Question 1

Raylene,who is Seth's guardian,convinces him to buy a certain parcel of land from Trevor at a greatly inflated price. Raylene may be liable for

Accepted Answer

Raylene may be liable for undue influence because she used her position as Seth's guardian to improperly persuade him to make a decision that was not in his best interest.

Question 2

In selling a commercial building,Birdie tells Colt that theproperty has a certain capacity,making it suitable for a nightclub. Birdie knows nothing about the capacity of the building,but it is not as she specifies. Colt buys the building.
-Refer to Fact Pattern 14-4. On learning the truth,Colt confronts Birdie,who says she was not trying to fool him-she was only trying to make a sale. This is

Accepted Answer

Birdie's false statement about the capacity of the building constitutes misrepresentation, as she knowingly made a false statement to induce Colt to purchase the property. Colt could potentially take legal action against Birdie for misrepresentation. Her defense that she was only trying to make a sale does not excuse her from intentionally providing false information to a potential buyer. Therefore, options A, B, and D are incorrect.

Question 3

Morris threatens physical harm to force Barb to contract to pay him for protecting her store-Barb's Baubles-against vandalism and destruction. Barb may

Accepted Answer

Morris's actions constitute duress, which makes the contract voidable at the option of Barb. She can choose to rescind the contract or refuse to comply with its terms without penalty. Additionally, Morris's behavior could be a criminal offense, and Barb may want to report it to the authorities. Recovering from her insurer or the local police is not likely to be successful in this situation.

Question 4

Dumont threatens physical harm to force Eddie to sell his business,Citywide Vending,Inc.,to Dumont for a below-market price. This is

Accepted Answer

Dumont's threat of physical harm amounts to duress, which is the use of force or coercion to pressure someone into performing an act that they would not have otherwise done. Eddie is being forced to sell his business at a price below the market value, and such action is not valid because it was not taken out of Eddie's free will. Therefore, this scenario satisfies the definition of duress. Fraud involves deception, unconscionability involves an unfair bargain, and undue influence involves a situation where one party influences the other party's decision-making ability. None of these definitions apply to the given scenario.

Question 5

In selling a commercial building,Birdie tells Colt that theproperty has a certain capacity,making it suitable for a nightclub. Birdie knows nothing about the capacity of the building,but it is not as she specifies. Colt buys the building.
-Refer to Fact Pattern 14-4. Under these circumstances,Colt's best course of action is most likely to

Accepted Answer

Colt can choose to recover damages from Birdie for the misrepresentation or rescind the contract to buy the building. These are the most appropriate courses of action to take in this situation, rather than resorting to fraud or sabotage. It is important to note that misrepresentation is a violation of the law, and victims have legal remedies available to them.

Question 6

Creighton applies to BigData Corporation for a position as a software engineer. Creighton has no training in computers or programming and no background as an engineer. After Creighton is hired,BigData learns the truth. BigData can

Accepted Answer

Creighton intentionally made a false statement in his application with the purpose of gaining employment at BigData, which constitutes fraud. Based on this, BigData can rescind the contract.

Question 7

Drake enters into a contract with Eve,who claims to have access to a stock-trading algorithm that will multiply an investment many times over. When the results do not match this promise,Drake learns that Eve does not have access to any unique software and files a suit against her,alleging fraud. Proof of an injury is required to

Accepted Answer

In a fraud case, the plaintiff must prove that they suffered an injury or loss as a result of the defendant's false statements or misrepresentations. Without proof of injury, the plaintiff cannot recover damages. Therefore, option A is the correct answer. Rescinding the contract or undoing Eve's influence would also require proof of injury. Punishing the defendant may be possible in a criminal case, but this question only addresses a civil lawsuit for fraud.

Question 8

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

Accepted Answer

Cullen's statement is an opinion, and opinions are subjective judgments that may or may not be true. Barrie mistakenly believed it to be a guarantee or a fact, but it was only Cullen's personal belief about the bike's capabilities. It does not constitute fraud or undue influence, as there was no intent to deceive or manipulate Barrie into buying the bike.

Question 9

Health Source,Inc.,offers to buy Medico Equipment & Supplies Corporation. On June 1,Medico gives Health Source copies of Medico's financial statements for the pre-vious year. The statements show an inventory of $10 million. On June 15,Medico discovers that the previous year's inventory is overstated by $500,000,but does not inform Health Source. On July 1,Health Source,relying on the fi-nancial statements,buys Medico. On July 10,Health Source discovers the inven-tory over-statement. Can Health Source succeed in a suit against Medico? On what basis?

Accepted Answer

The answer of Health Source,Inc.,offers to buy Medico Equipment &...

Question 10

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

Accepted Answer

Newt used undue influence in inducing Mona to sign the contract, which means Mona was forced or coerced into signing the contract. Mona did not fully understand the consequences of the contract and did not consent freely. Therefore, she has the right to rescind the contract based on undue influence.

Question 11

The elements of an action for fraud are (1)the misrepresentation of a material fact,(2)the intent to deceive,and (3)the innocent party's justifiable reli-ance on the misrepresentation. Ordinarily,no party to a contract has a duty to come forward and disclose facts. Each party is responsible for the use of common sense and normal business sense in negotiating a con-tract. An action for fraud can be based on a failure to disclose material facts when there is a certain relationship between the parties such as be-tween part-ners in a partnership or when a party could not reasonably discover a fact known to the other party. An action may also be maintained if,as here,a party that misstates a material fact later learns of the misstate-ment but does not disclose it to the other party.This is misrepresentation by conduct.
Here,by providing finan-cial statements,Medico made certain representations. Those representa-tions were false,how-ever,as Medico learned. Medico's knowledge of the over-stated inventory and failure to disclose this to Health Source indicated intent to deceive. Health Source's reli-ance on Medico's statements was reasonable and justifiable.
-Nero is an elderly man who lives with his nephew Mervyn. Nero is depend-ent on Mervyn for support. Mervyn advises Nero to "invest" in Mervyn's "profes-sional gambling" venture,or Mervyn will no longer support him. Nero liq-uidates his other investments and signs a contract with Mervyn,to whom Nero gives the funds. Can Nero set aside this contract?

Accepted Answer

The answer of The elements of an action for fraud...

Question 12

Mark fails to reveal a material fact in a business deal with Nancy. This constitutes fraud

Accepted Answer

Fraud requires the defendant to have knowledge of the material fact he is failing to disclose. In this case, Mark knows of the serious defect and it is unlikely Nancy would know about it, so his failure to disclose it constitutes fraud. The gross inadequacy of consideration (B) may indicate duress, but it is not a necessary element for fraud. A lack of awareness of the fact or failure (A) would not meet the knowledge requirement for fraud. Fraud does not occur under any circumstance (D).

Quiz 14: Voluntary Consent