Deck 13: Capacity and Consent

Question 1

Both fraudulent AND innocent,misrepresentation permit the injured party to rescind a contract.

Answer 1

True

Question 2

All states allow the remedy of rescinding a contract for the sale of goods while still allowing the remedy of suing for damages.

Answer 2

True

Question 3

When courts consider economic duress,they consider all the following factors EXCEPT:

A)relative bargaining power.
B)financial distress.
C)legitimate business actions.
D)relative size of the contract.

Answer 3

D

Question 4

Brad,a minor,buys a video game system from GamePlanet,Inc.He uses the system for a few months,returns it to GamePlanet,and demands his money back.In a majority of states,Brad may return the game system but he will be liable for the use and depreciation of the product.

Question 5

Vernon suffers from a mental impairment due to a brain injury from a motorcycle accident.He contracts with Glena to purchase her dining room furniture.A month later,he tries to void the contract.If he is unable to return the furniture,a court will not rescind the agreement unless Vernon can show that Glena acted in bad faith.

Question 6

In the case Hess v.Chase Manhattan Bank,USA,N.A.,the Missouri Supreme Court held that Chase had no duty to disclose the ongoing investigation by the Environmental Protection Agency to Hess.

Question 7

If a minor can cancel a contract,it can be done at any time during minority or within a reasonable time after reaching majority.

Question 8

Ian,a 16-year-old,contracted with Anderson Used Cars to buy a $6,000 motorcycle.He agreed to make monthly payments until the purchase price plus interest were paid in full.Ian is now 18 and he has not disaffirmed the contract.He has made payments on the car since turning 18.Which of the following is correct?

A)The contract is void since Ian entered it as a minor.
B)The contract is now voidable by Anderson Used Cars.
C)Ian has ratified the contract and is now bound by its terms.
D)Ian has not ratified the contract since he has not stated so in writing.

Question 9

A party injured by fraud generally has the choice of suing for damages or rescinding the contract.

Question 10

After her 18th birthday Lora may,by words or action,ratify a contract she made during the previous year.

Question 11

Spencer,an adult of sound mind,has the legal capacity to contract.

Question 12

A offers to sell her car to B for $500,and B accepts.A's car has a market value of $1,000 but this fact is unknown to A.The contract is unenforceable.

Question 13

Pushy Pat,a persuasive salesman,talked Naive Nancy into purchasing something she didn't really need or want.Naive Nancy may rescind the contract because of undue influence.

Question 14

Seth had too much to drink during his birthday celebration.Luke realized that Seth was so intoxicated that he wouldn't know what he was doing,so he made him sign a promise to sell Lukehis baseball card collection for $20.When Seth gets sober,he may void the contract.

Question 15

Ian,a 16-year-old,contracts with Anderson Used Cars to buy a $6,000 1998 car.Ian agrees to make monthly payments until the purchase price plus interest are paid in full.Which of the following is correct?

A)The contract is void because of Ian's lack of capacity.
B)The contract is voidable by Ian.
C)The contract is voidable by Anderson Used Cars.
D)The contract is voidable by either Ian or Anderson Used Cars.

Question 16

Contract rescission can never be based upon a unilateral mistake.

Question 17

If a salesperson says,"This is a great car," but the car turns out to be a lemon,the salesperson has committed fraud.

Question 18

Angie,a minor,wants to avoid a contract she made with Cumberland Cycles.She may disaffirm the contract by:

A)notifying Cumberland orally that she will not honor the agreement.
B)filing a lawsuit to have a court formally cancel the contract.
C)just refusing to perform her obligations under the contract.
D)All of the answers are correct.

Question 19

Which of the following is most likely to constitute fraud?

A)A false prediction that a painting's value will rise.
B)A false statement that a used car is "the best deal in town."
C)A false statement that a $30,000 car attracts members of the opposite sex.
D)Silence as to a toxic waste problem on real property that the buyer would not reasonably find.

Question 20

A minor is someone under the age of 18.

Question 21

Which of the following is NOT a true statement about fraud?

A)The plaintiff must prove that the defendant has knowledge of the falsity of his or her statement.
B)It is necessary for the plaintiff to show that he or she has suffered some type of detriment or injury because of his or her reasonable reliance on the defendant's false statement.
C)The defendant made the statement with the intent to induce the plaintiff to enter into the contract.
D)The plaintiff must show that although the defendant acted in good faith, the statement was material because the defendant expected the plaintiff to rely on it and enter into the contract.

