Q&A Hero

Q: Lewis, an employee of Silos, Inc., makes a substantial mathematical error in totaling the estimated costs for a project for which AgriCo-op is seeking bids. Consequently, Silos's bid is significantly low. Any contract with AgriCo-op that includes the mistake may be rescindeda. if AgriCo-op knew or should have known of the mistake.b. if Lewis's supervisor did not know of the mistake.c. if Silos knew or should have known of the mistake.d. under no circumstances.

Q: In La Junta, Carlos and Alvaro contract for the sale of five hundred head of Carlos's cattle for $95 per head. Unknown to either party, a unforeseen storm has struck the herd and many of the cattle have died. Alvaro isa. entitled to recover the value of the lost cattle.b. not required to pay due to the bilateral mistake.c. not required to pay due to the unilateral mistake.d. required to pay because he assumed the risk the cattle might die.

Q: Jane and Phil enter into a contract, but make a bilateral mistake. For the contract to be rescinded by either party, the bilateral mistake must be about a. a material fact. b. value. c. an opinion. d. a prediction.

Q: Kathleen sells Richard a racehorse for $1,000. Both Kathleen and Richard think that the horse is too slow to win any races. Richard then enters the horse in a race, and it wins easily. He enters it in more races, and the horse soon wins more than $1 million. Kathleen tries to rescind the contract to sell the horse, claiming that it was worth more than $1,000. A court will a. cancel the contract due to Kathleen's failure to know the horse's value. b. cancel the contract due to Richard's failure to know the horse's price. c. cancel the contract due to the difference between the contract price and the horse's true value. d. enforce the contract.

Q: Byron agrees to sell to Charity, for $1,500, a remote parcel of land. They believe the land to be worthless, but beneath it is a gold mine. A court would a. cancel the contract due to Byron's failure to know the land's value. b. cancel the contract due to Charity's failure to know the land's price. c. cancel the contract due to the difference between the contract price and the market price. d. enforce the contract.

Q: Katie and Linda enter into a contract for Katie to buy Linda's house in which there are several terms that are subject to more than one reasonable interpretation. If Katie and Linda attach materially different meanings to a term a. only Katie will be able to void the contract. b. only Linda will be able to void the contract. c. neither Katie nor Linda will be able to void the contract. d. either Katie or Linda will be able to void the contract.

Q: Garth owns two all-terrain vehicles (ATVs), worth $1,000 and $500, respectively. 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.

Q: When the dominant party in a fiduciary relationship benefits from that relationship, a presumption of undue influence arises.

Q: Because fraud actions necessarily involve wrongful conduct, courts may award punitive damages.

Q: The use of threats to force a party to enter into a contract is duress.

Q: Most courts require a showing of injury when an action is to rescind a contract for fraud.

Q: 31. The use of threats to force a party to enter into a contract is undue influence.

Q: Duress is a defense to the enforcement of a contract, but not a ground for rescission of a contract.

Q: A contract entered into under undue influence is voidable.

Q: Reliance on a misrepresentation is justified if the misrepresentation is an obviously extravagant statement.

Q: Intent to deceive is an element of fraud.

Q: A deceived person must have a justifiable reason for relying on a misrepresentation.

Q: Scienter exists if a party makes a statement that he or she believes to be scientifically verifiable.

Q: A seller's failure to disclose a serious defect about a product for sale may give rise to an action for fraud.

Q: Misrepresentation can occur by words or actions, but not by silence.

Q: Misrepresentation of a material fact cannot occur through conduct alone.

Q: Misrepresentation of a material fact can occur by words or action.

Q: Misrepresentation of law ordinarily entitles a party to relief from a contract.

Q: When a nave purchaser relies on an opinion from an expert, the innocent party is not entitled to rescission or reformation.

Q: A fact is objective and verifiable.

Q: A false statement by an expert to a naive buyer usually will entitle the buyer to rescind or reform a contract.

Q: Misrepresentation can occur through conduct.

Q: Misrepresentation of a material fact is an element of fraud.

Q: An innocent party can enforce a fraudulent contract and seek damages for any harm resulting from the fraud.

Q: An innocent party does not need to suffer an injury to collect damages as a result of a misrepresentation.

Q: An innocent party may never rescind a fraudulent contract.

Q: If a contractor's bid contains a mistake in addition when totaling the estimated costs, the contract may not be enforceable.

Q: A mistake in value will rarely enable a party to a contract to avoid the contract.

Q: Words or terms in contracts that are subject to more than one reasonable interpretation can lead to bilateral mistakes.

Q: Often, when both parties to a contract are mistaken as to the same material fact, either party can rescind the contract.

Q: For a party to a contract to receive relief from either a unilateral or a bilateral mistake, the mistake must involve a material fact.

Q: A unilateral mistake always gives the mistaken party a right to relief from the contract.

Q: A unilateral mistake is a mistake made by both parties to a contract.

Q: A contract is sometimes voidable if one party is aware that the other party made a mistake of fact.

Q: Any party who does not receive what he or she considers a fair bargain can argue mistake.

Q: A material fact is a fact that a reasonable person would consider important when determining his or her course of action.

Q: Voluntary consent may be lacking because of misrepresentation but not because of a mistake.

Q: Beth is a minor. She buys a set of sessions with a personal trainer, and a water bottle and some weights from a fitness store. Later, Beth decides that she does not want the water bottle or weights. In most states, Beth a. can disaffirm the contract and return the water bottle and weights, but keep the training sessions. b. can only disaffirm the contract if she returns all the goods. c. cannot disaffirm the contract. d. can disaffirm the contract and keep all the goods.

