Deck 11: Capacity and Legality

Question 1

Which of the following was the result on appeal in Manderville v. PCG&S Group, Inc., the case in the text in which the defendant property broker claimed that the plaintiffs could not recover on their claim for intentional misrepresentation because the plaintiffs did not diligently investigate the legal condition of the property and also because the agreement between the parties contained an exculpatory clause releasing the defendant from any understandings not incorporated into the contract?

A) That the plaintiffs could not recover because the plaintiff failed to meet the obligation of inspecting the legal condition of the property.
B) That the plaintiffs could not recover based on the exculpatory clause in the contract.
C) That the plaintiffs could not recover because there was nothing wrong with the property, such as environmental contamination.
D) That the plaintiffs were entitled to proceed to trial and that an exculpatory clause attempting to render a defendant not liable for fraud is void as a matter of public policy.
E) That the plaintiffs were entitled to proceed to trial on the property issue only if they could first establish that they did no read the exculpatory clause.

Answer 1

D
Explanation: The appellate court ruled that an exculpatory clause that would render a defendant not liable for fraud is void as a matter of public policy and that the plaintiffs should have the opportunity to attempt to prove that they entered into the agreement because of the fraudulent misrepresentations of the defendants.

Question 2

What was the result in Scott v. Mid-Carolina Homes, Inc., the case in the text in which the defendant attempted to rescind a contract to sell a mobile home because its salesperson was acting under a mistake of fact when he gave the plaintiff the sales price?

A) The seller was allowed to rescind the contract because a unilateral contract was involved.
B) The seller was allowed to rescind the contract because a bilateral contract was involved.
C) The seller was allowed to rescind the contract because the mistake involved a price differential of over 25%.
D) The seller was allowed to rescind the contract because the mistake involved a price differential of over 50%.
E) The seller was not allowed to rescind the contract.

Answer 2

E
Explanation: In upholding an award to the plaintiff, the state supreme court explained that a contract may be rescinded for unilateral mistake only when the mistake has been induced by fraud, deceit, misrepresentation, concealment, or imposition of the party opposed to the rescission, without negligence on the part of the party claiming rescission, or when the mistake is accompanied by very strong and extraordinary circumstances that would make it a great wrong to enforce the agreement; and Mid-Carolina had not demonstrated the presence of any of the circumstances that would justify a rescission.

Question 3

A[n] _____________ mistake is the result of an error by one party about a material fact.

A) Unclear
B) Mutual
C) Unilateral
D) Clear
E) Single

Answer 3

C
Explanation: Mistakes may be unilateral, the result of an error by one party about a material fact, that is, a fact that is important in the context of the particular contract.

Question 4

A[n] _____________ mistake is a mistake that is shared by both parties to an agreement.

A) Unclear
B) Mutual
C) Unilateral
D) Clear
E) Single

Question 5

Scienter is present when the party accused of making the fraudulent assertion believed that the assertion was false or made the claim without any regard for whether it was true or false.

Question 6

In legal terms nondisclosure involves the active hiding of the truth about a material fact.

Question 7

Mistakes in contract law result from untrue statements made by one party to the contract.

Question 8

European courts permit rescission of a contract for a mistake of value when the mistake involves more than 40 percent of the value at the time of the contract.

Question 9

Threatening physical harm or extortion to gain consent to a contract is classified as duress.

Question 10

A mistake is an erroneous belief about the facts of the contract at the time the contract is concluded.

Question 11

In the area of mistake, distinguishing between unilateral and mutual mistakes is important because the classification bears on which contracts ______________.

A) Are void.
B) Are voidable.
C) Lack consideration.
D) Lack legality.
E) None of these because mutual mistakes are not recognized in the area of contracts.

Question 12

Undue influence refers to those special relationships in which one person has taken advantage of his or her dominant position in a relationship to unduly persuade the other person.

Question 13

Although there are some exceptions, a[n] _____________ mistake does not generally void a contract.

A) Unclear
B) Mutual
C) Unilateral
D) Clear
E) Single

Question 14

Which of the following was the result on appeal in Telekenex IXC, Inc. v. Charlotte Russe Inc., the case in the text in which the defendant claimed that an amendment to a contract for communication services was unenforceable because it was entered into based on a threat that the services would be discontinued otherwise?

A) The court found that the defendant had established a prima facie defense of duress and remanded the case for further proceedings.
B) The court found that the defendant had established a prima facie defense of misrepresentation and remanded the case for further proceedings.
C) The court found that the defendant had established a prima facie defense of undue influence and remanded the case for further proceedings.
D) The court found that the defendant was bound to the amendment because no one forced agreement.
E) The court found that the defendant was bound to the amendment because the defendant had begun performance under it.

