Question 1

Fact Pattern 15-B2 (Questions B3-B4 apply)
Organic Farms Company contracts to buy two tracts of land from Prime Bottomland, Inc. Both parties believe that the two tracts are adjacent, but in fact they are not. Prime Bottomland is still willing to sell the land, but under these circumstances the deal would adversely affect Organic Farms.
-Refer to Fact Pattern 15-B2. The parties' belief about the adjacency of the property is
A) a bilateral mistake.
B) a fraudulent misrepresentation.
C) a unilateral mistake.
D) unconscionable.

Accepted Answer

The answer of Fact Pattern 15-B2 (Questions B3-B4 apply)
Organic Farms...

Question 2

At an auction for the first time, Dulcinea bids on a one-hundred-year-old Edison-brand phonograph, believing that it is worth more than the price asked. When the item proves to be less valuable, Dulcinea is
A) liable on the bid.
B) not liable on the bid because Dulcinea overestimated the value of the auctioned item.
C) not liable on the bid because the auctioneer overstated the value of the auctioned item.
D) not liable on the bid because this was Dulcinea's first auction.

Accepted Answer

When Dulcinea bids on the phonograph, she is making a binding contract with the auctioneer to purchase the item at the price stated. Even if she overestimated the value of the item, she is still liable on the bid and obligated to pay for it. The auctioneer's role is to facilitate the bidding process and provide information about the item, but ultimately the responsibility of determining value falls on the bidder.

Question 3

Nora enters into a contract with Oceanic Transport, Inc., to insure and ship a painting from France to the United States for a certain price. But Oceanic makes a mistake in adding the costs, which results in a contract price that is $1,000 less than the true cost. Most likely, a court would
A) allow the parties to rescind the contract.
B) award damages to Nora for the mistake.
C) award damages to Oceanic for the mistake.
D) enforce the contract as is.

Accepted Answer

The answer of Nora enters into a contract with Oceanic...

Question 4

Fact Pattern 15-B2 (Questions B3-B4 apply)
Organic Farms Company contracts to buy two tracts of land from Prime Bottomland, Inc. Both parties believe that the two tracts are adjacent, but in fact they are not. Prime Bottomland is still willing to sell the land, but under these circumstances the deal would adversely affect Organic Farms.
-Refer to Fact Pattern 15-B2. Because of the parties' belief about the adjacency of the property, their contract is
A) unavoidable.
B) unconscionable.
C) unenforceable.
D) voidable.

Accepted Answer

The answer of Fact Pattern 15-B2 (Questions B3-B4 apply)
Organic Farms...

Question 5

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
A) a mistake.
B) fraudulent.
C) an opinion.
D) an attempt at undue influence.

Accepted Answer

Cullen's statement is an opinion and does not guarantee that the bike will actually win any race. It is possible for Barrie to have not won any races with the bike due to various factors such as Barrie's skill level or the competition level.

Question 6

Fact Pattern 15-B1 (Questions B1-B2 apply)
Digital Storage, Inc., offers to sell provide cloud-computing services to Entrepreneur Enterprises, Inc., but mistakenly transposes some of the digits in the price so that $15,400 appears in the offer as $14,500. Entrepreneur Enterprises accepts the written offer.
-Refer to Fact Pattern 15-B1. Entrepreneur Enterprises' best argument in favor of enforcement of the contract is that
A) a bilateral mistake does not afford relief from a contract.
B) a mistake of value does not afford relief from a contract.
C) a unilateral mistake does not afford relief from a contract.
D) the price was below the prices of comparable devices.

Accepted Answer

A unilateral mistake occurs when one party is mistaken about a material fact, such as the price, and the other party knows or should have known about the mistake. In this case, Digital Storage, Inc. made the mistake and Entrepreneur Enterprises was not aware of the mistake. Therefore, Entrepreneur Enterprises could argue that the mistake should not be grounds for rescission of the contract.

Question 7

ApartmentsRUs, a property management firm, presents a standard-form lease for an apartment to Barnaby, a potential tenant. ApartmentsRUs does not pressure Barnaby to sign the lease, but offers it on a take-it-or-leave-it basis. Barnaby signs the lease, but later wants to withdraw from the contract. He is most likely to avoid enforcement of the lease on the ground of
A) economic duress.
B) undue influence.
C) unconscionability.
D) mistake.

