Question 1

Which scenario is an example of puffery?
A) Martina purchases a ring from Alison. Both genuinely believe the stone in the ring is an emerald, but Martina later finds out the stone is just cut glass.
B) A salesperson tells Jinxing that the shiny, chrome-covered motorcycle he is looking at is "the hottest ride on the road."
C) Simon threatens to smash the windshield out of Clara's vintage Pontiac GTO unless she agrees to sell it to him.
D) The clerk at the candy store tells Billy the "Jug 'o Jellybeans" contains 1,000 jellybeans. When Billy takes the jug home and counts, he finds that the jug contains only 995 jellybeans.

Accepted Answer

Puffery refers to exaggerated or subjective claims that cannot be proven true or false. In this scenario, the salesperson's statement that the motorcycle is "the hottest ride on the road" is an example of puffery. It is an opinion and cannot be objectively verified.

Question 2

A(n) _______ contract is illegal from the beginning and may not be enforced by either party; a(n) _______ contract is legal but permits one party to escape, if he or she so wishes.
A) disaffirmed; affirmed
B) void; voidable
C) affirmed; disaffirmed
D) voidable; void

Accepted Answer

A void contract is illegal from the beginning, such as a contract to commit a crime, and is not enforceable by either party. A voidable contract is legal but allows one party to choose to cancel or enforce the contract, such as a contract entered into by a minor, which the minor can choose to disaffirm or affirm upon reaching the age of majority.

Question 3

Duress occurs when
A) the enforcement of a contract results in unconscionability.
B) an improper threat is made to force another party to enter into a contract.
C) both parties contract based on the same factual error.
D) a party gives notice of refusal to be bound by an agreement.

Accepted Answer

Duress occurs when an improper threat is made to force another party to enter into a contract. This includes threats of physical harm, economic harm, or other forms of coercion that can eliminate a party's free will in making the agreement.

Question 4

In contract law, capacity is best defined as
A) a benefit which must be bargained for between the parties.
B) one person's compliance with the offer made by another.
C) a promise in exchange for performance by another party.
D) the legal ability of a party to enter into a contract.

Accepted Answer

Capacity in contract law refers to the legal ability of a party to enter into a contract. This includes factors such as age, mental state, and legal status. A party lacking capacity may not have the legal authority to enter into a contract or may have limited capacity requiring special terms and conditions to be met. A contract entered into by a party lacking capacity may be voidable or unenforceable.

Question 5

Deborah purchased a boat from Sun 'N Surf Marine. She later learned that the salesman had made misrepresentations to induce her to make the purchase. Under UCC Section 2-721, Deborah can rescind the contract
A) only if the misrepresentation was fraudulent.
B) and sue for damages if the misrepresentation was fraudulent.
C) but cannot sue for damages even if the misrepresentation was fraudulent.
D) but must forego all other remedies.

Accepted Answer

Under UCC Section 2-721, if a seller makes misrepresentations that induce a buyer to purchase goods, the buyer can rescind the contract and sue for damages if the misrepresentation was fraudulent. Therefore, choice B is the correct answer.

Question 6

Sasha, who is mentally infirmed, 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.

Accepted Answer

A court will typically allow Sasha to void the contract due to her mental impairment, but it will require her to return the piano to avoid unjust enrichment. This ensures fairness to the seller, who entered into the contract in good faith.

Question 7

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."

Accepted Answer

While exaggerated or opinion-based statements do not necessarily reflect truth, they are not considered material misrepresentations of fact. The other options make specific factual claims that can be proven true or false, and if made knowingly falsely, would result in a cause of action for fraud.

Question 8

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.

Accepted Answer

Ron is responsible for paying for the treatment he received because medical care is a necessary service. The fact that he is a minor does not relieve him of the obligation to pay for the benefit he received. Furthermore, the contract is not fully executory because the care has already been provided. Ratification is also not applicable here, as it typically applies to a minor affirmatively agreeing to be bound by a contract after reaching the age of majority.

Question 9

A person who is mentally impaired generally can create only __________ contracts.
A) fraudulent
B) void
C) unconscionable
D) voidable

Accepted Answer

A mentally impaired person can create voidable contracts, which means the contract can be either affirmed or voided by the impaired person. However, if the impairment is severe enough to render the person completely incapable of understanding the nature and consequences of the contract, then the contract may be considered void. It is important to note that a mentally impaired person may still be able to create valid contracts if they have a legal guardian or representative who can act on their behalf.

Question 10

Which of the following is the MOST accurate statement regarding economic duress?
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.

Accepted Answer

Economic duress may be grounds for rescission of a contract. Economic duress occurs when one party uses their economic power to force the other party to agree to contractual terms they would not have otherwise agreed to. However, proving economic duress can be difficult as it requires showing that there was no reasonable alternative but to agree to the terms.

Question 11

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.

Accepted Answer

This statement is not true because fraud requires the defendant to have made the false statement with the intent to deceive or mislead the plaintiff, not in good faith. The other statements accurately reflect the elements of fraud, which include knowledge of falsity, reliance on the false statement, and motive or intent to induce the plaintiff to enter into a contract.

Question 12

Vince has begun forgetting things and is becoming very difficult to get along with. He is 85, has been ill, and is very fond of his housekeeper Annie. He gives a deed to Annie for all of his real property. At Vince's death, his children, who got only his photograph albums according to the will, ask that the deed be set aside and the land be put back in the estate for purposes of division among all the children. What will be the probable result in this case?
A) Since Vince was 85 he was probably incompetent and the court would rule for the children.
B) Clearly Annie used her position of dominance to persuade Vince to deed her the property, and it will be set aside.
C) Unless the children can prove that Vince was unable to understand what he was doing, or that Annie used her position to improperly influence Vince, Annie can keep the property.
D) Annie will not be able to keep the property since she is not a family member.