Question 22

If Mitch persuades Elena to buy his sports car by telling her that the car is "fast as a rocket",then Mitch's statement is:

A)fraudulent mistrepresentation.
B)innocent misrepresentation.
C)puffery.
D)an illusory promise.

Question 23

Miles purchased a motorcycle from LB Cycles.He later learned that the salesman had made misrepresentations to induce him to make the purchase.Under UCC Section 2-721,can Miles rescind the contract?

A)Yes, but only if the misrepresentation was fraudulent.
B)Yes, but he cannot sue for damages if the misrepresentation was innocent.
C)Yes, and he can sue for damages whether the misrepresentation was fraudulent or innocent.
D)No, as the contract has been fully executed.

Question 24

An example of the type of relationship required to find undue influence would be:

A)a salesperson-purchaser relationship.
B)a bartender-customer relationship.
C)a doctor-patient relationship.
D)a neighbor-neighbor relationship.

Question 25

Pamela is planning to sell her home decorating store to her daughter.Pamela has:

A)a greater duty to reveal problems in the business because her daughter assumes she will be honest.
B)no duty to disclose hidden defects in the business.
C)a lesser duty to reveal problems in the business because she has a relationship of trust with the buyer.
D)a duty to report only any latent defects she knows about that her daughter should not be expected to discover herself.

Question 26

Which of the following statements,if made by a seller who knows the statement to be untruthful,would not be misrepresentation of material fact resulting in a cause of action for fraud?

A)"This horse is only six years old."
B)"There is no better car in the world."
C)"The tires have less than 5,000 miles on them."
D)"This car gets 28 miles per gallon."

Question 27

Marty's home had burned to the ground.When he met with his insurance adjuster,she accused him of burning down the house,and said she would have him criminally prosecuted if he didn't settle the claim for much less than the house was worth.Marty agreed to the settlement.If he changed his mind,he can probably rescind the settlement on the basis of:

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

Question 28

Jeff was a subcontractor,bidding on a contract for ACE Corp.,the general contractor.When adding up the total of materials and labor,Jeff's secretary mistakenly moved the decimal point one place,ending up with a bid of $3500 rather than $35,000.ACE Corp.accepted Jeff's bid,mostly because all the other bids were over $30,000.When Jeff learned of the mistake,he tells ACE Corp.that he cannot do the job for $3500.If ACE Corp.sues to enforce this contract,what is the most likely result?

A)The contract is enforceable, since there was an offer, acceptance, and consideration.
B)This is a bilateral mistake, so the contract can be rescinded by either party.
C)This is a unilateral mistake, so the contract cannot be rescinded by Jeff.
D)This is a unilateral mistake, but one where ACE Corp.knew that a mistake had been made.Jeff should be able to rescind the contract.

Question 29

Greg purchased a used car from Knutson's Auto Mart for $12,000.As Greg was writing the check,Knutson told Greg that the car was featured in a Clint Eastwood's movie.Greg later found out that the car had not appeared in the movie.If Greg seeks to rescind the deal based on Knutson's statement,Greg will:

A)win because Knutson's statement was fraudulent.
B)win because there was a misrepresentation of a material fact.
C)lose because he will not be able to prove reliance on the misrepresentation.
D)lose because Knutson's statement was innocent.

Question 30

In the case Donovan v.RRL Corporation,the Supreme Court of California held that the car dealer's price mistake:

A)did not entitle the dealer to recind the contract as the mistake was unilateral.
B)did not entitle the dealer to rescind the contract as it was on the value.
C)entitled the dealer to rescind as it was a material mistake made by the newspaper.
D)was not sufficiently severe to render the bargain unfair.

Question 31

Which of the following situations may render a contract voidable?

A)A mistake made by both parties.
B)A party was unduly influenced by the other.
C)A party signed the contract under duress.
D)All of the above.

Question 32

In the case of Sepulveda v.Aviles,the New York Supreme Court,Appellate Division,found evidence of undue influence in:

A)the relationship based on family connection between Seals and Aviles.
B)Aviles's use of Seals' funds and credit cards.
C)opinions of Aviles and Seals' attorney about Seals' mental state at the property closing.
D)All of the answers are correct.

