,tells a client that he has a house that "will make all her dreams come true."
D)John forces Bill to sign a contract to sell John a car below market value.

Question 65

Beau sells a car to Cody without disclosing that the odometer,which reads 40,000 miles,was disconnected 80,000 miles ago.Beau is liable for

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

Question 66

Lou uses undue influence to induce Mona to sign a contract to invest her student loan funds in National Overseas Bank.Mona may

A)avoid the contract or choose to carry it out.
B)do nothing once she has signed the contract.
C)recover from her lender for a failure to influence her "due."
D)recover from the bank for a failure to undo Lou's influence.

Question 67

Dale files a suit against Evelyn,alleging her fraud in entering into a con?tract with him.Proof of an injury is required

A)to recover damages.
B)to rescind the contract.
C)to undo Evelyn's influence.
D)under no circumstances.

Question 68

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

Question 69

Mark fails to reveal a material fact in a business deal with Nancy.This constitutes fraud

A)if Mark is unaware of the fact and the failure.
B)if the amount of consideration received is grossly inadequate.
C)if the fact concerns a serious defect known to Mark and unlikely to be known by Nancy.
D)under any circumstances.

Question 70

Minerva,an accountant,convinces her client Ozzie to invest in Idle Schemes,Ltd.,a business with little potential.When Ozzie learns the truth,he

A)can do nothing.
B)may enforce the contract but cannot rescind it.
C)may rescind the contract but cannot enforce it.
D)may enforce the contract or rescind it.

Question 71

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

A)enforce it.
B)not enforce it.
C)rescind it.
D)order the parties to renegotiate it.

Question 72

Jill sells Thomas her 1996 Volvo.Jill has not driven the car for two years and is unaware that the brake cables have rusted.Thomas does not ask Jill any questions about the brakes before he buys the car.When Thomas is driving the car home,the brakes fail.Thomas

A)can rescind the contract on the ground of fraud.
B)can rescind the contract on the ground of misrepresentation.
C)can rescind the contract on the ground of bilateral mistake.
D)cannot rescind the contract.