Deck 14: Mistakes, Fraud, and Voluntary Consent

Question 1

Altering contract terms to reflect the true intentions of the parties is a rescission.

Answer 1

False

Question 2

A contract is always enforceable even if one party is aware that the other party made a mistake of fact.

Answer 2

False

Question 3

Even if an obvious, significant clerical error exists in a written contract, the contract is enforceable.

Answer 3

False

Question 4

A mistake of fact cannot be unilateral.

Question 5

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 6

A mistake of fact cannot be bilateral.

Question 7

To reform a contract is to cancel it.

Question 8

A mistake in value will usually enable a party to a contract to avoid it.

Question 9

A mistake in judgment as to value is a ground to avoid a contract.

Question 10

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

Question 11

If a price quotation contains a mistake in the adding of a number of fig?ures, the contract may not be enforceable.

Question 12

A general contractor who suspects that a subcontractor's bid is a mis?take can still enforce the bid.

Question 13

If the parties to a contract attach materially different meanings to a con?tract term, the contract cannot be rescinded.

Question 14

An innocent party may seek damages for a fraudulent contract.

Question 15

Reliance on an "expert's" statement of opinion may be the basis for an ac?tion based on fraud.

Question 16

Misrepresentation of a material fact is an element of fraud.

Question 17

Overestimating the value of an object is a mistake for which a court will normally provide relief.

Question 18

A statement of opinion is generally subject to a claim of fraud.

Question 19

An innocent party can rescind a fraudulent contract.

Question 20

An innocent party can enforce a fraudulent contract.

Question 21

Misrepresentation of a material fact can occur through conduct alone.

Question 22

An expert's false statement to a naive buyer about a technical detail will not usually entitle the buyer to rescind a contract.

Question 23

Reliance on a non-expert's statement of opinion will not normally enti?tle a party to relief.

Question 24

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

Question 25

Misrepresentation of a material fact can occur through words alone.

Question 26

A contract is termed an adhesion contract when both parties adhere to it.

Question 27

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

Question 28

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

Question 29

Misrepresentation of a material fact cannot occur through conduct alone.

Question 30

Justifiable reliance is an element of fraud.

Question 31

Intent to deceive is an element of fraud.

Question 32

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

Question 33

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

Question 34

Economic need is always sufficient to constitute duress.

Question 35

A contract entered into under undue influence is voidable.

Question 36

An adhesion contract can occur in a one-sided transaction in which one party has substantially superior bargaining power.

Question 37

Misrepresentation of a material fact cannot occur through words alone.

Question 38

An innocent misrepresentation is not a basis for rescinding a contract.

Question 39

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

Question 40

To rescind a contract for fraud, a plaintiff must prove an injury.

Question 41

Fact Pattern 14-B1
Gert contracts to sell two tracts of land to Hank. Both parties believe that the two tracts are adjacent, but in fact they are not. Gert is still willing to sell the land, but under these circumstances the deal would adversely affect Hank.
Refer to Fact Pattern 14-B1. 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 42

Fact Pattern 14-B1
Gert contracts to sell two tracts of land to Hank. Both parties believe that the two tracts are adjacent, but in fact they are not. Gert is still willing to sell the land, but under these circumstances the deal would adversely affect Hank.
Refer to Fact Pattern 14-B1. Because of the parties' belief about the adjacency of the property, their contract is

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

Question 43

Local Investment Company and Midstate Properties, Inc., contract for the sale of a retail mall. A mutual mistake of fact will make it possible for ei?ther party to rescind the contract

A) if the mistake of fact is immaterial.
B) if the mistake of fact is material.
C) under any circumstances.
D) under no circumstances.

Question 44

Fact Pattern 14-A2
Moore Properties, Inc., offers in writing to sell to New Development Corporation a certain half-acre of land for "$112,000." After New Development signs the offer in acceptance and returns it, Moore discovers that the price should have been stated as "$121,000."
Refer to Fact Pattern 14-A2. The effect of Moore's misstatement of the price will most likely fall on

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

Question 45

Joy induces Kelly to enter into a contract for the purchase of a condominium about which Joy knowingly misrepresents a number of material features. When Kelly discovers the truth, Kelly 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 46

Great City and Highway Construction Company (HCC) enter into a construction contract that includes si

A) award damages to Great City for the mistakes.
B) award damages to HCC for the mistakes.
C) enforce the contract without requiring changes.
D) reform the contract to reflect the figures accurately.