Question 15

Which of the following is necessary in order to establish that a mutual mistake involving a basic assumption about the subject matter of a contract was made?

A) That the mistake involved the existence, quality, or quantity of the items to be exchanged.
B) That the mistake involved whether a party could profit from the contract.
C) That the mistake involved whether a party could profit from the contract or whether a party misunderstood the time constraints involved in regard to the contract.
D) That the mistake involved the identity of parties to the contract or whether a party misunderstood the time constraints involved in regard to the contract.
E) That the mistake involved a misunderstanding of law as to whether or not the UCC applied.

Question 16

When a contract is voidable, it may be ____________.

A) Chargeable
B) Rescinded
C) Deassented
D) Reassented
E) Uncharged

Question 17

For fraudulent misrepresentation to be the basis for a contract rescission, the statement of fact need not be an actual assertion.

Question 18

When a fraudulent misrepresentation is at issue, intent to deceive may not be inferred.

Question 19

Which of the following was the result on appeal in Caliber One Indemnity Co. v. Wade Cook Financial Corp. and Diana K. Carey, the case in the text in which the plaintiff claimed relief on the basis that the limit of insurance coverage for earthquake damage was reduced from $5,000,000 to $500,000 due to a mutual mistake?

A) That the plaintiff was not entitled to relief on the basis that a representative of the plaintiff should have read the contract and noticed the mistake.
B) That because both parties were negligent in not catching the mistake, the mutual-mistake doctrine was inapplicable resulting in no relief to the plaintiff.
C) That the plaintiff was not entitled to relief because the mistake was not related to a basic assumption on which both parties relied when making the contract for all types of property insurance.
D) That the plaintiff was entitled to relief based on the mutual-mistake doctrine.
E) That the plaintiff was entitled to relief based on the unilateral-mistake doctrine.

Question 20

A negligent misrepresentation results when the party making the statement would have known the truth about the fact had he used reasonable care to discover or reveal it.

Question 21

What was the result in the Peerless case discussed in the text in which there were two ships named Peerless and the parties disagreed over which ship was the subject of the contract?

A) The court rescinded the contract.
B) The court ruled that the older ship would be identified to the contract.
C) The court ruled that the newer ship would be identified to the contract.
D) The court ruled that the defendant would be allowed to choose which ship would be identified to the contract.
E) The court ruled that the plaintiff would be allowed to choose which ship would be identified to the contract.

Question 22

What is the effect of a negligent misrepresentation?

A) There is no effect because there is no such term as "negligent misrepresentation."
B) It is treated the same as an innocent misrepresentation.
C) It is treated the same as a fraudulent misrepresentation.
D) It is treated the same as a material misrepresentation.
E) It is treated the same as an implied misrepresentation.

Question 23

Which of the following occurs when one party threatens physical harm or extortion to gain consent to a contract?

A) Duress
B) Undue influence
C) Durable fraud
D) Criminal influence
E) Duress and undue influence, but not durable fraud

Question 24

Which of the following is available to a party who was misled by a false statement contained in an innocent misrepresentation?

A) Rescission of the contract only
B) Compensatory damages along with rescission of the contract
C) Punitive damages in addition to compensatory damages and the right to rescind the contract
D) Exemplary damages in addition to compensatory damages and the right to rescind the contract
E) Relevant damages only

Question 25

Which of the following refers to special relationships in which one person has taken advantage of his or her dominant position in a relationship to unduly persuade the other person?

A) Fraudulent misrepresentation
B) Undue influence
C) Pressing dominance
D) Pressing persuasion
E) Relationship dominance

Question 26

Which of the following is false regarding rescinding a contract in the Philippines?

A) If consent is given through mistake, violence, intimidation, undue influence, or fraud, contracts are valid until they are annulled.
B) The period in which to annul a contract for mistake, violence, intimidation, undue influence, or fraud is four years.
C) In cases of intimidation, violence, or undue influence, the time period for annulling a contract is measured from the time the defect in the assent ceases.
D) In cases of mistake or fraud, the time period for annulling a contract is measured from the time of the discovery of the defect.
E) The law of the Philippines in regard to rescinding a contract for mistake, violence, intimidation, undue influence, or fraud is typical to that of the U.S.

Question 27

In Indian Law, duress is referred to as _____________.

A) Coercion
B) Pardanashin
C) Forced contractual relation
D) Undue bias
E) Undue pressurizing

Question 28

Which of the following involves the active hiding of the truth about a material fact?

