Deck 17: Legal Assent

Question 1

Nondisclosure involves the active hiding of the truth about a material fact.

Answer 1

False

Question 2

Without legal assent a contract may be ____.

A) Unmarketable
B) Unchargeable
C) Void
D) Illegal
E) Voidable

Answer 2

Voidable

Question 3

Which of the following is true regarding European courts?

A) European courts are in total disagreement with the reluctance of American courts to interfere with a contract because the value of the item in question has changed since the agreement.
B) European courts refuse to assume that parties accept the risk when they make a contract that the value might change later.
C) European courts permit rescission of the contract for a mistake of value when the mistake involves more than 10 percent of the value at the time of the contract.
D) European courts permit rescission of the contract for a mistake of value when the mistake involves more than 40 percent of the value at the time of the contract.
E) European courts permit rescission of the contract for a mistake of value when the mistake involves more than 50 percent of the value at the time of the contract.

Answer 3

European courts permit rescission of the contract for a mistake of value when the mistake involves more than 50 percent of the value at the time of the 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) Double

Question 5

Which of the following was the result in Orville Arnold and Maxine Arnold v. United Companies and Michael T. Searls, involving the issue of whether an arbitration agreement entered into as part of a consumer loan transaction containing a substantial waiver of the consumer's rights, including access to the courts, while preserving for all practical purposes the lender's right to a judicial forum, is void as a matter of law?

A) The court upheld the agreement based upon principles of freedom of contract.
B) The court upheld the agreement as far as the plaintiffs' duty to arbitrate but stated that the same obligation would be imposed on the defendants.
C) The court upheld the agreement so long as the parties agreed that plaintiffs would not be required to pay the defendants' attorney fees even if the defendants prevailed at arbitration.
D) The court found that the waiver of the plaintiffs' rights to a judicial forum considered along with the defendants' retention of such rights and other unfair aspects of the agreement required a finding that the arbitration agreement was void.
E) The court found that the agreement was void because a consumer loan transaction was involved.

Question 6

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

Question 7

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

Question 8

When a contract is voidable, it may be ______.

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

Question 9

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

Question 10

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 11

Susie and Sam have significant funds invested with a stock broker named Will and also with other brokers. Susie and Sam decided to divorce. Susie was really interested in investments, so the divorce decree provided that Susie would retain "all investment accounts," and Sam would receive a "cash settlement" from funds the parties had in the bank. Six months after the divorce was final, it was discovered that Will had absconded to parts unknown with all the money invested with him. Susie could have withdrawn the funds at the time of the divorce, before Will left town, but she had no reason for concern and left the funds there for investment purposes. After discovering Will's wrongdoing, Susie asked Sam to renegotiate the divorce agreement, but he refused. Which of the following is the most likely result of their dispute if the court follows the decision of the court in Simkin v. Blank, discussed in the text?

A) The original divorce agreement will be rescinded, and the parties will be required to renegotiate the agreement because Susie and Sam were mutually mistaken in regard to investing with Will.
B) The original divorce agreement will be rescinded, and the parties will be required to renegotiate the agreement because the investment accounts with Will were a significant basis of the divorce agreement, and Will's fraud caused termination of that contract.
C) The original divorce agreement will be rescinded, and the parties will be required to renegotiate the agreement because, regardless of whether or not Will was guilty of fraud, the end result is that Susie did not receive the benefit of her bargain.
D) The original divorce agreement will be enforced only in part because based on their mutual mistake in regard to investing with Will, the parties will be required to renegotiate the part of the contract involving the investments with Will.
E) The original divorce agreement will be enforced.

Question 12

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

Question 13

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

Question 14

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

Question 15

Which of the following was the result on appeal in the Case Opener involving the claim that Michael Jordan owed $5 million based on his agreement to pay the plaintiff's mother on the premise that he was the father although it was later determined that the child was not his?

