Question 1

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

Accepted Answer

In order for Mark's failure to reveal a material fact to constitute fraud, the fact must concern a serious defect known to Mark and unlikely to be known by Nancy. This means that Mark cannot be ignorant of the fact or its importance, and the failure to disclose cannot be excused by Nancy's own negligence in discovering it. The amount of consideration received or any other factors are not relevant to the determination of fraud in this case.

Question 2

Multi Investments, Inc., offers to buy Nano Toy Corporation. On May 1, Nano provides copies of its financial statements for the pre?vious year, showing an inventory of $10 million. On May 15, Nano discovers that the previous year's inventory is overstated by $5 million, but does not inform Multi. On June 1, Multi, relying on the fi?nancial statements, buys Nano. On June 10, the buyer discovers the inven?tory over?statement. Can Multi succeed in a suit against Nano for fraud?

Accepted Answer

The answer of Multi Investments, Inc., offers to buy Nano...

Question 3

Scienter exists if

Accepted Answer

Scienter refers to knowledge or awareness of a particular fact. In this case, Martin knows that the transmission on his truck is defective, but he does not disclose this fact to potential buyers. Therefore, he has scienter with respect to the defective transmission.

Question 4

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

Accepted Answer

Undue influence is a type of fraud, and if Mona was induced to sign the contract because of Lou's undue influence, the contract is voidable. Mona may choose to avoid the contract or carry it out if she wishes. However, recovering from her lender for a failure to influence her "due" or recovering from the bank for a failure to undo Lou's influence is not an option in this scenario.

Question 5

Beau sells a 1940 Ford pick-up truck car to Cody without disclosing that he had originally planned to restore the truck but changed his mind because of the cost. Beau is liable for

Accepted Answer

Beau is not liable for anything because he did not have a legal obligation to disclose his initial plans to restore the truck. The decision not to restore it due to cost is not a material fact that would constitute fraud or misrepresentation.

Question 6

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

Accepted Answer

Gene's failure to disclose the fact that the odometer was disconnected 90,000 miles ago constitutes fraud, which involves an intentional misrepresentation of a material fact with intent to deceive or induce reliance. Hollis relied on the odometer reading in purchasing the trail bike and may have paid a higher price than he would have if he had known the true mileage. Therefore, Gene is likely liable for fraud.

Question 7

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

Accepted Answer

In order to recover damages for fraud, proof of an injury is required to show that Drake suffered a financial loss or harm as a result of Eve's false promises. Without proof of injury, it may be difficult or impossible to recover damages in a fraud case. While rescission or undoing Eve's influence may also be remedies available in a fraud case, proof of injury is necessary for any of these remedies to be awarded. Punishing the defendant is not a remedy in a civil lawsuit; it is a function of criminal law.

Question 8

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

Accepted Answer

This is a classic example of duress or coercion, where Seth is manipulating Tia into selling the house for less than its worth by using fear as a tool. A court would likely not enforce this agreement as it goes against the basic principles of contract law, where parties need to enter into contracts voluntarily and without coercion.

Question 9

Floramaria is an elderly woman who lives with her niece Galaxy. Floramaria is depend?ent on Galaxy for support. Galaxy advises Floramaria to "invest" in Galaxy's "profes?sional gambling" venture, or Galaxy will no longer support her. Floramaria liq?uidates her other investments and signs a contract with Galaxy, to whom Floramaria gives the funds. Can Floramaria set aside this contract?

Accepted Answer

The answer of Floramaria is an elderly woman who lives...

Question 10

Dumont threatens physical harm to force Eddie to sell his business, Citywide Vending, Inc., to Dumont for a below-market price. This is

Accepted Answer

Dumont's use of physical harm to force Eddie to sell his business constitutes duress, which is an improper method of inducing a person to enter into a contract.

Question 11

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

Accepted Answer

Mona may rescind the contract on the basis of undue influence because Newt had a position of trust and authority over Mona, and used that position to induce her to enter into the contract for his own benefit. This is a form of coercion and overbearing conduct that undermines the voluntary nature of Mona's consent. Mona may have been vulnerable or inexperienced, and thus susceptible to Newt's influence. As such, the contract may be voidable at Mona's option.

Question 12

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

Accepted Answer

Cullen's statement is an opinion, as it is a subjective assessment of the bike's abilities rather than a factual statement. It is possible that in Cullen's opinion, the bike could win any race, but this does not guarantee that it will actually happen. Ultimately, Barrie's lack of knowledge about bikes may have contributed to the unsuccessful outcome of their attempt to win races with the bike.

Quiz 12: Voluntary Consent