A) Concealment
B) Nondisclosure
C) Negligence
D) Concealment, nondisclosure, and negligence
E) Concealment and nondisclosure, but not negligence

Question 29

Heather innocently misrepresented the status of a puppy as being a full blooded Pomeranian when actually it was a mixed breed. Brad had contracted to purchase the dog, but the problem was discovered prior to his paying for the dog and picking it up. Nevertheless, Brad was very angry and felt that Heather should have been more careful. He said that he planned to rescind the contract and also sue her for damages to punish her and deter others from behaving similarly. Which of the following is true regarding the remedies available to Brad?

A) Because Heather violated the contract to provide a full blooded Pomeranian, Brad is entitled to rescind the contract and also to the damages he seeks.
B) Because Heather violated the contract to provide a full blooded Pomeranian, Brad is entitled to rescind the contract, but he is not entitled to the damages he seeks.
C) Because Heather is not guilty of any wrongdoing, Brad is entitled to no remedy; and Heather has an additional 30 days in order to honor the contract.
D) Because Heather is not guilty of any wrongdoing, Brad is entitled to no remedy; and Heather has an additional 60 days in order to honor the contract.
E) Because Heather is not guilty of any wrongdoing, Brad is entitled to no remedy; and Heather has an additional 90 days in order to honor the contract.

Question 30

As discussed in the text, which of the following is true in China when fraud is involved?

A) Because of the governmental interest in increasing international business, it is very difficult to prove fraud when an international business is involved.
B) Because of the governmental interest in increasing international business, few penalties are imposed on international businesses that are guilty of fraud.
C) Because of the governmental interest in increasing international business, it is very difficult to prove fraud when an international business is involved; and few penalties are imposed on international businesses that are guilty of fraud.
D) Chinese law does not recognize the concept of fraud.
E) Fraudulent misrepresentations have resulted in heavy fines and refusals to allow any more agreements with Chinese firms.

Question 31

Which of the following refers to a failure to provide pertinent information about a projected contract?

A) Concealment
B) Nondisclosure
C) Negligence
D) Concealment, nondisclosure, and negligence
E) Concealment and nondisclosure, but not negligence

Question 32

Under what condition or conditions will a court now find nondisclosure as having the same legal effect as an actual false assertion?

A) When a relationship of trust exists between the parties to the contract.
B) When there is a failure to correct assertions of fact that are no longer true in light of events that have occurred since the initial consent to the terms of the agreement.
C) When the transaction at issue is the first dealing the parties have undertaken together.
D) When a relationship of trust exists between the parties to the contract and when there is a failure to correct assertions of fact that are no longer true in light of events that have occurred since the initial consent to the terms of the agreement.
E) When a relationship of trust exists between the parties to the contract, when there is a failure to correct assertions of fact that are no longer true in light of events that have occurred since the initial consent to the terms of the agreement, and when the contract at issue is the first contract the parties have undertaken together.

Question 33

George offers to sell Penelope a ring that George found in his yard. He and Penelope look at the ring and decide that they are not sure what it is, probably just a shiny stone. Penelope pays George $10 for the ring. The ring turns out to be a diamond worth much more than $10. George wants the ring back, and Penelope refuses. What is the most likely result?

A) The ring will be returned to George because of mutual mistake.
B) The ring will be returned to George because of unilateral mistake.
C) The ring will be returned to George because of equity.
D) The ring will remain with Penelope unless George can establish that she was negligent in not recognizing the ring's true value.
E) The ring will remain with Penelope because the parties contracted on the assumption that they did not know the value of the ring.

Question 34

A[n] _____________ misrepresentation results when the party making the statement would have known the truth about the fact had he used reasonable care to discover or reveal it.

A) Innocent
B) Material
C) Immaterial
D) Negligent
E) Scienter

Question 35

A[n] _____________ misrepresentation results from a false statement about a fact material to an agreement that the person making the statement believed to be true.

A) Wrongful
B) Innocent
C) False
D) Misleading
E) Illegal

Question 36

Which of the following is involved in a situation in which a person refuses to perform according to a contract unless the other person either signs another contract with the one making the threat or pays that person a higher price than was specified in the original agreement?

A) Fraudulent duress
B) Contractual duress
C) Negligent duress
D) Economic duress
E) Specific duress

Question 37

Which of the following must a mutual mistake involve in order for a mutual mistake to interfere with legal consent?

A) A basic assumption about the subject matter of the contract.
B) A material effect on the agreement.
C) A basic assumption about the subject matter of the contract and an adverse effect on a party who did not agree to bear the risk of mistake at the time of the agreement, but not a material effect on the agreement.
D) A basic assumption about the subject matter of the contract, an adverse effect on a party who did not agree to bear the risk of mistake at the time of the agreement, and a material effect on the agreement.
E) An admission by one of the parties that a misrepresentation occurred.

Question 38

When a person who makes a misrepresentation has no knowledge about the falsity of the claim, it is said that the person lacked _____________.