Accepted Answer

The fact that ApartmentsRUs is presenting a take-it-or-leave-it standard-form lease can indicate that the contract is unconscionable. Unconscionability refers to a contract being "overly harsh or one-sided in favor of the party who has the greater bargaining power", and can be used as a defense against enforcement of a contract that is deemed to be unconscionable. In this case, Barnaby may argue that the lease is unconscionable due to the unequal bargaining power between ApartmentsRUs and himself. Economic duress might apply if ApartmentsRUs had used threats or coercion to make Barnaby sign the contract. Undue influence would require ApartmentsRUs to have used deceitful tactics to persuade Barnaby to sign the contract. Mistake would only be applicable if both parties made errors during the negotiation of the contract.

Question 8

Raven, the owner of Strawberry Fields, contracts to sell its harvest to Tender Fruits, Inc. When Raven refuses to per?form, Tender Fruits files a suit to enforce the contract. Raven and Tender Fruits are in a state that does not recognize the doctrine of unconscionability. To defend suc?cess?fully against enforce?ment of the contract on similar grounds, Raven might rely on traditional notions of
A) fraud.
B) materiality.
C) mistake.
D) value.

Accepted Answer

Without the doctrine of unconscionability as an option, Raven would need to rely on traditional contract defenses. Of the options given, fraud might be the most viable defense as it involves intentional misrepresentation of material facts, which could have induced Raven to enter the contract under false pretenses.

Question 9

Camille, a tennis pro, convinces Dante, who has no athletic ability, that he has considerable skill and induces him to pay Camille $1,000 for tennis lessons. When Dante realizes the truth, he files a suit against Camille. Dante is most likely to recover on the basis of
A) opinion.
B) fraud.
C) unconscionability.
D) none of the choices.

Accepted Answer

Camille's actions constitute fraud, as she intentionally misled Dante about his skill level in order to financially benefit from him. This makes the agreement between them voidable, and Dante may be able to recover the $1,000 he paid for the lessons.

Question 10

Mona is induced by her guardian Newt to sign a contract to invest her student loan funds in Overseas Bank through Newt's investment firm. Unknown to Mona, Newt realizes ongoing commissions from the investment. Most likely, Mona may
A) not rescind the contract.
B) rescind the contract on the basis of undue influence.
C) rescind the contract on the basis of mistake.
D) rescind the contract on the basis of unconscionability.

Accepted Answer

Mona was induced by her guardian (who may have authority over her) to sign a contract without full understanding of its terms, and the guardian was receiving commissions from the investment. This is an example of undue influence, which makes the contract voidable at the option of the victim. Therefore, Mona may rescind the contract on the basis of undue influence.

Question 11

Fact Pattern 15-B3 (Questions B14-B15 apply)
In selling a commercial building, Birdie tells Colt that the property 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 15-B3. 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
A) a mistake of value.
B) a valid defense to a charge of fraud.
C) negligent misrepresentation.
D) unconscionable.

Accepted Answer

Birdie made a statement about the property without having any knowledge about its capacity, which shows her negligence. This is a case of negligent misrepresentation. Her statement was made with the intention of making a sale, but it still qualifies as a misrepresentation. This defense would not be valid for a charge of fraud. Neither does this situation meet the requirements of mistake of value or unconscionability.

Question 12

Garth owns two all-terrain vehicles (ATVs), worth $1,000 and $500, re?spec?tively. Helen agrees to buy "Garth's ATV" for $750. Garth believes, in good faith, that he is selling the $500 ATV. Helen believes, in good faith, that she is buying the $1,000 ATV. In this situation
A) Garth is entitled to $750 for the $500 ATV.
B) Helen is entitled to the $1,000 ATV for $750.
C) Helen must buy both ATVs for $1,500.
D) there is no contract.

Accepted Answer

There is no contract because both parties had different understandings of what was being sold, and there was no meeting of the minds. This is known as a mutual mistake. Without an agreement as to the specific ATV being sold, there can be no valid contract. Therefore, neither party is entitled to anything, and the transaction is void.

Question 13

Byron agrees to sell to Charity, for $1,500, a remote parcel of land. They be?lieve the land to be worthless, but beneath it is a gold mine. Byron can
A) not rescind the contract.
B) rescind the contract on the basis of fraud.
C) rescind the contract on the basis of mistake.
D) rescind the contract on the basis of undue influence.

Accepted Answer

The answer of Byron agrees to sell to Charity, for...

Question 14

Gene sells a trail bike to Hollis without disclosing that the odome?ter, which reads 10,000 miles, was disconnected 90,000 miles ago. Gene is most likely liable for
A) unconscionability.
B) fraud.
C) mistake.
D) nothing.

Accepted Answer

Gene's failure to disclose the fact that the odometer was disconnected 90,000 miles ago is a deliberate misrepresentation of the mileage to Hollis, which constitutes fraud. As such, he is likely liable for fraud.