Question 47

Fact Pattern 14-A1
Dina, an employee of Eagle Industries, is injured in a work-related accident. Based on the diagnosis of Frank, a doctor, Dina accepts $50,000 from Eagle and waives the right to future claims. Frank's diagnosis later proves to have been wrong.
Refer to Fact Pattern 14-A1. Dina may, according to the deci?sion in Case 14.1, Roberts v. Century Contractors, Inc.,

A) obtain damages from Eagle for nonfraudulent misrepresentation.
B) obtain damages from Frank for fraudulent misrepresentation.
C) recover nothing because Dina waived the right to future claims.
D) set aside the settlement with Eagle due to a mistake of fact.

Question 48

Jill and Karl contract for the sale of Jill's horse for $1,000. Unknown to either party, the horse has died. Karl is

A) entitled to another horse of equivalent value.
B) not required to pay due to the mutual mistake.
C) not required to pay due to the unilateral mistake.
D) required to pay because she assumed the risk the horse might die.

Question 49

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 50

Hillside Homes, Inc., and Ideal Builders, Inc., enter into a construction contract that includes si

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

Question 51

Used Car Lot's salesperson Vic offers to sell Will, who is twenty years of age, a car about which Vic intentionally misrepresents several material facts. In reliance on the misrepresentations, Will buys the car. To prove fraud in this transaction, Will would 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 52

Fact Pattern 14-B2
Nano Corporation offers to sell a robotic device to Opal Assembly, Inc., but mistakenly transposes some of the digits in the price so that $15,400 appears in the offer as $14,500. Opal accepts the written offer.
Refer to Fact Pattern 14-B2. Nano's best defense against enforcement of the contract is that Opal 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 53

Fact Pattern 14-B2
Nano Corporation offers to sell a robotic device to Opal Assembly, Inc., but mistakenly transposes some of the digits in the price so that $15,400 appears in the offer as $14,500. Opal accepts the written offer.
Refer to Fact Pattern 14-B2. Opal's 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 54

Harold believes his old baseball bat has little value, but Murray is con?vinced it is a valu?able collector's item. Harold sells it to Murray for $100 before learning it is worth $1,000. The contract

A) may be rescinded because a mutual mistake was made.
B) may serve as the basis for a court order to Murray to return the bat.
C) may be rescinded because Murray used superior knowledge about the bat to take advantage of Harold.
D) will not be canceled because the mistake relates to the value of the item.

Question 55

Fact Pattern 14-A2
Moore Properties, Inc., offers in writing to sell to New Development Corporation a certain half-acre of land for "$112,000." After New Development signs the offer in acceptance and returns it, Moore discovers that the price should have been stated as "$121,000."
Refer to Fact Pattern 14-A2. Moore's misstatement of the price is

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

Question 56

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 57

Rally offers to sell Sophie, who is seventeen years of age, a car about which Rally intentionally misrepresents several material facts. In reliance on the misrepresentations, Sophie buys the car. To prove fraud in this transaction, Sophie would have to show that

A) Rally intentionally deceived Sophie.
B) Rally made statements that were obviously exaggerated.
C) Sophie does not know anything about cars.
D) Sophie is under eighteen years of age.

Question 58

Fact Pattern 14-A1
Dina, an employee of Eagle Industries, is injured in a work-related accident. Based on the diagnosis of Frank, a doctor, Dina accepts $50,000 from Eagle and waives the right to future claims. Frank's diagnosis later proves to have been wrong.
Refer to Fact Pattern 14-A1. According to the reasoning of the court in Case 14.1, Roberts v. Century Contractors, Inc., Frank's misdiagnosis is, in terms of its impact on Dina's agreement with Eagle,

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

Question 59

Owen, a famous chef, sells to Pat a restaurant that Owen closed years ago. Pat discovers in the restaurant a collection of Owen's recipes, which are considered valuable. In a suit to obtain the recipes, Owen will likely

A) not prevail because he should have known that the recipes were in the restaurant.
B) not prevail because the sale of a restaurant includes everything in it.
C) prevail because there was no mutual assent.
D) prevail because the sale of a restaurant includes nothing in it.

Question 60

Gina induces Hu to enter into a contract for the purchase of a condominium about which Gina knowingly misrepresents a number of material features. When Hu discovers the truth, Hu 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 61

Lacy uses undue influence to induce Mina to sign a contract to invest her National Education Fund student loan money in Overseas Bank. Mina may

A) avoid the contract.
B) do nothing after Mina signs the contract.
C) recover from National for a failure to monitor Mina's money.
D) recover from Overseas for a failure to undo Lacy's influence.

Question 62

Dora, an accountant, uses undue influence to induce her client Emily to invest in Fine Gems, Ltd., a business with little potential. When Emily learns the truth, she can

A) do nothing.
B) enforce the contract but not rescind it.
C) enforce the contract or rescind it.
D) rescind the contract but not enforce it.