A) That the agreement to pay $5 million could be rescinded based on a mutual mistake of fact.
B) That the agreement to pay $5 million could be rescinded based on the mother's fraud.
C) That the agreement to pay $5 million could be rescinded based on either a mutual mistake of fact or based on the mother's fraud.
D) That the agreement to pay $5 million could not be rescinded because Jordan was aware of a question about his parentage.
E) That the agreement to pay $5 million could not be rescinded because Jordan waited too long in which to complain about the contract.

Question 16

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 and interfere with that person's ability to make his or her own decision.

Question 17

When a mistake of fact occurs, ______ is absent.

A) Legal coherence
B) Bilateral understanding
C) Joint reasoning
D) Contractual concurrence
E) Legal assent

Question 18

Unconscionability is a concept strictly limited today to the sale of goods.

Question 19

Which of the following involves a promise to buy or sell that the courts will require the parties to obey?

A) Bilateral assent
B) A special agreement
C) Legal assent
D) Contractual affirmance
E) Legal affirmance

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

Mary and Jason discuss the fact that a new teacher is being hired for business law at their school. Jason mentions that he does not yet have a book, and Mary agreed to sell Jason a used business law book for $30 for the upcoming semester. When the new semester begins, the new business law teacher announces that a new custom business law text will be used that is only available in the campus bookstore. Jason wants a refund. Which of the following is Mary's best defense?

A) That Jason knew of the change of change of teacher and bore the risk of mistake.
B) That only a unilateral mistake was involved on Jason's behalf because Mary was aware of the change and that, therefore, Jason is not entitled to a discharge.
C) That a mutual mistake was involved and that Jason is, therefore, not entitled to a refund.
D) That transactions involving goods are not subject to the defense of mistake.
E) That she did not commit fraud and that, therefore, Jason is not entitled to rescission.

Question 22

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 he 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 23

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 24

In China which of the following is true regarding the treatment of fraudulent misrepresentations by outsiders?

A) Outsiders have been fined but by law are allowed to continue operation in the country because of the country's concern with joint ventures.
B) Outsiders have been prohibited from doing further business with Chinese firms but not fined because of the country's concern with its reputation with foreign investors.
C) Outsiders are jailed for at least 20 years by law.
D) Outsiders are jailed for at least 10 years, fined heavily, and have all property confiscated.
E) Outsiders have been fined heavily and refused permission to enter into more agreements with Chinese firms.

Question 25

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) Browbeating
E) Coercion

Question 26

In determining whether a mistake of fact occurred, what of the following is true?

A) Courts look to determine whether a mistake of fact occurred at the time the contract was concluded.
B) Courts look to determine whether a mistake of fact occurred during contract negotiations.
C) Courts look to determine whether a mistake of fact occurred when the initial offer was made.
D) Courts look to determine whether a mistake of fact occurred when an advertisement was made.
E) Courts look to determine whether a mistake of fact occurred after the contract was concluded.

Question 27

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

A) Concealment
B) Nondisclosure
C) Negligence
D) Secretion
E) Entombment

Question 28

A[n] ______ 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) Acknowledged misrepresentation
E) True misrepresentation

Question 29

In cases where both parties to a contract are mistaken about either a current or a past material fact, either can choose to ______ the contract.

A) Uphold
B) Confirm
C) Rescind
D) Refute
E) Disclaim

Question 30

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 31

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 32

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 33

Which of the following is true regarding the elements that must be satisfied in order for a mutual mistake to interfere with legal consent?

A) The required elements are: (1) a basic assumption about the subject matter of the contract, and (2) an admission by one of the parties that a misrepresentation occurred.
B) The required elements are: (1) a basic assumption about the subject matter of the contract, and (2) a material effect on the agreement.
C) The required elements are: (1) a basic assumption about the subject matter of the contract, and (2) an adverse effect on a party who did not agree to bear the risk of mistake at the time of the agreement.
D) The required elements are: (1) a basic assumption about the subject matter of the contract, (2) an adverse effect on a party who did not agree to bear the risk of mistake at the time of the agreement, and (3) a material effect on the agreement.
E) The required elements are: (1) a basic assumption about the subject matter of the contract, (2) an adverse effect on a party who did not agree to bear the risk of mistake at the time of the agreement, (3) a material effect on the agreement, and (4) fraud.