A) Information
B) Premeditation
C) Planning
D) Plotting
E) Scienter

Question 39

A _____________ is a false representation of a material fact that is consciously false and intended to mislead the other party.

A) Negligent misrepresentation
B) Fraudulent misrepresentation
C) Scienter misrepresentation
D) Negligent misrepresentation, fraudulent misrepresentation, and scienter misrepresentation
E) Negligent or fraudulent misrepresentation, but not a scienter misrepresentation

Question 40

Which of the following is found when one party was forced into an agreement by the wrongful act of another?

A) Duress
B) Negligence
C) Fraud
D) Duress, negligence, and fraud
E) Duress and fraud, but not negligence

Question 41

Reference - Scheming Friends. Willy very much wants to rent a basement apartment in Weaver's home. Willy threatens to tell all Weaver's friends that he and Weaver had been arrested for illegally smoking marijuana unless Weaver rents the apartment to him for $100 per month. Weaver reluctantly agrees to rent the apartment to Willy for that amount. Willy also wants to buy Weaver's car. Weaver runs back the odometer on the car before Willy test drives it. Willy is impressed by the low mileage and agrees to buy the car. Finally, Weaver offers to sell Willy a ring for Willy's fiancée. Weaver tells Willy that the ring is a diamond and believes that to be true. After the deal is made, however, a jeweler friend of Weaver's informs him that the ring is a fake. When Willy shows up with the money, Weaver says nothing. He just hands Willy the ring and takes the money. Later, Willy finds out that the odometer was run backwards from another friend to whom Weaver confided. Willy also finds out from his girlfriend that the ring is a fake. Which of the following is true regarding Willy's rights in regards to the car purchase?

A) He will not be able to rescind the contract because Weaver made no affirmative statements.
B) He will not be able to rescind the contract unless he can prove that he expressly asked Weaver if the mileage was run backwards on the car and Weaver failed to reveal that it had been altered.
C) He will not be able to rescind the contract because the mileage alteration did not affect the engine of the car.
D) He will be able to rescind the contract because of duress practiced by Weaver.
E) He will be able to rescind the contract because of the fraudulent misrepresentation of Weaver.

Question 42

Jane operates a home decorations shop selling slightly used goods. She bought a painting from Sally for the shop. Bob came into the shop and asked if the painting was by Bill, a local artist of some repute. Jane, without checking with Sally, says "I'm sure it is" because she really did think it looked like one of Bill's paintings. Bob bought the painting. A week or so later, he took the painting by Bill's studio. Bill just laughed and said that he never painted anything that horrible. Bob took the painting back to Jane and asked for a refund. Jane refused on the basis that she never gave refunds and that Bob took the risk that the painting was not done by Bill. Should Bob sue in small claims court, who will likely win and why?

A) Bob on the basis of negligent misrepresentation.
B) Bob on the basis of innocent misrepresentation.
C) Bob on the basis of unilateral mistake.
D) Jane on the basis that Bob accepted the risk of loss.
E) Jane both on the basis that Bob accepted the risk of loss and on the basis that he agreed by verbal contract to purchase the painting.

Question 43

Which of the following occurs when a party threatens to file a criminal lawsuit unless consent is given to the terms of a contract?

A) Duress
B) Undue influence
C) Durable fraud
D) Criminal influence
E) Duress and undue influence, but not durable fraud

Question 44

Reference - Pet Pig Farm. Marcy wanted to buy Lucy's land and use it to breed small pigs to be kept as pets. Marcy told Lucy that having water on the property was very important. Lucy assured her that a spring ran through one corner of the property. Therefore, Marcy agreed to buy the farm. Although she did not ask Lucy anything about it, Marcy, who loved pigs, assumed that the neighbors would be pleased with the pigs being in the area. In a separate contract, Lucy also agreed to sell Marcy a used truck for $5,000. After the contract for the land sale was entered into, it was discovered that actually the spring did not run through the corner of Lucy's property. The area in which the spring ran actually belonged to a neighbor. Additionally, when Lucy brought Marcy the used truck, Marcy said, "That's not the truck!" It was discovered that Lucy, who had two trucks, thought that Marcy had bought the older truck when Marcy thought she had purchased the newer truck. Marcy was also surprised when she received a petition signed by all surrounding landowners objecting to the presence of the pigs and threatening to sue Marcy for nuisance. Which of the following would be the result if Marcy attempts to rescind the contract and recover damages only on the basis of the neighbor's objection to a pig farm?

