Q&A Hero

Q: The primary purpose of the Statute of Frauds is to ensure that all parties to a contract understand all the terms of the contract.

Q: The Statute of Frauds is a compilation of all the laws and regulations related to fraud.

Q: Under the Statute of Frauds, oral contracts are void.

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

Q: Multi Investments, Inc., offers to buy Nano Toy Corporation. On May 1, Nano provides copies of its financial statements for the previous 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 financial statements, buys Nano. On June 10, the buyer discovers the inventory overstatement. Can Multi succeed in a suit against Nano for fraud?

Q: Dumont threatens physical harm to force Eddie to sell his business, Citywide Vending, Inc., to Dumont for a below-market price. This is a. duress. b. fraud. c. a unilateral mistake. d. undue influence.

Q: 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.

Q: 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 opinion.

Q: Lou uses undue influence to induce Mona to sign a contract to invest her student loan funds in National Overseas Bank. Mona may a. avoid the contract or choose to carry it out. b. do nothing once she has signed the contract. c. recover from her lender for a failure to influence her "due." d. recover from the bank for a failure to undo Lou's influence.

Q: 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.

Q: Scienter exists if a. Martin knows that the transmission on his truck is defective, but does not tell this fact to potential buyers. b. The racehorse that Karen is trying to sell has a genetic defect, but Karen does not know about the defect, and so she does not warn potential buyers. c. Jake, a real estate agent, tells a client that he has a house that "will make all her dreams come true." d. Jon forces Bill to sign a contract to sell Jon a car below market value.

Q: 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 a. opinion. b. fraud. c. mistake. d. nothing.

Q: Mark fails to reveal a material fact in a business deal with Nancy. This constitutes fraud a. if Mark is unaware of the fact and the failure. b. if the amount of consideration received is grossly inadequate. c. if the fact concerns a serious defect known to Mark and unlikely to be known by Nancy. d. under any circumstances.

Q: Gene sells a trail bike to Hollis without disclosing that the odometer, which reads 10,000 miles, was disconnected 90,000 miles ago. Gene is most likely liable for a. undue influence. b. fraud. c. mistake. d. nothing.

Q: 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.

Q: 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.

Q: Creighton applies to BigData Corporation for a position as a software engineer. Creighton has no training in computers or programming and no background as an engineer. After Creighton is hired, BigData learns the truth. BigData 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.

Q: Winona enters into a contract with Peyton to buy Peyton's land based on Peyton's assertion that the land is legally open to development. After the sale, Winona learns what Peyton knew previouslyonly a small section of the land can be built on. A local law prohibits construction on the rest of the property. Winona can a. not avoid the contract because persons are assumed to know the law. b. avoid the contract due to a mutual mistake. c. avoid the contract due to a mistake in value. d. avoid the contract due to fraud.

Q: In selling a 300-acre farm to Rural Land Investments, Inc., Simone tells the buyer's representative that the land "will be worth twice as much by next year." This is a. undue influence. b. fraud. c. a mistake. d. an opinion.

Q: Garland induces Jules to enter into a contract for the purchase of a Chef's Burger House restaurant. Garland knowingly misrepresents a number of material features about the restaurant and the business. When Jules discovers the truth, he can a. not rescind the contract because Jules assumed the risk that the bargain would prove to be different from what he thought. 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.

Q: Barb, a real estate agent, is showing John a house. She tells him that this is a house where "his family can live happily ever after." John buys the house, but his wife does not like it. John a. can rescind the contract on the ground of fraud. b. can rescind the contract on the ground of misrepresentation. c. can rescind the contract on the ground of mistake. d. was not defrauded.

Q: Andy knows nothing about horses. Peter, an expert horse trainer, knows that a certain horse has no talent and is not likely to win any competitions. Peter convinces Andy to buy the horse for $500,000 by assuring him that it has great talent. The horse turns out to have no talent and never wins any competitions. Andy can most likely recover damages based on a. fraud. b. mistake. c. undue influence. d. none of the choices.

Q: James is in an art gallery when Mitch, who has no special art expertise, points to a painting and says, "That artist is so good. That piece will be worth a fortune in a few years!" James buys the painting, which does not turn out to be valuable. James tries to return the painting and recover his purchase price. A court will a. order the art gallery to pay James the full purchase price. b. order Mitch to pay James the full purchase price. c. enforce the contract between James and the art gallery. d. enforce the contract between James and the art gallery, but order Mitch to pay James the full purchase price.

Q: Pete, an accountant, convinces his client Kasey to invest her savings in a nonexistent social-networking Web site. When Kasey learns the truth, she can a. seek to void the contract on the ground of undue influence. b. recover damages based on a claim of mistake of value. c. rescind the contract to invest in the Web site. d. seek to void the contract on the ground of unconscionability.

Q: Phoebe enters into a contract with Everest for a guided tour of Whitewater Canyon. Everest acts as though he is an experienced, knowledgeable guide, when in reality he has never been in the canyon. Phoebe is most likely a victim ofa. undue influence.b. fraud.c. mistake.d. nothing.

Q: 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. Digital Storage's best defense against enforcement of the contract is that Entrepreneur Enterprises knewa. 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.

Q: 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.Entrepreneur Enterprises' best argument in favor of enforcement of the contract is thata. 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.

Q: 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 isa. 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.

Q: 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. Because of the parties' belief about the adjacency of the property, their contract isa. unavoidable.b. unconscionable.c. unenforceable.d. voidable.

Q: 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. The parties' belief about the adjacency of the property isa. a bilateral mistake.b. a fraudulent misrepresentation.c. a unilateral mistake.d. unconscionable.

Q: Dwight believes that a new phone to be sold by Ear Sonic Corporation will become the most widely bought and used phone in the global market. Dwight enters into a contract to buy 500 shares of Ear Sonic stock, anticipating an increase in its value. If the price of the stock does not rise, Dwight can recovera. nothing.b. the amount of the purchase price.c. the amount of the purchase price plus the expected increase.d. the amount of the purchase price plus the unexpected decrease.

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 the mistake involves a material fact.b. if the mistake involves any fact.c. if the mistake is one of value or quality.d. under no circumstances.

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 the error was made inadvertently and without gross negligence.b. if the error was made intentionally or negligently.c. if the error was made intelligently but distractedly.d. under no circumstances.

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.