Deck 15: Mistakes, Fraud, and Voluntary Consent

Question 1

To recover for fraud, a plaintiff must be twenty-one or more years of age.

Answer 1

False

Question 2

An innocent party does not need to suffer an injury to collect damages as a result of a misrepresentation.

Answer 2

False

Question 3

Any party who does not receive what he or she considers a fair bargain can argue mistake.

Answer 3

False

Question 4

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

Question 5

Courts typically set aside contracts because a party did not volunteer pertinent information.

Question 6

Voluntary consent may be lacking because of misrepresentation but not because of a mistake.

Question 7

A material fact is a fact that a reasonable person would consider important when determining his or her course of action.

Question 8

Misrepresentation can occur by words or actions, but not by silence.

Question 9

When the dominant party in a fiduciary relationship benefits from that relationship, a presumption of undue influence arises.

Question 10

An innocent party can rescind a fraudulent contract and be restored to his or her original position.

Question 11

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

Question 12

Because fraud actions necessarily involve wrongful conduct, courts may award punitive damages.

Question 13

Scienter clearly exists if a party knows a fact is not as stated.

Question 14

Generally, a unilateral mistake affords the mistaken party a right to relief from the contract.

Question 15

Misrepresentation of a material fact cannot occur through conduct alone.

Question 16

The element of justifiable reliance requires the misrepresentation to be the sole factor in inducing the deceived party to enter into the contract.

Question 17

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

Question 18

Many courts have broadened the concept of unconscionability to apply it in situations other than sales of goods.

Question 19

A negligent misrepresentation is not a basis for rescinding a contract.

Question 20

In some states, the courts prefer to rely on traditional notions of fraud, undue influence, and duress rather than the concept of unconscionability.

Question 21

Fact Pattern 15-B2 (Questions B3-B4 apply)
Organic Farms Company contracts to buy two tracts of land from Prime Bottomland, Inc. Both parties believe that the two tracts are adjacent, but in fact they are not. Prime Bottomland is still willing to sell the land, but under these circumstances the deal would adversely affect Organic Farms.
Refer to Fact Pattern 15-B2. 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 22

At an auction for the first time, Dulcinea bids on a one-hundred-year-old Edison-brand phonograph, believing that it is worth more than the price asked. When the item proves to be less valuable, Dulcinea is

A) liable on the bid.
B) not liable on the bid because Dulcinea overestimated the value of the auctioned item.
C) not liable on the bid because the auctioneer overstated the value of the auctioned item.
D) not liable on the bid because this was Dulcinea's first auction.

Question 23

Nora enters into a contract with Oceanic Transport, Inc., to insure and ship a painting from France to the United States for a certain price. But Oceanic 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 Nora for the mistake.
C) award damages to Oceanic for the mistake.
D) enforce the contract as is.

Question 24

Fact Pattern 15-B2 (Questions B3-B4 apply)
Organic Farms Company contracts to buy two tracts of land from Prime Bottomland, Inc. Both parties believe that the two tracts are adjacent, but in fact they are not. Prime Bottomland is still willing to sell the land, but under these circumstances the deal would adversely affect Organic Farms.
Refer to Fact Pattern 15-B2. Because of the parties' belief about the adjacency of the property, their contract is

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

Question 25

In a bike shop, Barrie, who is not knowledgeable about bikes, overhears Cullen say, "This bike could win any race!" Barrie buys the bike, but does not win any races with it. Cullen's statement is

A) a mistake.
B) fraudulent.
C) an opinion.
D) an attempt at undue influence.

Question 26

Fact Pattern 15-B1 (Questions B1-B2 apply)
Digital Storage, Inc., offers to sell provide cloud-computing services to Entrepreneur Enterprises, Inc., but mistakenly transposes some of the digits in the price so that $15,400 appears in the offer as $14,500. Entrepreneur Enterprises accepts the written offer.
Refer to Fact Pattern 15-B1. Entrepreneur Enterprises' best argument in favor of enforcement of the contract is that

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 devices.