Question 34

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 35

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 36

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

A) Concealment
B) Nondisclosure
C) Negligence
D) Masking
E) Veiling

Question 37

Which of the following was the result on appeal in the case of Evan Rothberg v. Walt Disney Pictures, the case in the text in which the defendant allegedly used undue influence to obtain a release of employee benefits from a person in the hospital dying of AIDS?

A) The court ruled that the defendant was rightfully entitled to a summary judgment ruling in its favor because there was no direct evidence of legal undue susceptibility on the part of the weaker party.
B) The court ruled that the defendant was rightfully entitled to a summary judgment ruling in its favor because there was no direct evidence of application of excessive pressure by the stronger party.
C) The court ruled that the defendant was subject to summary judgment because the employer/employee relationship was present when the benefits at issue were granted, and no action for undue influence could later be brought against the employer.
D) The court ruled that the plaintiff was entitled to recover as a matter of law because there was sufficient proof of undue influence.
E) The court ruled that a jury question was presented as to whether undue influence was present.

Question 38

Which of the following is true on appeal regarding the case of Mary W. Scott v. Mid-Carolina Homes Inc., discussed in the "Case Nugget" in which the plaintiff sued to recover damages after a salesperson allegedly mistakenly agreed to sell a mobile home to her for a price that was too low, later told her the mobile home could not be sold because of a bent frame, and then proceeded to sell it for a higher price to other buyers?

A) The court refused to find that the defendant had the right to rescind the contract based on the alleged unilateral mistake.
B) The court refused to find that the defendant had the right to rescind the contract because a mutual mistake was involved.
C) The court found that the defendant had the right to rescind the contract because, even though the salesperson acted questionably, the plaintiff had not made a down payment.
D) The court ruled that the defendant had the right to rescind the contract because a unilateral mistake was involved.
E) The court ruled that the defendant had the right to rescind the contract because a mutual mistake was involved.

Question 39

Why is it important to distinguish between unilateral and mutual mistakes?

A) Because it determines which contracts are considered fraudulent.
B) Because it determines which contracts are voidable.
C) Because it determines which contracts lack consideration.
D) Because it determines how much may be awarded in damages under a contract.
E) Because it determines whether punitive damages may be awarded.

Question 40

Which of the following is true regarding the effect of an innocent misrepresentation on a contract?

A) It permits the party that was misled by the false statement to rescind the contract, but damages are not available.
B) It permits the party who made the false statement to rescind the contract.
C) It permits either the party that was misled by the false statement or the party who made the false statement to rescind the contract.
D) The contract is automatically void and of no effect, and the party who was misled may recover damages.
E) It permits either the party that was misled by the false statement or the party who made the false statement to rescind the contract, and it also makes the contract void and of no effect.

Question 41

"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. (The information regarding the arrests is true.) Weaver reluctantly agrees to rent the apartment to Willy for $100 per month. 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. 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 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 the odometer 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 on the part of Weaver.

Question 42

"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. (The information regarding the arrests is true.) Weaver reluctantly agrees to rent the apartment to Willy for $100 per month. 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. 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 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 the proper legal term, if any, for Weaver's action in regard to running back the odometer?

A) Concealment.
B) Nondisclosure.
C) Active duress.
D) Conscious disregard.
E) There is no legal term because although he acted illegally, Willy had no duty to disclose his action and incriminate himself.