Question 63

Nero makes an honest but erroneous statement that misrepresents a ma?te?rial fact in a contractual transaction with Odell. Nero is guilty of

A) a unilateral mistake.
B) duress.
C) fraud.
D) innocent misrepresentation.

Question 64

Bret is convicted of arson for burning down his warehouse to collect the in?surance. On an application for insurance from Cover-All Insurance Company on a new building, in answer to a question about prior convictions, Bret does not disclose his convic?tion. This makes the contract

A) binding because the omission is immaterial to Cover-All's decision to issue coverage.
B) binding due to Cover-All's failure to discover Bret's conviction.
C) voidable by Bret because the omission is immaterial to Cover-All's decision to issue coverage.
D) voidable by Cover-All because the omission is material to its decision to issue coverage.

Question 65

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

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 66

Roc buys a farm from Steve, who claims that it would be a prime site for a housing subdivision. Roc later learns that the law does not permit the land to be used for housing. Roc may

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

Question 67

In selling software to Payroll Services Corporation, Ray tells Payroll's purchas?ing agent that the software is "almost human." This is

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

Question 68

Allen, who is Beth's guardian, convinces her to buy a certain parcel of land from Chris at a greatly inflated price. Allen may be liable for

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

Question 69

Kurt persuades Leo to buy his bicycle by telling Leo that the bike rides "like the wind." Kurt's statement is

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

Question 70

Fact Pattern 14-B3
Pete, the owner of Quality Orchards, contracts to sell fruit to Ripe Produce, Inc. When Pete refuses to per?form, Ripe Produce files a suit to enforce the contract.
Sam uses duress to force Tanya to agree to pay him for protecting her re?tail store against the vandalism and destruction. Tanya may

A) avoid the contract or choose to carry it out.
B) do nothing once she has agreed to pay.
C) recover from her insurer for a failure to direct her "protection."
D) recover from the local police for a failure to protect her "direction."

Question 71

Ben sells a sport utility vehicle to Cody without disclosing that the odome?ter, which reads 40,000 miles, was disconnected 80,000 miles ago. Ben is liable for

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

Question 72

Olin 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 73

Dale files a suit against Eve, 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 Eve's influence.
D) under no circumstances.

Question 74

Fact Pattern 14-B3
Pete, the owner of Quality Orchards, contracts to sell fruit to Ripe Produce, Inc. When Pete refuses to per?form, Ripe Produce files a suit to enforce the contract.
Refer to Fact Pattern 14-B3. To defend successfully on the ground of un?con?scionability, Pete must show that enforcement of the contract would be

A) economically meaningless.
B) legally worthless.
C) manifestly unfair or oppressive.
D) undeniably valuable.

Question 75

Fact Pattern 14-A3
Flo enters into a contract under Gail's threats. Later, Flo refuses to perform, claiming that she acted under duress.
Refer to Fact Pattern 14-A3. Flo sues to rescind the contract. Gail claims that duress is a defense to enforcement of a contract, not a ground for re?scission. The court will probably rule in favor of

A) Flo only.
B) Flo and Gail.
C) Flo or Gail, but not both.
D) Gail only.

Question 76

Fact Pattern 14-B3
Pete, the owner of Quality Orchards, contracts to sell fruit to Ripe Produce, Inc. When Pete refuses to per?form, Ripe Produce files a suit to enforce the contract.
Refer to Fact Pattern 14-B3. If Pete and Ripe Produce 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, Pete might rely on traditional notions of

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

Question 77

Gary threatens physical harm to force Hugh to sell his business, Imported Goods, Inc., to Gary for a below-market price. This is

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

Question 78

Fact Pattern 14-A3
Flo enters into a contract under Gail's threats. Later, Flo refuses to perform, claiming that she acted under duress.
Refer to Fact Pattern 14-A3. Gail sues to enforce the contract. To be guilty of duress, Gail must have threatened

A) a civil suit.
B) a lost opportunity.
C) a social snubbing.
D) a wrongful act.

Question 79

Yvon convinces Zack, who has no athletic ability, that Zack has considerable talent and induces Zack to pay Yvon $10,000 for golf lessons. When Zack realizes the truth, he files a suit against Yvon. Zack is most likely to recover on the basis of

A) duress.
B) misrepresentation.
C) unconscionability.
D) none of the choices.

Question 80

Mary induces Nick to sign a contract by placing a gun to Nick's head. The contract is void

A) only if the contract has an illegal purpose.
B) only if the terms are unfair to Nick.
C) under any circumstances.
D) under no circumstances.