Question 1

Ilsa and Jiffy Loan Company enter into an oral contract under which Ilsa agrees to pay Kyle's debt if he does not. Ilsa does not get any personal benefit from the agreement. This contract is enforceable by
A) any party.
B) Jiffy only.
C) Jiffy or Kyle.
D) none of the parties.

Accepted Answer

This contract falls under the statute of frauds and must be in writing to be enforceable. Since it is an oral contract, none of the parties can enforce it.

Question 2

Ted and Svetlana orally agree to several different oral contracts. The Statute of Frauds will bar enforcement of an oral contract for
A) a deal that will be performed within a year.
B) a primary obligation.
C) a sale of goods for $100.
D) a sale of land.

Accepted Answer

The Statute of Frauds requires that contracts for the sale of land must be in writing to be enforceable. All the other options listed may be enforceable even if agreed upon through an oral contract.

Question 3

Dale files a suit against Evelyn, alleging her fraud in entering into a contract with him. Proof of an injury is required
A) to recover damages.
B) to rescind the contract.
C) to undo Evelyn's influence.
D) under no circumstances.

Accepted Answer

In order to recover damages, proof of an injury is required in a fraud case. This is because damages are meant to compensate the injured party for any losses they may have suffered as a result of the fraudulent transaction. Proof of injury is not required to rescind the contract or undo the influence of Evelyn, but it is necessary in order to receive monetary compensation for any harm caused.

Question 4

Scienter exists if
A) Martin knows that the transmission on his truck is defective, but does not tell this fact to potential buyers.
B) The racehorse that Karen is trying to sell has a genetic defect, but Karen does not know about the defect, and so she does not warn potential buyers.
C) Jake, a real estate agent, tells a client that he has a house that "will make all her dreams come true."
D) Jon forces Bill to sign a contract to sell Jon a car below market value.

Accepted Answer

Scienter, also known as intent to deceive or knowledge of wrongdoing, exists if Martin knows that the transmission on his truck is defective but does not disclose this fact to potential buyers. Choices B, C, and D do not fulfill the requirement of scienter as there is either no knowledge of the defect (choice B), no intent to deceive (choice C), or no mention of deceitful actions (choice D).

Question 5

James is in an art gallery when Mitch, who has no special art expertise, points to a painting and says, "That artist is so good. That piece will be worth a fortune in a few years!" James buys the painting, which does not turn out to be valuable. James tries to return the painting and recover his purchase price. A court will
A) order the art gallery to pay James the full purchase price.
B) order Mitch to pay James the full purchase price.
C) enforce the contract between James and the art gallery.
D) enforce the contract between James and the art gallery, but order Mitch to pay James the full purchase price.

Accepted Answer

Mitch's statement was merely an expression of opinion and did not create a warranty or guarantee of the painting's future value. Therefore, James cannot return the painting and recover his purchase price solely based on Mitch's statement. Instead, the court will enforce the contract between James and the art gallery, which would govern any terms related to potential returns or refunds.

Question 6

Fiona and Dora enter into an oral contract under which Fiona agrees to work on Dora's farm for not less than one week. This contract is enforceable by
A) Fiona only.
B) Dora only.
C) either party.
D) neither party.

Accepted Answer

Since an oral contract was formed between Fiona and Dora, and it is for a valid purpose (working on Dora's farm) with a specific time frame (not less than one week), the contract is enforceable by either party. However, proving the existence of the contract and its terms in court may be difficult without written documentation.

Question 7

Pete, an accountant, convinces his client Kasey to invest her savings in a nonexistent social-networking Web site. When Kasey learns the truth, she can
A) seek to void the contract on the ground of undue influence.
B) recover damages based on a claim of mistake of value.
C) rescind the contract to invest in the Web site.
D) seek to void the contract on the ground of unconscionability.

Accepted Answer

Kasey can rescind the contract to invest in the Web site as Pete has deceived her by convincing her to invest in a nonexistent social-networking Web site. Rescission allows the parties to be placed in the position they were in before the contract was made, and is an appropriate remedy when a party has been induced to enter the contract by fraud, misrepresentation, or mistake. The other options are not applicable in this scenario. Undue influence and unconscionability require proof of a special relationship between the parties or that the agreement was clearly one-sided and oppressive, which is not evident in this case. Damages based on a claim of mistake of value would be appropriate if Kasey made a mistake about the value of the investment, but there is no indication of this in the scenario.

Question 8

Andy knows nothing about horses. Peter, an expert horse trainer, knows that a certain horse has no talent and is not likely to win any competitions. Peter convinces Andy to buy the horse for $500,000 by assuring him that it has great talent. The horse turns out to have no talent and never wins any competitions. Andy can most likely recover damages based on
A) fraud.
B) mistake.
C) undue influence.
D) duress.