A) Marcy may rescind the contract and recover damages because Lucy made an implied misrepresentation.
B) Marcy may rescind the contract but may not recover damages because the situation involved a mutual mistake.
C) Marcy may recover damages but may not rescind the contract because Lucy made an implied misrepresentation.
D) Marcy may not rescind the contract nor may she recover damages because she, Marcy, made a unilateral mistake.
E) Marcy may rescind the contract but may not recover damages because she, Marcy, made a unilateral mistake.

Question 45

Reference - Pet Pig Farm. Marcy wanted to buy Lucy's land and use it to breed small pigs to be kept as pets. Marcy told Lucy that having water on the property was very important. Lucy assured her that a spring ran through one corner of the property. Therefore, Marcy agreed to buy the farm. Although she did not ask Lucy anything about it, Marcy, who loved pigs, assumed that the neighbors would be pleased with the pigs being in the area. In a separate contract, Lucy also agreed to sell Marcy a used truck for $5,000. After the contract for the land sale was entered into, it was discovered that actually the spring did not run through the corner of Lucy's property. The area in which the spring ran actually belonged to a neighbor. Additionally, when Lucy brought Marcy the used truck, Marcy said, "That's not the truck!" It was discovered that Lucy, who had two trucks, thought that Marcy had bought the older truck when Marcy thought she had purchased the newer truck. Marcy was also surprised when she received a petition signed by all surrounding landowners objecting to the presence of the pigs and threatening to sue Marcy for nuisance. Assuming that Lucy innocently made a misrepresentation regarding the spring running through the corner of the farm with no reason to believe that was not correct, considering only the lack of a spring issue, which of the following is true if Marcy does not want to go through with the sale of the farm?

A) Marcy may rescind the contract and recover compensatory damages only.
B) Marcy may rescind the contract, but she may not recover damages.
C) Marcy may sue for damages, but she may not rescind the contract.
D) Because Lucy acted with scienter, Marcy may receive reliance damages in addition to compensatory damages, but she may not rescind the contract.
E) Because Lucy acted with scienter, Marcy may receive reliance damages in addition to compensatory damages, and she may rescind the contract.

Question 46

Reference - Scheming Friends. Willy very much wants to rent a basement apartment in Weaver's home. Willy threatens to tell all Weaver's friends that he and Weaver had been arrested for illegally smoking marijuana unless Weaver rents the apartment to him for $100 per month. Weaver reluctantly agrees to rent the apartment to Willy for that amount. Willy also wants to buy Weaver's car. Weaver runs back the odometer on the car before Willy test drives it. Willy is impressed by the low mileage and agrees to buy the car. Finally, Weaver offers to sell Willy a ring for Willy's fiancée. Weaver tells Willy that the ring is a diamond and believes that to be true. After the deal is made, however, a jeweler friend of Weaver's informs him that the ring is a fake. When Willy shows up with the money, Weaver says nothing. He just hands Willy the ring and takes the money. Later, Willy finds out that the odometer was run backwards from another friend to whom Weaver confided. Willy also finds out from his girlfriend that the ring is a fake. Of which of the following is Willy guilty in threatening to tell friends about the arrest unless Weaver rents the apartment?

A) Duress.
B) Unconscionability.
C) Fraud.
D) Duress, unconscionability, and fraud.
E) Duress and unconscionability, but not fraud.

Question 47

Which of the following occurs when a party threatens to file a frivolous civil lawsuit unless consent is given to the terms of a contract by another party?

A) Duress
B) Undue influence
C) Durable fraud
D) Criminal influence
E) Duress and undue influence, but not durable fraud

Question 48

Reference - Pet Pig Farm. Marcy wanted to buy Lucy's land and use it to breed small pigs to be kept as pets. Marcy told Lucy that having water on the property was very important. Lucy assured her that a spring ran through one corner of the property. Therefore, Marcy agreed to buy the farm. Although she did not ask Lucy anything about it, Marcy, who loved pigs, assumed that the neighbors would be pleased with the pigs being in the area. In a separate contract, Lucy also agreed to sell Marcy a used truck for $5,000. After the contract for the land sale was entered into, it was discovered that actually the spring did not run through the corner of Lucy's property. The area in which the spring ran actually belonged to a neighbor. Additionally, when Lucy brought Marcy the used truck, Marcy said, "That's not the truck!" It was discovered that Lucy, who had two trucks, thought that Marcy had bought the older truck when Marcy thought she had purchased the newer truck. Marcy was also surprised when she received a petition signed by all surrounding landowners objecting to the presence of the pigs and threatening to sue Marcy for nuisance. Which of the following is the most likely result in the dispute between Marcy and Lucy regarding which used truck was sold assuming that both Marcy and Lucy were each innocently mistaken and did not intend to defraud the other?

