Question 1

Relationships that may lead to a court's careful scrutinization of contracts between the parties to make sure undue influence was not present include all but:

Accepted Answer

Contracts between a salesperson and a customer are generally considered to be between parties in an ordinary commercial relationship, without the inherent power imbalance that might lead to undue influence, unlike the other relationships listed which involve a fiduciary duty or a significant imbalance of power or trust.

Question 2

Which of these statements about duress is accurate?

Accepted Answer

Duress by improper threats or acts is more common than physical duress because it involves psychological pressure rather than physical force.

Question 3

An arm's-length transaction is one in which:

Accepted Answer

An arm's-length transaction is one where the parties involved are independent and on equal footing, each acting in their own self-interest, without any pressure from the other. This ensures that the transaction is conducted fairly and that the price reflects the true market value.

Question 4

Sam wants to sell his golden retriever to Al. Sam tells Al that the dog is three years old and that he will point, back, and retrieve. Al relies on these statements and purchases the bird dog. Although the dog is three years old and will point at birds, he will not back (honor another dog's point). The buyer has most probably been a victim of:

Accepted Answer

Fraud in the inducement occurs when a party is tricked into entering a contract by false statements, misrepresentations, or other deceitful practices. In this case, Sam's false statement about the dog's ability to back constitutes fraud in the inducement, as Al relied on this misinformation when deciding to purchase the dog.

Question 5

Which of the following is NOT an element of fraud?

Accepted Answer

Competent parties are not relevant to fraud as it refers to the legal capacity of individuals to enter into a contract or agreement. The other elements of fraud include material misrepresentation (making a false statement), knowledge of falsity (knowing that the statement is false), and justifiable reliance (the victim relies on the false statement to their detriment).

Question 6

In the Berardi v. Meadowbrook Mall Company case, the court found:

Accepted Answer

Economic duress is recognized when a party is left with no reasonable alternative but to accept the terms of a contract, which was the finding in the Berardi v. Meadowbrook Mall Company case.

Question 7

A contract was made for 125 bales of cotton to arrive on a ship named "Peerless" from Bombay. Unbeknownst to either party to the contract, there were two ships named "Peerless," both of which were sailing from Bombay. One sailed in October and the other in December. The buyer had in mind the ship sailing in October, but the seller had in mind the ship sailing in December. Each party held his belief in good faith. When the goods failed to arrive on time, the buyer sued for breach of contract. The court found:

Accepted Answer

The court found that no contract existed due to a mutual mistake regarding the identity of the ship named "Peerless," as both parties had different ships in mind when they made the contract. This mistake in the meaning of terms meant there was no meeting of the minds, a fundamental requirement for a valid contract.

Question 8

Stewart entered into a contract with Will to have Will build a 10-unit apartment complex on Elm Street in Randolph County. Unknown to both parties, this land had recently been rezoned and only single-unit dwellings can be constructed. In this case:

Accepted Answer

A mistake of law, which in some jurisdictions is treated similarly to a mistake of fact, can make a contract voidable if it is based on a fundamental misunderstanding that significantly affects the agreement. In this scenario, the rezoning of the land, unbeknownst to both parties, constitutes such a mistake, impacting the feasibility and legality of the intended construction project.

Question 9

Tom tries to sell his Aston-Martin to Victoria for $12,000. Tom tells Victoria, "I paid $12,000 for the car in 1978 and it's worth twice that today." Tom really paid $8,000 for the car in 1978. If Victoria buys the car, basing her decision on Tom's statement, which of the following correctly states the situation?

Accepted Answer

Tom's false statement about the original purchase price to persuade Victoria to buy the car at a specific price can be considered a material misrepresentation, providing grounds to set the contract aside if Victoria relies on this misinformation in her decision to purchase the car.

Question 10

A contract induced by threatening to bring a civil suit against an individual is prohibited:

Accepted Answer

A contract induced by threatening to bring a civil suit against an individual is prohibited if the threat constitutes an abuse of process, meaning using legal process against someone in an improper manner or for an ulterior purpose.

Question 11

Scienter is a legal term which means:

Accepted Answer

Scienter is a legal term that refers to the knowledge that a person has about a particular fact or situation. In the context of contract law, scienter specifically refers to the knowledge that a seller has about the falsity of a statement made to a buyer. If a seller makes a statement that they know to be false, and they do so with the intention of deceiving the buyer, then they are said to have acted with scienter.

Question 12

Under the Restatement, if the parties to a contract attach materially different meanings to their manifestations and neither party knows or has reason to know the meaning attached by the other:

Accepted Answer

Under the Restatement (Second) of Contracts, when parties to a contract attach materially different meanings to their manifestations and neither party knows or has reason to know the meaning attached by the other, the situation is treated as a mutual mistake. This can lead to there being no contract at all because there is no meeting of the minds—an essential element for contract formation.

Question 13

A misrepresentation is material if:

Accepted Answer

A misrepresentation is considered material if it would likely induce a reasonable person to enter into a transaction, as it significantly affects the decision-making process of the person being misled.

Question 14

Which of the following results in a void contract?

Accepted Answer

Duress by physical force results in a void contract because it means one party was forced into the contract against their will, which invalidates the agreement from the outset.

Question 15

Adam wants to buy a six-passenger car. The salesman tells him that the two-seat sports car Adam sees on the car lot would be just perfect for six people. Adam test drives the car and then buys it.

Accepted Answer

Adam is not entitled to relief based on fraud because the claim that a two-seat sports car could seat six people is not a statement that a reasonable person would rely on as being true. It's an obvious exaggeration or puffery, and Adam had the opportunity to observe the car's capacity himself during the test drive.

Question 16

Contracts induced by threats of __________ are voidable, regardless of whether the coerced party has committed an unlawful act.

Accepted Answer

Contracts induced by threats of criminal prosecution are voidable because they involve coercion, undermining the voluntary nature of the agreement. Threatening criminal prosecution to force someone into a contract is considered an improper use of the legal system for personal gain.

Question 17

If incorrect, which of the following would probably be considered a misrepresentation of a material fact?

Accepted Answer

A statement about new brakes is a factual claim that can be verified or disproven, making it a material fact. If incorrect, it would be considered a misrepresentation.

Question 18

Anita tells Murray she will hit him in the head with a golf club unless Murray signs a contract agreeing to pay Anita $14,000 for her golf cart, which is only worth $4,000. Because of the threat, Murray signs the contract.

Accepted Answer

The answer of Anita tells Murray she will hit him...

Question 19

Which of the following is not a requisite for fraud in the inducement?

Accepted Answer

Fraud in the inducement involves a false representation, knowledge and intent to deceive, and justifiable reliance on the misrepresentation, but it does not require a specific monetary loss threshold to be considered fraud.

Question 20

By holding a knife to his back, Ed compelled Sean to sign a contract advantageous to Ed. This contract was entered under:

Accepted Answer

Physical duress occurs when one party compels another to agree to a contract through physical force or threats thereof, as in the scenario where Ed uses a knife to coerce Sean into signing a contract.

Quiz 11: Conduct Invalidating Assent