Q: Gaye, a minor, signs a contract to buy a motorcycle from Hi-Valu Cycles by misrepresenting her age as twenty-one. Gaye fails to make the payments. Hi-Valu sues. Ordinarily, Gaye can a. not return the motorcycle nor avoid further liability. b. not return the motorcycle but can avoid further liability. c. return the motorcycle and avoid further liability. d. return the motorcycle but cannot avoid further liability.

Q: Eli, a minor, buys an automobile insurance policy from Faithful Insurance Company and pays a $1,000 premium. If Eli can disaffirm the contract, he can most likely recover a. $500. b. $1,000. c. $1,500. d. nothing.

Q: On Mitchell's eighteenth birthday, he decides that he no longer wants to keep a fishing boat he bought from Water Craft, Inc., when he was seventeen. His right to disaffirm the deal will depend on a. why Mitchell no longer wants to keep the boat. b. why Mitchell entered into the contract to buy the boat. c. whether Mitchell acts within a reasonable period of time. d. whether Water Craft has the right to disaffirm.

Q: Chet, a minor, signs a contract with Porsha, an adult. The contract is a. neither void nor voidable. b. voidable at the option of Chet. c. void as a matter of law. d. voidable at the option of Porsha.

Q: Fletcher signs a contract to buy a new electric guitar and amplifier just before reaching the age of majority. After reaching the age of majority, Fletcher does not take possession or make payments. With respect to the contract, most courts would hold that this is a. disaffirmance. b. emancipation. c. ratification. d. rescission.

Q: Gabriella and Esteban are emancipated minors who, after their emancipation, marry each other. Later, they enter into a contract to buy a condominium. In this sequence of events, most likely, their minority status a. terminated on their emancipation. b. terminated on their marriage. c. terminated on entering into the contract to buy a condominium. d. has not yet terminated.

Q: Olivia, a minor, signs a contract to buy a bike from Phil, the owner of SuperCycles Bike Store. Olivia's right to disaffirm the contract a. does not change the fact that Phil is bound by the contract. b. does not yet exist because Olivia is still a minor. c. gives Phil, an adult, the right to disaffirm the contract. d. is not valid because a bike is a "necessary."

Q: At age seventeen, Daryl enters into a contract to buy a dozen movies from eHD TV Stream, Inc., an online video service. Soon after reaching the age of majority, Daryl attempts to disaffirm the contract. eHD files a suit against him. The court will most likely consider the contract ratified if it is a. executed. b. exculpatory. c. express or implied. d. emancipated.

Q: Katie buys a car when she is seventeen. When she is twenty-five, Katie tries to disaffirm the contract and recover all her car payments. A court will likely find that the contract was a. ratified and Katie cannot recover her payments. b. not ratified and Katie can recover her payments. c. not a valid contract because Katie was a minor when she entered into it and she can recover her payments. d. ratified, but Katie can still recover her payments because she was a minor when she entered into the contract.

Q: Chris, a minor, signs a contract to purchase alcoholic beverages for Dine & Drink, his parents' restaurant. The contract is a. valid but may be disaffirmed. b. valid but may not be disaffirmed. c. void as a matter of law. d. void unless it is also signed by Edie, the manager of Dine & Drink.

Q: Richard is an adult. He enters into a contract to sell sixteen-year-old Jane his car for $3,000. The next day Richard receives an offer of $4,000 for his car from twenty-year-old Bill. Richard a. cannot disaffirm his contract with Jane because he is an adult. b. can disaffirm his contract with Jane because Bill is an adult and contracts with adults take precedence over contracts with minors. c. cannot disaffirm his contract with Jane because she is a minor. d. can disaffirm his contract with Jane because the contract has not been ratified.

Q: When one party uses fraud to induce another party to enter into an illegal bargain, the second party will be allowed to recover for the performance or its value.

Q: When a statute protects a certain class of people, a member of that class cannot enforce an illegal contract.

Q: In most illegal contracts, both parties are considered to be equally at fault, and neither party can enforce it or recover damages under it.

Q: In general, if a contract is illegal, a court will not enforce it.

Q: An exculpatory clause in an employment contract is not enforceable if it removes the employer's potential liability for injuries to employees.

Q: In a contract, an exculpatory clause releases a party from liability in the event of monetary or physical injury no matter who is at fault.

Q: In certain circumstances, bargains are so oppressive that the courts relieve innocent parties of part or all of their duties.

Q: All adhesion contracts are unconscionable.

Q: Uunconscionability can involve the lack of an opportunity to read a contract or ask questions about its meaning.

Q: An adhesion contract is a contract drafted by one party and presented to another on a take-it-or-leave-it basis.

Q: A covenant not to compete is never enforceable.

Q: Whether a contract with an unlicensed professional is legal and enforceable depends on the purpose of the licensing statute.

Q: All states require that members of certain professions to have licenses.

Q: Any contract entered into with an unlicensed party is unenforceable.

Q: Gambling involves the distribution of property by chance among persons who have paid valuable consideration for the opportunity to receive it.

Q: All forms of gambling are legal in all states.

Q: It is legal to charge any interest rate for an ordinary loan.

Q: Statutes often set forth rules specifying the terms of contracts.

Q: Any contract to commit a crime is in violation of a statute and thus is unenforceable.

Q: Contracts entered into by mentally incompetent persons can be valid.

Q: A person who enters into a contract when he or she is intoxicated can void the contract under any circumstances.

Q: A person who enters into a contract when he or she is intoxicated can void the contract if he or she did not comprehend the legal consequences.

Q: Parents who sign a contract made by their minor child with an adult have the same option to disaffirm as the child.

Q: In general, minors are personally liable for their contracts.

Q: In some states, misrepresentation of age by a minor is enough to prohibit disaffirmance.

Q: Some states impose a duty on a minor who disaffirms a contract to restore the adult party to the position he or she held before the contract was made.