Question 15

Fact Pattern 15-B3 (Questions B14-B15 apply)
In selling a commercial building, Birdie tells Colt that the property 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 15-B3. Under these circumstances, Colt's best course of action is most likely to
A) scam Birdie.
B) induce Birdie to give him the commission on her next sale.
C) recover damages or rescind the contract to buy the building.
D) sabotage Birdie's career with bad publicity.

Accepted Answer

Colt can choose to either recover damages or rescind the contract since Birdie made a false statement that induced him to buy the property. This gives Colt a legal right to seek legal remedies for the damages he has suffered. Scamming Birdie, inducing her to give him a commission, or sabotaging her career would not be legal or ethical courses of action.

Question 16

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 duress, where Seth is using a threat to coerce Tia into selling the house for less than its market value. Such agreements are not enforceable by law.

Question 17

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
A) recover damages.
B) rescind the contract.
C) undo Eve's influence.
D) punish the defendant.

Accepted Answer

In order to recover damages for alleged fraud, Drake will need to prove that he suffered an injury or financial loss as a result of Eve's misrepresentation. This is a key element of any fraud claim, and without proof of an injury, it will be difficult for Drake to successfully recover damages.

Question 18

Kari, a real estate agent, assures Linc that a certain parcel of commercial property fronts on the most highly trafficked street in Metro City. Linc buys the property and then discovers that the street has no more traffic than any other in its vicinity. Linc is most likely a victim of
A) opinion.
B) fraud.
C) mistake.
D) nothing.

Accepted Answer

Linc is a victim of fraud because Kari made a false representation to him about the property, knowingly or recklessly made false statements of material fact that induced Linc to buy the property.

Question 19

Fact Pattern 15-B1 (Questions B1-B2 apply)
Digital Storage, Inc., offers to sell provide cloud-computing services to Entrepreneur Enterprises, Inc., but mistakenly transposes some of the digits in the price so that $15,400 appears in the offer as $14,500. Entrepreneur Enterprises accepts the written offer.
-Refer to Fact Pattern 15-B1. Digital Storage's best defense against enforcement of the contract is that Entrepreneur Enterprises knew
A) a bilateral mistake supports the cancellation of a contract.
B) a mistake of value supports the cancellation of a contract.
C) a unilateral mistake supports the cancellation of a contract.
D) the price was below the prices of comparable devices.

Accepted Answer

The answer of Fact Pattern 15-B1 (Questions B1-B2 apply)
Digital Storage,...

Question 20

Ray buys a rural vineyard from Sergio, who claims that it would be a prime site for a housing subdivision. Ray later learns that the law does not permit the land to be used for housing. Ray may
A) not rescind the contract.
B) rescind the contract only if Ray did not know the law before the deal.
C) rescind the contract only if Sergio knew about the law before the deal.
D) rescind the contract only if the law is not common knowledge.

Accepted Answer

The answer of Ray buys a rural vineyard from Sergio,...

Quiz 15: Mistakes, Fraud, and Voluntary Consent

At an auction for the first time, Dulcinea bids on a one-hundred-year-old Edison-brand phonograph, believing that it is worth more than the price asked. When the item proves to be less valuable, Dulcinea is

Nora enters into a contract with Oceanic Transport, Inc., to insure and ship a painting from France to the United States for a certain price. But Oceanic makes a mistake in adding the costs, which results in a contract price that is $1,000 less than the true cost. Most likely, a court would

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

Camille, a tennis pro, convinces Dante, who has no athletic ability, that he has considerable skill and induces him to pay Camille $1,000 for tennis lessons. When Dante realizes the truth, he files a suit against Camille. Dante is most likely to recover on the basis of

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

Garth owns two all-terrain vehicles (ATVs) , worth $1,000 and $500, re?spec?tively. Helen agrees to buy "Garth's ATV" for $750. Garth believes, in good faith, that he is selling the $500 ATV. Helen believes, in good faith, that she is buying the $1,000 ATV. In this situation

Byron agrees to sell to Charity, for $1,500, a remote parcel of land. They be?lieve the land to be worthless, but beneath it is a gold mine. Byron can

Gene sells a trail bike to Hollis without disclosing that the odome?ter, which reads 10,000 miles, was disconnected 90,000 miles ago. Gene is most likely liable for

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

Kari, a real estate agent, assures Linc that a certain parcel of commercial property fronts on the most highly trafficked street in Metro City. Linc buys the property and then discovers that the street has no more traffic than any other in its vicinity. Linc is most likely a victim of

Ray buys a rural vineyard from Sergio, who claims that it would be a prime site for a housing subdivision. Ray later learns that the law does not permit the land to be used for housing. Ray may