Question 43

"Cheap Motorcycle." Tony, a hateful, disgruntled, business law teacher notices that a student, Peter, who is past the age of majority, has a nice motorcycle that is for sale. Peter has struggled through school, is in his last semester, and needs to pass business law in order to graduate. Tony tells Peter that he would like to see Peter pass and, in the next sentence, says that he wants to buy the motorcycle for $100, a price far below the value of the motorcycle. Peter asks if Tony is serious about the price, and Tony replies, "I have the power here! Take it or leave it!" Tony proceeds to draw up a contract for the sale of the motorcycle for $100 which Peter signs. Peter does some research and finds that Tony has had several arrests for driving under the influence in a nearby town. As an act of revenge, Peter tells Tony that unless Tony sells Peter his new Mustang convertible for $50, he is publishing the facts about the arrests in the school newspaper. Tony reluctantly agreed to the deal.

-Which of the following is true if Peter seeks to rescind the contract for the sale of the motorcycle?

A) Peter may rescind the contract on grounds of fraud or on grounds of duress.
B) Peter may rescind the contract on grounds of duress or on grounds of unconscionability.
C) Peter may rescind the contract on grounds of undue influence or on grounds of duress.
D) Peter may rescind the contract on the ground that although he is past the age of majority, he is still a student.
E) Peter may not rescind the contract.

Question 44

As discussed in the text, which of the following is true regarding Japanese law and consumers?

A) A special Consumer Contracts Law was developed to place consumers and businesses on a more equal footing in transactions.
B) The Civil Code has more lax requirements regarding fraud than the country's Consumer Contracts law.
C) The goal in regard to consumers is to form the law so that in litigation businesses are at a distinct disadvantage in regard to consumers.
D) In order to encourage economic advancement and international investment, the goal is to form the law so that in litigation consumers are at a distinct disadvantage in comparison to businesses.
E) Japanese law does not recognize rights of consumers as the buyer must beware.

Question 45

Selma agreed to buy a used car from Hillary for $2,000. Hillary drew up the contract providing that the exchange would occur the next week. Unfortunately, Hillary was not very good with the keyboard and typed in $1,200 as the price of the car. Selma noticed that the contract said $1,200, not $2,000, and was very pleased. She signed it without saying anything. When it was time to make the exchange, Selma gave Hillary $1,200. In response to Hillary's inquiry regarding an additional $800, Selma pulled out the contract and showed her that it said $1,200. Hillary immediately responded that she had made a typographical error. Selma said that there was no mistake on her part because she knew exactly what she was doing and that she thought that Hillary had decided to give her a deal on the car. Which of the following is Hillary's best argument for a rescission of the contract?

A) That a unilateral mistake was involved and that courts typically allow relief in situations involving unilateral mistakes as opposed to mutual mistakes.
B) That the mistake resulted from a sale of goods, as opposed to the provision of services, and that courts are more likely to grant relief for a mistake when actual physical work is not involved.
C) That because a bilateral contract, as well as a unilateral mistake was involved, most courts would grant relief.
D) That the mistake resulted from an accidental clerical error and that it would be unconscionable to enforce the contract.
E) That duress was involved because of Selma's wrongful behavior.

Question 46

"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. (The information regarding the arrests is true.) Weaver reluctantly agrees to rent the apartment to Willy for $100 per month. 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. 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 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) Undue influence
E) Consumer misbehavior

Question 47

"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 although she did not mention to Lucy her plan to breed small pigs. Lucy assured her that a spring ran through one corner of the property. Therefore, Marcy agreed to buy the farm. Marcy, who loved pigs, assumed that the neighbors would be pleased with the pigs being in the area. Lucy also agreed to sell Marcy a used truck for $5,000. After the contract for the land sale was entered into, Marcy had a land survey done, and 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 although 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. It will cost Marcy more than she had agreed to pay Lucy in order for Marcy to obtain a similar farm which actually has a spring on it.



-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 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 48

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) Coercion

Question 49

"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. (The information regarding the arrests is true.) Weaver reluctantly agrees to rent the apartment to Willy for $100 per month. 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. 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 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 undue influence.
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 50

The reasoning in innocent misrepresentation cases resembles the reasoning in a[n] ______ case.