A) The contract will be rescinded.
B) Marcy will be allowed to pick the truck she wants to buy because she is the buyer, and she may also recover damages.
C) Lucy will be allowed to pick the truck she wants to sell because she is the seller.
D) Marcy will be allowed to pick the truck she wants to buy because she also had a contract on the ancillary farm.
E) Marcy will be allowed to pick the truck she wants to buy because she is the buyer, but she may not recover damages.

Question 49

Reference - Shady lawyer. Brice had a number of ethical issues come up in law school involving alleged cheating but managed to graduate because nothing was ever proven. Upon obtaining his law license, Brice enjoyed living "on the edge" and engaged in tactics that were at least questionable. One of his clients was an older gentleman, Sam, with significant assets and significant legal issues involving a messy divorce stemming from his involvement with a local dog groomer, Susie. Brice told Sam that he felt certain that he could arrange matters so that Sam could live happily in the Caribbean with Susie but that, in addition to paying a hefty legal fee, Sam would need to name Brice as a significant beneficiary in his will and give Brice power of attorney over his assets. Sam agreed to do so and gave Brice power of attorney, and changed his will to reflect that upon his death, Brice would receive half his estate. The other half went to Susie. Sam also paid the hefty fee Brice demanded. At that point Brice agreed to proceed with negotiations in the divorce. Shortly after the divorce, Sam had an unexpected heart attack and died immediately. Susie, the executor of the will, told Brice that she was reporting him to the state bar association and that he was not entitled to any sums from the estate. Brice told Susie that he knew that Susie had failed to pay income tax for all her dog grooming and that he was reporting her unless she kept her mouth shut and consented to the terms of the contract. Brice also said that in return for keeping his mouth shut, he wanted additional sums purportedly for his work on Sam's divorce. Assuming that Sam had paid all amounts validly due from the divorce proceeding, which of the following is true regarding Brice's attempt to obtain additional fees?

A) Brice is guilty of duress.
B) Brice is guilty of undue influence.
C) Brice is guilty of duress and undue influence.
D) Brice is guilty of intentional wrongful disclosure.
E) Brice is not guilty of anything so long as he uses no physical force to obtain Susie's agreement.

Question 50

When duress is at issue, the ____________ needed for legal consent has been removed by the specifics of the threat.

A) Free will
B) Knowledge
C) Specifics
D) Consideration
E) Realization

Question 51

Bruce runs back the odometer on his car to make it appear as if it had fewer miles. Wally buys the car. When he checks back through past sale reports through his state's title office, Wally discovers that the car had fewer miles when Bruce sold it to him than it had when a previous owner sold it to Bruce. In legal terms, in selling the car knowing that he had tempered with the odometer, Bruce is said to have had _____________.

A) Rogue
B) Corpulence
C) Scienter
D) Wrongness
E) Inattentiveness

Question 52

Reference - Scheming Friends. Willy very much wants to rent a basement apartment in Weaver's home. Willy threatens to tell all Weaver's friends that he and Weaver had been arrested for illegally smoking marijuana unless Weaver rents the apartment to him for $100 per month. Weaver reluctantly agrees to rent the apartment to Willy for that amount. Willy also wants to buy Weaver's car. Weaver runs back the odometer on the car before Willy test drives it. Willy is impressed by the low mileage and agrees to buy the car. Finally, Weaver offers to sell Willy a ring for Willy's fiancée. Weaver tells Willy that the ring is a diamond and believes that to be true. After the deal is made, however, a jeweler friend of Weaver's informs him that the ring is a fake. When Willy shows up with the money, Weaver says nothing. He just hands Willy the ring and takes the money. Later, Willy finds out that the odometer was run backwards from another friend to whom Weaver confided. Willy also finds out from his girlfriend that the ring is a fake. Which of the following would be the most likely result if Weaver attempts to rescind the agreement to rent the apartment?

A) He will be able to rescind the agreement based upon Willy's threat of extortion.
B) He will be able to rescind the agreement based upon the threat to Willy's economic interests.
C) He will be able to rescind the contract because of a misrepresentation.
D) He will not be able to rescind the contract because he agreed to it.
E) He will not be able to rescind the agreement unless he can show that he was not actually convicted of the crime alleged.

Question 53

Maurice contracted with Suzanne to feed and walk her Corgi mix dog, Baby, for $100 while Suzanne was on vacation for one week. One day before Suzanne was to leave, Maurice came over and said that Baby would be a significant amount of trouble and that he would have to receive $150 in order to walk and feed Baby. Suzanne reluctantly agreed. When she returned from vacation, she handed Maurice $100 and refused to pay more. Maurice threatens to take her to small claims court. What would be the likely result?