Accepted Answer

Peter, the expert horse trainer, intentionally deceived Andy into believing that the horse had great talent to induce him to buy it for $500,000. This constitutes fraud, and Andy can recover damages as a result.

Question 9

Jane and Phil enter into a contract, but make a bilateral mistake. For the contract to be rescinded by either party, the bilateral mistake must be about
A) a material fact.
B) value.
C) an opinion.
D) a prediction.

Accepted Answer

In order for a contract to be rescinded due to a bilateral mistake, the mistake must be about a material fact - a fact that is significant and would have influenced the decision to enter into the contract. Mistakes about value, opinions, or predictions are generally not sufficient to justify rescission.

Question 10

Seth offers to buy a house from Tia for less than Tia paid for it, stating that he would "hate to see anything bad happen to Tia or her house." Tia agrees to sell. Regarding this agreement, a court would likely
A) enforce it.
B) not enforce it.
C) reform it to reflect the true market value of the property.
D) order the parties to renegotiate the price.

Accepted Answer

This agreement is an example of undue influence, where Seth is using emotional manipulation to coerce Tia into selling the house for less than what it's worth. The court would likely not enforce this agreement as it lacks the element of a voluntary and knowing consent.

Question 11

Barb, a real estate agent, is showing John a house. She tells him that this is a house where "his family can live happily ever after." John buys the house, but his wife does not like it. John
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.

Accepted Answer

The answer of Barb, a real estate agent, is showing...

Question 12

Lou uses undue influence to induce Mona to sign a contract to invest her student loan funds in National Overseas Bank. Mona may
A) avoid the contract or choose to carry it out.
B) do nothing once she has signed the contract.
C) recover from her lender for a failure to influence her "due."
D) recover from the bank for a failure to undo Lou's influence.

Accepted Answer

Undue influence occurs when one party exerts pressure on the other party in a way that overcomes the other party's free will and judgment. If Mona was induced to sign the contract through undue influence by Lou, she has the option to either avoid the contract (meaning the contract becomes void) or choose to carry it out (meaning the contract remains valid). Mona cannot recover from her lender or the bank for undue influence because it was not their actions that caused the undue influence; it was Lou's actions.

Question 13

Jayne and Wilbur enter into an oral contract on May 1 under which Jayne agrees to deliver a collection of exotic wines by April 30 of the following year. This contract is enforceable by
A) Jayne only.
B) Wilbur only.
C) either party.
D) neither party.

Accepted Answer

An oral contract is generally enforceable, and both parties to the contract have rights and obligations. Therefore, either party could seek to enforce the contract if the other party fails to perform.

Question 14

Beau sells a car to Cody without disclosing that the odometer, which reads 40,000 miles, was disconnected 80,000 miles ago. Beau is liable for
A) duress.
B) fraud.
C) mistake.
D) undue influence.

Accepted Answer

Beau intentionally concealed information about the car's true mileage, which constitutes fraud.

Question 15

Big Dog Security Service, Inc. orally agrees to provide security services for NorthGate Mall for as long as NorthGate Mall requires them. This contract is enforceable by
A) Big Dog Security only.
B) NorthGate Mall only.
C) either party.
D) neither party.

Accepted Answer

Either party can enforce the contract as this is an oral contract, which is enforceable as long as there is an agreement, consideration, and the terms are definite.

Question 16

Mark fails to reveal a material fact in a business deal with Nancy. This constitutes fraud
A) if Mark is unaware of the fact and the failure.
B) if the amount of consideration received is grossly inadequate.
C) if the fact concerns a serious defect known to Mark and unlikely to be known by Nancy.
D) under any circumstances.

Accepted Answer

In order for Mark's failure to reveal a material fact to Nancy to constitute fraud, the fact must concern a serious defect known to Mark and unlikely to be known by Nancy. This is referred to as "active concealment" and is a type of fraud. If Mark is unaware of the fact or the failure, it would not be considered fraud. Similarly, if the amount of consideration received is grossly inadequate, it would not necessarily constitute fraud unless there was active concealment of a serious defect. Therefore, option C is the correct choice.

Question 17

Julie orally agrees to assume Carlyle's debt to FunGames, Inc. Julie gets a substantial personal benefit from the agreement-Carlyle agrees to work for Julie's landscaping service for six months. Julie's oral assumption of the debt is enforceable by
A) Julie or Carlyle only.
B) FunGames only.
C) any of the parties.
D) no one.

Accepted Answer

The answer of Julie orally agrees to assume Carlyle's debt...