A) Duress
B) Unilateral mistake
C) Mutual mistake
D) Fraudulent misrepresentation
E) Negligent misrepresentation

Question 51

Which of the following was the result on appeal in the case in the text, Gary W. Cruse and Venita R. Cruse v. Coldwell Banker/Graben Real Estate Inc., in which the court considered whether the plaintiffs could prevail based on alleged misrepresentations by a salesman that a house was new when it was actually not new leading the plaintiffs to forego a home inspection?

A) That the realtor had merely engaged in sales talk when marketing the home as new which could not be relied upon by the purchasers.
B) That the plaintiffs were barred from proceeding because they knew that the home builder had occupied the house.
C) That the plaintiffs were barred from proceeding because they signed an "as-is" disclaimer.
D) That as a matter of law the plaintiffs were allowed to recover.
E) That a jury question was presented on whether the plaintiffs could have justifiably relied on the defendants' misrepresentation.

Question 52

"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 although she did not mention to Lucy her plan to breed small pigs. Lucy assured her that a spring ran through one corner of the property. Therefore, Marcy agreed to buy the farm. Marcy, who loved pigs, assumed that the neighbors would be pleased with the pigs being in the area. Lucy also agreed to sell Marcy a used truck for $5,000. After the contract for the land sale was entered into, Marcy had a land survey done, and 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 although 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. It will cost Marcy more than she had agreed to pay Lucy in order for Marcy to obtain a similar farm which actually has a spring on it.



-Assuming that Lucy innocently made a misrepresentation regarding the spring running through the corner of the farm with no reason to believe that was incorrect, which of the following is true, considering only the lack of a spring issue, if Marcy does not want to go through with the sale?

A) Marcy may rescind the contract and recover compensatory damages.
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) Marcy may rescind the contract, or she may keep the contract and sue for damages.
E) Marcy has no remedy based on an innocent misrepresentation based on the theory that she should have checked more closely before entering into the contract.

Question 53

"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 although she did not mention to Lucy her plan to breed small pigs. Lucy assured her that a spring ran through one corner of the property. Therefore, Marcy agreed to buy the farm. Marcy, who loved pigs, assumed that the neighbors would be pleased with the pigs being in the area. Lucy also agreed to sell Marcy a used truck for $5,000. After the contract for the land sale was entered into, Marcy had a land survey done, and 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 although 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. It will cost Marcy more than she had agreed to pay Lucy in order for Marcy to obtain a similar farm which actually has a spring on it.



-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 Lucy made an implied misrepresentation.
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 54

"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 although she did not mention to Lucy her plan to breed small pigs. Lucy assured her that a spring ran through one corner of the property. Therefore, Marcy agreed to buy the farm. Marcy, who loved pigs, assumed that the neighbors would be pleased with the pigs being in the area. Lucy also agreed to sell Marcy a used truck for $5,000. After the contract for the land sale was entered into, Marcy had a land survey done, and 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 although 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. It will cost Marcy more than she had agreed to pay Lucy in order for Marcy to obtain a similar farm which actually has a spring on it.



-Assuming that Lucy fraudulently made a misrepresentation regarding the spring running through the corner of the farm knowing the statement was not correct, which of the following is true, considering only the lack of a spring issue, if Marcy does not want to go through with the sale?

A) Marcy may rescind the contract and recover compensatory damages.
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) Marcy may rescind the contract, or she may keep the contract and sue for damages.
E) Marcy must allow Lucy an opportunity to cure, or fix, the problem; and in the event that is not done, she may not rescind the contract although she can sue for damages.

Question 55

Which of the following occurs in Australia whenever an illegitimate threat is made to hold on to goods unless a payment is made or an agreement is entered into?

A) Unconscionable duress
B) Duress of goods
C) Duress of merchandise
D) Duress of trade
E) Unreasonable duress

Question 56

The resulting contract from an agreement reached because one of the parties has so much more bargaining power than the other that he or she dictates the terms of the agreement is called which of the following?