A) Maurice will lose based on economic duress.
B) Maurice will lose based on undue influence.
C) Maurice will lose based on fraud.
D) Suzanne will lose because she breached the amended contract with Maurice.
E) Suzanne will lose because she breached the amended contract with Maurice unless she can establish that the prevailing rate for walking and feeding a dog for one week is no more than $100.

Question 54

Reference - Shady lawyer. Brice had a number of ethical issues come up in law school involving alleged cheating but managed to graduate because nothing was ever proven. Upon obtaining his law license, Brice enjoyed living "on the edge" and engaged in tactics that were at least questionable. One of his clients was an older gentleman, Sam, with significant assets and significant legal issues involving a messy divorce stemming from his involvement with a local dog groomer, Susie. Brice told Sam that he felt certain that he could arrange matters so that Sam could live happily in the Caribbean with Susie but that, in addition to paying a hefty legal fee, Sam would need to name Brice as a significant beneficiary in his will and give Brice power of attorney over his assets. Sam agreed to do so and gave Brice power of attorney, and changed his will to reflect that upon his death, Brice would receive half his estate. The other half went to Susie. Sam also paid the hefty fee Brice demanded. At that point Brice agreed to proceed with negotiations in the divorce. Shortly after the divorce, Sam had an unexpected heart attack and died immediately. Susie, the executor of the will, told Brice that she was reporting him to the state bar association and that he was not entitled to any sums from the estate. Brice told Susie that he knew that Susie had failed to pay income tax for all her dog grooming and that he was reporting her unless she kept her mouth shut and consented to the terms of the contract. Brice also said that in return for keeping his mouth shut, he wanted additional sums purportedly for his work on Sam's divorce. Which of the following is true regarding Brice's threat to report Susie for tax evasion?

A) Brice is guilty of duress.
B) Brice is guilty of undue influence.
C) Brice is guilty of duress and undue influence.
D) Brice is guilty of intentional wrongful disclosure.
E) Brice is not guilty of anything so long as Susie truly cheated on her taxes.

Question 55

Reference - Pet Pig Farm. Marcy wanted to buy Lucy's land and use it to breed small pigs to be kept as pets. Marcy told Lucy that having water on the property was very important. Lucy assured her that a spring ran through one corner of the property. Therefore, Marcy agreed to buy the farm. Although she did not ask Lucy anything about it, Marcy, who loved pigs, assumed that the neighbors would be pleased with the pigs being in the area. In a separate contract, Lucy also agreed to sell Marcy a used truck for $5,000. After the contract for the land sale was entered into, it was discovered that actually the spring did not run through the corner of Lucy's property. The area in which the spring ran actually belonged to a neighbor. Additionally, when Lucy brought Marcy the used truck, Marcy said, "That's not the truck!" It was discovered that Lucy, who had two trucks, thought that Marcy had bought the older truck when Marcy thought she had purchased the newer truck. Marcy was also surprised when she received a petition signed by all surrounding landowners objecting to the presence of the pigs and threatening to sue Marcy for nuisance. Assuming that Lucy fraudulently made a misrepresentation regarding the spring running through the corner of the farm knowing the statement was not correct, considering only the lack of a spring issue, which of the following is true if Marcy does not want to go through with the sale of the farm?

A) Marcy may rescind the contract, and she will recover $10,000 in damages which is an amount set by federal law.
B) Marcy may rescind the contract, but she may not recover damages.
C) Marcy may sue for damages regardless of whether she can establish injury, but she may not rescind the contract.
D) Marcy may rescind the contract, and she may also sue for damages if she can establish injury.
E) Marcy may rescind the contract and she may also recover damages, but only nominal damages.

Question 56

Reference - Scheming Friends. Willy very much wants to rent a basement apartment in Weaver's home. Willy threatens to tell all Weaver's friends that he and Weaver had been arrested for illegally smoking marijuana unless Weaver rents the apartment to him for $100 per month. Weaver reluctantly agrees to rent the apartment to Willy for that amount. Willy also wants to buy Weaver's car. Weaver runs back the odometer on the car before Willy test drives it. Willy is impressed by the low mileage and agrees to buy the car. Finally, Weaver offers to sell Willy a ring for Willy's fiancée. Weaver tells Willy that the ring is a diamond and believes that to be true. After the deal is made, however, a jeweler friend of Weaver's informs him that the ring is a fake. When Willy shows up with the money, Weaver says nothing. He just hands Willy the ring and takes the money. Later, Willy finds out that the odometer was run backwards from another friend to whom Weaver confided. Willy also finds out from his girlfriend that the ring is a fake. Which of the following is true regarding Willy's rights in regards to the ring purchase?