Question 18

Kathleen sells Richard a racehorse for $1,000. Both Kathleen and Richard think that the horse is too slow to win any races. Richard then enters the horse in a race, and it wins easily. He enters it in more races, and the horse soon wins more than $1 million. Kathleen tries to rescind the contract to sell the horse, claiming that it was worth more than $1,000. A court will
A) cancel the contract due to Kathleen's failure to know the horse's value.
B) cancel the contract due to Richard's failure to know the horse's price.
C) cancel the contract due to the difference between the contract price and the horse's true value.
D) enforce the contract.

Accepted Answer

The contract between Kathleen and Richard was valid and enforceable at the time of sale, and Kathleen cannot rescind it simply because the horse turned out to be worth more than $1,000. The concept of "caveat emptor" or "buyer beware" applies in this situation. Richard took a risk by purchasing a horse that Kathleen believed was not valuable, but he was allowed to do so. Therefore, the court will enforce the contract and Richard will be able to keep the horse and the winnings.

Question 19

Marta buys a candy bar for $5 and signs a contract for delivery of fresh flowers to her mother's nursing home every week for the rest of her mother's life. She then enters into a contract to assume George's debt to FastCars Dealership. Marta receives no personal benefit from assuming George's debt. The Statute of Frauds covers
A) the candy purchase only.
B) the candy purchase and the delivery contract only.
C) the contract to assume George's debt only.
D) the contract to assume George's debt and the delivery contract only.

Accepted Answer

The Statute of Frauds covers contracts for the sale of goods priced at $500 or more, contracts for services that cannot be performed within one year, contracts to assume the debt of another, and contracts for the transfer of an interest in real estate. The candy purchase is not covered because it is under $500 and does not fall under any of the other categories. The delivery contract might fall under the category of services that cannot be performed within one year. However, the details provided in the question do not clarify whether the contract is for a year or longer. Therefore, we cannot make a definitive determination as to whether this contract falls under the Statute of Frauds. The contract to assume George's debt, however, is clearly covered by the Statute of Frauds.

Question 20

Selena buys a cell phone for $350 and an air hockey table for $1,500, and signs a one-year employment contract for a $4,000 monthly salary to start at the beginning of the next month. The Statute of Frauds covers
A) the employment contract, and the game table and phone purchases.
B) the employment contract and the game table purchase only.
C) the employment contract only.
D) the game table and phone purchases only.

Accepted Answer

The answer of Selena buys a cell phone for $350...

Quiz 12: Defenses to Contract Enforceability

Ilsa and Jiffy Loan Company enter into an oral contract under which Ilsa agrees to pay Kyle's debt if he does not. Ilsa does not get any personal benefit from the agreement. This contract is enforceable by

Ted and Svetlana orally agree to several different oral contracts. The Statute of Frauds will bar enforcement of an oral contract for

Dale files a suit against Evelyn, alleging her fraud in entering into a contract with him. Proof of an injury is required

Scienter exists if

Fiona and Dora enter into an oral contract under which Fiona agrees to work on Dora's farm for not less than one week. This contract is enforceable by

Pete, an accountant, convinces his client Kasey to invest her savings in a nonexistent social-networking Web site. When Kasey learns the truth, she can

Jane and Phil enter into a contract, but make a bilateral mistake. For the contract to be rescinded by either party, the bilateral mistake must be about

Seth offers to buy a house from Tia for less than Tia paid for it, stating that he would "hate to see anything bad happen to Tia or her house." Tia agrees to sell. Regarding this agreement, a court would likely

Barb, a real estate agent, is showing John a house. She tells him that this is a house where "his family can live happily ever after." John buys the house, but his wife does not like it. John

Lou uses undue influence to induce Mona to sign a contract to invest her student loan funds in National Overseas Bank. Mona may

Jayne and Wilbur enter into an oral contract on May 1 under which Jayne agrees to deliver a collection of exotic wines by April 30 of the following year. This contract is enforceable by

Beau sells a car to Cody without disclosing that the odometer, which reads 40,000 miles, was disconnected 80,000 miles ago. Beau is liable for

Big Dog Security Service, Inc. orally agrees to provide security services for NorthGate Mall for as long as NorthGate Mall requires them. This contract is enforceable by

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

Julie orally agrees to assume Carlyle's debt to FunGames, Inc. Julie gets a substantial personal benefit from the agreement-Carlyle agrees to work for Julie's landscaping service for six months. Julie's oral assumption of the debt is enforceable by

Selena buys a cell phone for $350 and an air hockey table for $1,500, and signs a one-year employment contract for a $4,000 monthly salary to start at the beginning of the next month. The Statute of Frauds covers