A) An outrageous contract
B) An out-of-bounds contract
C) An adhesion contract
D) An untrue contract
E) An unaffirming contract

Question 57

"Cheap Motorcycle." Tony, a hateful, disgruntled, business law teacher notices that a student, Peter, who is past the age of majority, has a nice motorcycle that is for sale. Peter has struggled through school, is in his last semester, and needs to pass business law in order to graduate. Tony tells Peter that he would like to see Peter pass and, in the next sentence, says that he wants to buy the motorcycle for $100, a price far below the value of the motorcycle. Peter asks if Tony is serious about the price, and Tony replies, "I have the power here! Take it or leave it!" Tony proceeds to draw up a contract for the sale of the motorcycle for $100 which Peter signs. Peter does some research and finds that Tony has had several arrests for driving under the influence in a nearby town. As an act of revenge, Peter tells Tony that unless Tony sells Peter his new Mustang convertible for $50, he is publishing the facts about the arrests in the school newspaper. Tony reluctantly agreed to the deal.

-Which of the following is an appropriate term for the contract drawn up by Tony?

A) Adhesion
B) Valid
C) Misapplied
D) Misdrafted
E) Misdirected

Question 58

"Cheap Motorcycle." Tony, a hateful, disgruntled, business law teacher notices that a student, Peter, who is past the age of majority, has a nice motorcycle that is for sale. Peter has struggled through school, is in his last semester, and needs to pass business law in order to graduate. Tony tells Peter that he would like to see Peter pass and, in the next sentence, says that he wants to buy the motorcycle for $100, a price far below the value of the motorcycle. Peter asks if Tony is serious about the price, and Tony replies, "I have the power here! Take it or leave it!" Tony proceeds to draw up a contract for the sale of the motorcycle for $100 which Peter signs. Peter does some research and finds that Tony has had several arrests for driving under the influence in a nearby town. As an act of revenge, Peter tells Tony that unless Tony sells Peter his new Mustang convertible for $50, he is publishing the facts about the arrests in the school newspaper. Tony reluctantly agreed to the deal.

-Which of the following is true if Tony seeks to rescind the contract for the sale of the Mustang?

A) Tony may rescind the contract on grounds of fraud.
B) Tony may rescind the contract on grounds of misappropriation of name or likeness.
C) Tony may rescind the contract on grounds of duress.
D) Tony may rescind the contract on grounds of defamation.
E) Tony may not rescind the contract because truth is involved.

Question 59

Which of the following occurs when one of the parties to a contract has so much more bargaining power than the other that he or she dictates the terms of the agreement?

A) Unfairness
B) Cohesiveness
C) Disconnection
D) Unconscionability
E) Unprovable

Question 60

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 61

Sally bought a used computer from Polly for $300. Polly told her that the price seemed fair but that she really had no idea what it was worth and just wanted to get rid of it. Sally, who knew little about computers, thought she had a great deal. After Sally returned home, she discovered from a computer expert friend of hers that the computer was not worth as much as she believed. Sally wanted to return the computer claiming that they were both mistaken about value, but Polly said, "No way!" Who should win in the dispute between Sally and Polly and why?

Question 62

"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. (The information regarding the arrests is true.) Weaver reluctantly agrees to rent the apartment to Willy for $100 per month. 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. 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 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 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 63

Set forth the exceptions that would permit a court to invalidate a contract on grounds of unilateral mistake.

Question 64

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

Question 65

Why does there need to be a concept of legal assent?

Question 66

Set forth the factors referenced in the text that enter into a finding of whether undue influence exists.
(1) Was the dominant party rushing the other party to consent? (2) Did the dominant party gain undue enrichment from the agreement? (3) Was the nondominant party isolated from other advisers at the time of the agreement? (4) Is the contract unreasonable in the sense that the results of the exchange overwhelmingly benefit the dominant party?

Question 67

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 that Ralph and other initial 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.