A) He will not be able to rescind the contract because Weaver did not make an express false statement regarding the ring.
B) He will not be able to rescind the contract because Weaver did not make an express false statement regarding the ring and also because Weaver did not know the ring was a fake when the initial agreement was made.
C) He will not be able to rescind the contract unless he can prove that Weaver was at least negligent in not realizing the ring was a fake when the initial agreement was made.
D) He will be able to rescind the agreement because Weaver was guilty of duress.
E) He will be able to rescind the agreement because Weaver was guilty of fraudulent misrepresentation.

Question 57

A relationship in which one party has an unusual degree of ____________ in the other can trigger concern about undue influence in gaining the assent of the more dependent party.

A) Interest
B) Investment
C) Trust
D) Involvement
E) Both investment and involvement

Question 58

Reference - Shady lawyer. Brice had a number of ethical issues come up in law school involving alleged cheating but managed to graduate because nothing was ever proven. Upon obtaining his law license, Brice enjoyed living "on the edge" and engaged in tactics that were at least questionable. One of his clients was an older gentleman, Sam, with significant assets and significant legal issues involving a messy divorce stemming from his involvement with a local dog groomer, Susie. Brice told Sam that he felt certain that he could arrange matters so that Sam could live happily in the Caribbean with Susie but that, in addition to paying a hefty legal fee, Sam would need to name Brice as a significant beneficiary in his will and give Brice power of attorney over his assets. Sam agreed to do so and gave Brice power of attorney, and changed his will to reflect that upon his death, Brice would receive half his estate. The other half went to Susie. Sam also paid the hefty fee Brice demanded. At that point Brice agreed to proceed with negotiations in the divorce. Shortly after the divorce, Sam had an unexpected heart attack and died immediately. Susie, the executor of the will, told Brice that she was reporting him to the state bar association and that he was not entitled to any sums from the estate. Brice told Susie that he knew that Susie had failed to pay income tax for all her dog grooming and that he was reporting her unless she kept her mouth shut and consented to the terms of the contract. Brice also said that in return for keeping his mouth shut, he wanted additional sums purportedly for his work on Sam's divorce. Which of the following is true regarding Brice's dealing with Sam?

A) Brice is guilty of duress.
B) Brice is guilty of undue influence.
C) Brice is guilty of both duress and undue influence.
D) Brice is guilty of fraudulent misrepresentation and duress.
E) Brice is not guilty of anything unless it can be proven that Sam was not in good mind during his transactions with Brice; and, in that case, Brice is guilty of duress.

Question 59

Maurice offered to sell his used computer to Mike for $300, and Mike accepted. Both Maurice and Mike believed that the computer was one year old. When the receipt was found, however, it was discovered that the computer was actually 18 months old. Mike wants out of the agreement based on mutual mistake. Which of the following is Maurice's best position in an attempt to enforce the contract?

A) That the mistake did not have a material effect on the agreement.
B) That the mistake should be allocated equally between the parties.
C) That a mutual mistake was involved.
D) That a unilateral mistake was involved.
E) None of these because, as a matter of law, Mike can get out of the contract with this type of mistake.

Question 60

Which of the following occurs when a party threatens to file a nonfrivolous civil lawsuit unless consent is given to the terms of a contract by another party?

A) Duress
B) Undue influence
C) Durable fraud
D) Criminal influence
E) None of these

Question 61

What must a party prove in order to obtain money damages based on a fraudulent misrepresentation?

Question 62

Set forth the three reasons referenced in the text that would permit a court to invalidate a contract on grounds of unilateral mistake.

Question 63

Bob offered to sell Teresa his used motorcycle. She took a look at it and asked Bob how it ran to which Bob replied that it was in good shape. Teresa thought the motorcycle was two years old when she purchased it. A few days later, she discovered that it was actually five years old. She asks Bob to take back the motorcycle. He tells her no way, that he thought she knew the age of that model, and that she should have asked him if she had any uncertainty. If Teresa sues, who is likely to win and why?

Question 64

Constance was buying a used personal watercraft from Ralph. He told her that the engine on the watercraft was in good shape. Constance agreed to pay Ralph $4,000 for the watercraft. She was going to be out of town on vacation, so Ralph and Constance agreed that when she returned in a week, she would bring over the money and pick up the watercraft. During that week, Ralph was notified by the manufacturer that the watercraft was being recalled because it had a faulty engine that needed repair. Ralph said nothing about the condition of the engine or the recall when Constance came to pick up the watercraft. They chatted about other matters; she gave him the $4,000, and took the watercraft. Later, Constance started having problems with the watercraft and found out the purchasers had been notified of the issue with the engine. She asked for a refund accusing Ralph of fraud. Ralph refused on the basis that he did not make any misrepresentation. Who is correct and why? For purposes of this question, assume that sales talk or puffery is not at issue.

Question 65

What is the result of a contract being rescinded?