Question 33

Mentally infirm Sasha contracts to purchase a piano for $2,500 in 60 monthly installment payments.Six months later she tries to void the contract on grounds of mental impairment.A court will:

A)normally void the contract without requiring anything further on Sasha's part.
B)normally void the contract but will require Sasha to return the piano.
C)ordinarily not void the contract unless Sasha had a court-appointed guardian at the time she entered into the contract.
D)not void the contract unless Sasha agrees to have the court appoint a guardian for her.

Question 34

When a party to a contract makes a unilateral mistake,the contract:

A)generally can be rescinded by the mistaken party.
B)is void.
C)can be rescinded by either party.
D)generally cannot be rescinded by the mistaken party unless the contract is unconscionable or it is proven that the nonmistaken party knew of the error.

Question 35

Peter,a minor,purchased a car from ACME Motors.Using a fake ID,he misrepresented his age to be 18.The contract is fully executed.Which of the following is correct?

A)Peter cannot disaffirm the contract because a car is a necessary.
B)Peter cannot disaffirm the contract because of his misrepresentation.
C)Peter can disaffirm the contract, because a minor must be saved from his own poor judgment, including his lie.
D)Either b or c may be applicable depending on the law of the jurisdiction in which the contract was formed.

Question 36

The most accurate statement regarding economic duress is:

A)it is never grounds for rescission.
B)it is always grounds for rescission.
C)it is a UCC concept only.
D)it may be grounds for rescission.

Question 37

Ron,a minor,goes to the hospital for treatment of the flu.On the new-patient form Ron signs,he agrees to pay for any care or treatment he receives.When billed for the treatment:

A)Ron must pay for the value of the benefit he received, because medical care is a necessary.
B)Ron must pay for the benefit he received because the contract is fully executory.
C)Ron must pay for the benefit he received because he ratified the contract.
D)Ron does not have to pay for the benefit he received.

Question 38

Which of the following is least likely to be regarded as a necessary?

A)Rent.
B)Food.
C)Medical expenses.
D)Educational expenses.

Question 39

Sam,a minor,contracted to sell his computer to Cheryl,a 28-year-old.Sam later refused to complete the sale.If Cheryl sues to enforce the contract,she will:

A)win because Ryan breached the contract.
B)win because minors can only avoid contracts when they are the buyers.
C)lose, as the contract is void because of Sam's lack of capacity
D)lose, because the contract is voidable by Sam.

Question 40

Generally,a seller has no duty to disclose facts.However,there is a duty to disclose information or facts if the disclosure is necessary to:

A)correct a previous assertion.
B)correct a basic mistaken assumption on which the other party is relying.
C)report a latent defect that the buyer would not be expected to discover.
D)All of the above are true.

Question 41

Discuss the concept of a "material fact" in fraud situations.

Question 42

Discuss two types of misrepresentation and how they differ.List the three things a party must show to rescind a contract based on misrepresentation.

Question 43

Adrianna wants to purchase a ten-acre tract of land.Under what circumstances would the seller be required to divulge information Adrianna does not possess?

Question 44

Larson is the owner of a home in Eagle City,Iowa.He put the home on the market for sale.His good friend Bill,an attorney,came to look at the home for the purpose of possible purchase or rental.Bill noticed a crack in the ceiling and inquired about it to Larson.Larson informed Bill that there had been a water leakage problem in the area but it had been fixed two years ago and had not leaked since.Bill proceeded to make a written offer on the house which was accepted in writing by Larson the next day.On the day prior to closing the transaction,Bill went to the residence to make a final inspection.During the inspection,Bill observed water leaking through another crack in a ceiling of the house and in the garage.On the next day,Bill informed the real estate agent that he was rescinding the contract because of the leaks.Larson subsequently rented the property to another party.A couple of months later,Larson filed a suit seeking a court order to make Bill purchase the house or in the alternative for money damages.Bill defended by claiming that Larson either defrauded him or there was a mutual mistake and asked for the return of his earnest money and/or damages for fraud.The trial court found there was no evidence to find fraud on the part of Larson because the roof had been previously fixed and the two parties had been good friends.However,the trial court held that there was a mutual mistake of fact.What is the law with regard to mistakes? Was Bill under a duty to hire his own inspector to inspect the roof? What is the appropriate remedy when a court concludes that there has been a mutual mistake of material fact?

Question 45

Anne,a 15-year-old,has made several purchases at a department store.She bought frozen pasta dinners,a coat,two bars of soap and a cashmere scarf,as winter is here.A few days later,Anne returns the goods and demands her money.Will she be refunded?