Accepted Answer

Annie may keep the property unless the children can prove that Vince was unable to understand what he was doing or that Annie used her position to improperly influence Vince. Age alone does not determine competency, and being fond of his housekeeper does not inherently signify a problem. Additionally, the fact that the children received only photograph albums in the will does not necessarily indicate undue influence. The validity of the deed will depend on the circumstances surrounding its creation and whether Vince fully understood the consequences of his actions.

Question 13

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.

Accepted Answer

The best choice for a relationship required to find undue influence is a doctor-patient relationship. In this type of relationship, the patient may be vulnerable due to their medical condition and may rely heavily on the advice and guidance of the doctor. The doctor, in turn, may use their position of authority to influence the patient's decisions about medical treatment or other matters, which could be considered undue influence. Other choices such as a salesperson-purchaser or bartender-customer relationship may involve some level of persuasion or influence, but they may not be as inherently imbalanced or susceptible to abuse as a doctor-patient relationship. The neighbor-neighbor relationship is also unlikely to involve enough of a power differential to give rise to undue influence. Therefore, choice (C) is the best answer.

Question 14

Mark'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. Mark agreed to the settlement. If he changes his mind, he can probably rescind the settlement on the basis of
A) fraud.
B) duress.
C) undue influence.
D) mistake.

Accepted Answer

The insurance adjuster used duress by making a threat of criminal prosecution to force Mark to settle for less than the house was worth. As a result, Mark may be able to rescind the settlement. Fraud, undue influence, and mistake do not sufficiently apply to the situation described.

Question 15

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.

Accepted Answer

Whether Peter can disaffirm the contract or not depends on the law of the jurisdiction in which the contract was formed. In some jurisdictions, minors are allowed to disaffirm contracts even if they purchased a necessary. In other jurisdictions, misrepresentation can be a defense to disaffirmance by a minor. Therefore, both option B and C may be applicable depending on the law of the jurisdiction in which the contract was formed.

Question 16

As it applies to minors, which of the following is LEAST likely to be regarded as a necessary?
A) rent
B) food
C) medical expenses
D) educational expenses

Accepted Answer

The answer of As it applies to minors, which of...

Question 17

If Jane persuades Linda to buy her horse by telling Linda that the horse runs "like the wind," then Jane's statement is
A) fraud.
B) reckless misrepresentation.
C) a unilateral mistake.
D) puffery.

Accepted Answer

Jane's statement is an example of puffery, which involves using exaggerated or general statements in advertising or sales in order to make a product seem more appealing without making specific factual claims. Puffery is generally not considered legally binding and is not considered to be fraud because it is not intended to deceive, but rather to entice potential buyers.

Question 18

Larson entered Forrester's Auto Mart to purchase a used car. Larson found a vehicle with a sales price of $11,000. After Forrester answered all of Larson's questions, Forrester and Larson agreed to a sale. As Larson was leaving to get the money to pay for the car, Forrester told Larson that he thought Robert Redford formerly owned the car. Larson later learned that Robert Redford had never owned the car. If Larson seeks to rescind the deal based on Forrester's statement, Larson will
A) win because he relied on the misrepresentation.
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 Forrester made a unilateral mistake.

Accepted Answer

Forrester's statement about Robert Redford's ownership is not a material fact affecting the value or functionality of the car, and Larson's decision to purchase was likely based on the car's condition and price rather than the celebrity ownership claim. Thus, proving reliance on this non-material misrepresentation as the basis for the purchase would be challenging.

Question 19

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 $3,500 rather than $35,000. ACE Corp. accepted Jeff's bid, mostly because all the other bids were over $30,000. When Jeff learns of the mistake, he tells ACE Corp. that he cannot do the job for $3,500. 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.

Accepted Answer

This is a unilateral mistake where Jeff made the mistake, but ACE Corp. was aware or should have been aware of the mistake. Therefore, Jeff should be able to rescind the contract.

Question 20

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.

Accepted Answer

As a mother selling her business to her daughter, Pamela has a greater duty to reveal problems in the business because her daughter assumes she will be honest. The relationship of trust between them further magnifies this duty to disclose. Hidden defects in the business may significantly impact her daughter's decision to buy, so Pamela should disclose all known issues. Failing to do so could harm the trust they have, both as a family and as business partners.

Quiz 15: Voidable Contracts: Capacity and Consent

Which scenario is an example of puffery?

A(n) _ contract is illegal from the beginning and may not be enforced by either party; a(n) _ contract is legal but permits one party to escape, if he or she so wishes.

Duress occurs when

In contract law, capacity is best defined as

Deborah purchased a boat from Sun 'N Surf Marine. She later learned that the salesman had made misrepresentations to induce her to make the purchase. Under UCC Section 2-721, Deborah can rescind the contract

Sasha, who is mentally infirmed, 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

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?

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 person who is mentally impaired generally can create only __________ contracts.

Which of the following is the MOST accurate statement regarding economic duress?

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

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

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?

As it applies to minors, which of the following is LEAST likely to be regarded as a necessary?

If Jane persuades Linda to buy her horse by telling Linda that the horse runs "like the wind," then Jane's statement is

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