Question 1

Fact Pattern 14-A1 (Questions A2-A3 apply)
Linea,an employee of Hard Labor Industries (HLI),is injured in a work-related accident.Based on the diagnosis of Newt,a doctor,Linea accepts $50,000 from HLI and waives the right to future claims.Newt's diagnosis later proves to have been wrong.
-Refer to Fact Pattern 14-A1.Most likely,Linea may

Accepted Answer

The answer of Fact Pattern 14-A1 (Questions A2-A3 apply)
Linea,an employee...

Question 2

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

Accepted Answer

May's statements do not guarantee the increase in the price of OKGI. Nora made the decision to purchase the stock based on May's opinion and did not do independent research or analysis. As a result, Nora bears the risk of loss and cannot recover any amount from May.

Question 3

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

Accepted Answer

Duress is the use of threats or coercion to force someone to do something against their will. In this scenario, Gary is threatening physical harm in order to force Hugh to sell his business at a below-market price, which is clearly an act of duress.

Question 4

Fact Pattern 14-A3 (Questions A16-A17 apply)
Flip,an accountant,certifies an audit for Erstwhile Corporation,Flip's client,knowing that Erstwhile will use the audit to obtain a loan from Deepwater Bank.Flip believes that the audit is true and does not intend to deceive the bank,but does not check the audit before certifying it.
-Refer to Fact Pattern 14-A3.On learning the truth,Deepwater's chief loan officer confronts Flip,who says,"I didn't know." This is

Accepted Answer

Flip's failure to check the audit before certifying it constitutes negligence, which is a form of misrepresentation. Therefore, this is negligent misrepresentation.

Question 5

Fact Pattern 14-A1 (Questions A2-A3 apply)
Linea,an employee of Hard Labor Industries (HLI),is injured in a work-related accident.Based on the diagnosis of Newt,a doctor,Linea accepts $50,000 from HLI and waives the right to future claims.Newt's diagnosis later proves to have been wrong.
-Refer to Fact Pattern 14-A1.In terms of the impact on Linea's agreement with HLI,Newt's misdiagnosis is

Accepted Answer

A mistake of fact is an error in belief about a past or present fact that is material to a contract. In this case, Linea's belief that her injuries were not as severe as they actually were was a mistake of fact that was material to her decision to accept $50,000 from HLI and waive her right to future claims.

Question 6

Sam uses duress to force Tanya to agree to pay him for protecting her re?tail store-Tanya's Trends-against vandalism and destruction.Tanya may

Accepted Answer

Tanya can avoid the contract because it was made under duress, which makes the contract voidable. Alternatively, she may choose to carry it out if she decides the benefit of protection outweighs the harm caused by duress. However, she cannot recover from her insurer or the local police for the cost as they are not liable for the damages caused by duress.

Question 7

Fact Pattern 14-A2 (Questions A5-A6 apply)
Moore Properties,Inc.,offers in writing to sell to New Development Corporation (NDC)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

Accepted Answer

Moore's misstatement of the price is a unilateral mistake, meaning only one party was mistaken. In this case, it was Moore who made the mistake in offering the land at a lower price. Because NDC did not know about the mistake and accepted the offer in good faith, Moore cannot unilaterally change the price. However, this does not qualify as a bilateral mistake because only one party was mistaken, and it is not fraudulent misrepresentation because there was no intent to deceive. It is also not unconscionable because the price difference is not so significant as to shock the conscience.

Question 8

Sylvia creates a profile for Today's Date,Inc.,an online dating service.She exaggerates her appealing features and posts a photo of her friend Uva,whom Sylvia thinks is prettier.Enticed by the profile,Van subscribes to the service so that he can contact Sylvia.Van is most likely a victim of

Accepted Answer

Sylvia's exaggeration of her features and use of someone else's photo constitutes fraud, as it is intentional deception with the intent to induce someone to act to his or her detriment. Van subscribed to the service based on false information, making him a victim of fraud.

Question 9

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

Accepted Answer

The sale contract was based on a mutual mistake, as neither party was aware at the time of the contract that the horse had died. Therefore, the contract is voidable, and Karl is not required to pay for the horse.

Question 10

Fact Pattern 14-A2 (Questions A5-A6 apply)
Moore Properties,Inc.,offers in writing to sell to New Development Corporation (NDC)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

Accepted Answer

Moore made the mistake in the offer, and since NDC accepted the offer as stated, Moore is bound by the terms of the contract at the price of $112,000.