Question 27

ApartmentsRUs, a property management firm, presents a standard-form lease for an apartment to Barnaby, a potential tenant. ApartmentsRUs does not pressure Barnaby to sign the lease, but offers it on a take-it-or-leave-it basis. Barnaby signs the lease, but later wants to withdraw from the contract. He is most likely to avoid enforcement of the lease on the ground of

A) economic duress.
B) undue influence.
C) unconscionability.
D) mistake.

Question 28

Raven, the owner of Strawberry Fields, contracts to sell its harvest to Tender Fruits, Inc. When Raven refuses to per?form, Tender Fruits files a suit to enforce the contract. Raven and Tender Fruits are in a state that does not recognize the doctrine of unconscionability. To defend suc?cess?fully against enforce?ment of the contract on similar grounds, Raven might rely on traditional notions of

A) fraud.
B) materiality.
C) mistake.
D) value.

Question 29

Camille, a tennis pro, convinces Dante, who has no athletic ability, that he has considerable skill and induces him to pay Camille $1,000 for tennis lessons. When Dante realizes the truth, he files a suit against Camille. Dante is most likely to recover on the basis of

A) opinion.
B) fraud.
C) unconscionability.
D) none of the choices.

Question 30

Mona is induced by her guardian Newt to sign a contract to invest her student loan funds in Overseas Bank through Newt's investment firm. Unknown to Mona, Newt realizes ongoing commissions from the investment. Most likely, Mona may

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

Question 31

Fact Pattern 15-B3 (Questions B14-B15 apply)
In selling a commercial building, Birdie tells Colt that the property has a certain capacity, making it suitable for a nightclub. Birdie knows nothing about the capacity of the building, but it is not as she specifies. Colt buys the building.
Refer to Fact Pattern 15-B3. On learning the truth, Colt confronts Birdie, who says she was not trying to fool him-she was only trying to make a sale. This is

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

Question 32

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 33

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. Byron 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 34

Gene sells a trail bike to Hollis without disclosing that the odome?ter, which reads 10,000 miles, was disconnected 90,000 miles ago. Gene is most likely liable for

A) unconscionability.
B) fraud.
C) mistake.
D) nothing.

Question 35

Fact Pattern 15-B3 (Questions B14-B15 apply)
In selling a commercial building, Birdie tells Colt that the property has a certain capacity, making it suitable for a nightclub. Birdie knows nothing about the capacity of the building, but it is not as she specifies. Colt buys the building.
Refer to Fact Pattern 15-B3. Under these circumstances, Colt's best course of action is most likely to

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

Question 36

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) reform it to reflect the true market value of the property.
D) order the parties to renegotiate the price.

Question 37

Drake enters into a contract with Eve, 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 promise, Drake learns that Eve does not have access to any unique software and files a suit against her, alleging fraud. Proof of an injury is required to

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

Question 38

Kari, a real estate agent, assures Linc that a certain parcel of commercial property fronts on the most highly trafficked street in Metro City. Linc buys the property and then discovers that the street has no more traffic than any other in its vicinity. Linc is most likely a victim of

A) opinion.
B) fraud.
C) mistake.
D) nothing.

Question 39

Fact Pattern 15-B1 (Questions B1-B2 apply)
Digital Storage, Inc., offers to sell provide cloud-computing services to Entrepreneur Enterprises, Inc., but mistakenly transposes some of the digits in the price so that $15,400 appears in the offer as $14,500. Entrepreneur Enterprises accepts the written offer.
Refer to Fact Pattern 15-B1. Digital Storage's best defense against enforcement of the contract is that Entrepreneur Enterprises 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 devices.

Question 40

Ray buys a rural vineyard from Sergio, who claims that it would be a prime site for a housing subdivision. Ray later learns that the law does not permit the land to be used for housing. Ray may

A) not rescind the contract.
B) rescind the contract only if Ray did not know the law before the deal.
C) rescind the contract only if Sergio knew about the law before the deal.
D) rescind the contract only if the law is not common knowledge.

Question 41

Niles, an accountant, certifies several audit reports on Optimal Operational Processes, Inc., Niles's client, knowing that the company intends to use the reports to borrow money from Prime Business Lending Company to buy new equipment. Niles believes that the reports are true and does not intend to deceive Prime Business, but does not check the re?ports before certifying them. Can Niles be held liable to Prime Business?

Question 42

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