Question 11

Fact Pattern 14-A3 (Questions A16-A17 apply)
Flip,an accountant,certifies an audit for Erstwhile Corporation,Flip's client,knowing that Erstwhile will use the audit to obtain a loan from Deepwater Bank.Flip believes that the audit is true and does not intend to deceive the bank,but does not check the audit before certifying it.
-Refer to Fact Pattern 14-A3.Under these circumstances,Deepwater's best course of action is most likely to

Accepted Answer

Deepwater's best course of action would be to recover damages from Flip for any loss on the loan since Flip certified the audit without checking it, making him liable for any losses incurred by Deepwater due to the inaccurate audit. Exerting economic duress on Flip or undercutting his career with negative puffery would not be appropriate or legal actions. Rescinding the loan on the ground of unconscionability would not be a viable option either as there is no evidence of unconscionability in the given fact pattern.

Question 12

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

Accepted Answer

Nero's statement is an honest mistake that misrepresents a material fact, which constitutes innocent misrepresentation, not fraud or duress.

Question 13

In selling paving stones to Yard & Garden Supply,Trey tells Yard & Garden's buying representative that the stones are "soft as carpet." This is

Accepted Answer

Trey's statement that the paving stones are "soft as carpet" is a clear example of puffery, which is an exaggerated statement meant to enhance the attractiveness of a product. It is not a fraudulent statement, as Trey is not deliberately misleading the buyer, nor is it a mistake. Therefore, the best choice is D - puffery.

Question 14

Veronica offers to sell Rowena her luxury sedan and says that it has never been in an accident.Rowena hires Laszlo,a mechanic,to appraise the vehicle.Laszlo says that it most likely has been in an accident.In spite of this information,Rowena buys the car.Later,when it develops mechanical problems,she can

Accepted Answer

Rowena cannot rescind the contract because she was informed by Laszlo that the car had likely been in an accident, yet she chose to proceed with the purchase. This indicates she was aware of the potential issue and accepted the risk.

Question 15

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

Accepted Answer

Bianca can rescind the contract to invest in the nonexistent social-networking Web site since it was based on fraud and misrepresentation by Cartier. This means that she can cancel the contract and potentially get her money back. The other choices either involve illegal actions or are not viable options.

Question 16

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

Accepted Answer

Bret's omission of his prior conviction for arson is material to Cover-All's decision to issue coverage. Cover-All has a right to know the risk they are insuring and Bret's prior conviction is relevant to the assessment of that risk. Therefore, Cover-All can void the contract due to the material misrepresentation made by Bret.

Question 17

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

Accepted Answer

Hu can rescind the contract on the basis of fraud because Gina knowingly misrepresented material features of the condominium. Fraud involves intentional deception, and Hu relied on Gina's misrepresentations when entering into the contract. This gives Hu the right to rescind the contract and potentially seek legal remedies for any damages incurred as a result of the fraud. Options A, C, and D do not apply in this scenario.

Question 18

Crosscreek County and Bridgework Corporation enter into a construction contract that includes mathematical specifications.Later Crosscreek,whose engineer,Damon,compiled the specs,learns that some of the dollar figures are incorrect.Bridgework refuses to agree to changes.A court would most likely

Accepted Answer

A court would most likely reform the contract to reflect the figures accurately if there was a mutual mistake in the specifications, as this would align with the original intent of the parties.

Question 19

Danton,a popular performer,dies.His spouse Caitlin sells their house to Buck.Un?known to Caitlin or Buck,in one of the closets is the mas?ter recording of an unreleased album.With respect to this recording,Buck can

Accepted Answer

Buck cannot keep the recording because there was no voluntary consent to its sale. The recording was not known to either party at the time of the sale, so it was not part of the agreed transaction.

Question 20

Olin,a professional artist and art teacher,convinces Plato,who has no artistic ability,that he has considerable talent and induces him to pay Olin $10,000 for art lessons.When Plato realizes the truth,he files a suit against Olin.Plato is most likely to recover on the basis of

Accepted Answer

Olin has deceived Plato by convincing him that he had considerable artistic talent and induced him to pay $10,000 for art lessons. Plato's payment was based on Olin's misrepresentation, which constitutes fraud. As a result, Plato can recover on the basis of fraud.

Quiz 14: Mistakes, fraud, and Voluntary Consent

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