Q&A Hero

Q: Bob's threat to breach an existing contract unless Lauren makes another contract with Bob is considered: A. an element of duress, because breach of an existing contract violates a criminal statute. B. an element of duress, depending mainly on the coerciveness of the threat. C. not an element of duress, because it does not involve physical force. D. not an element of duress, because breaking a contract normally does not violate a criminal statute.

Q: In order for a purchaser of land to avoid a contract with the seller based on duress, it must be shown that the seller's improper threats: A. were due to his relationship with the purchaser. B. actually induced the purchaser to assent to the contract. C. were due to his position of dominance with the purchaser. D. influenced the purchaser to assent as there were no reasonable alternatives.

Q: Geometry Co. manufactures microchips for electrical products. Jojoba monopolizes the supply of gallium arsenide, which is used heavily in the manufacturing of microchips. Because of this monopoly and the demand for microchips, Geometry enters into a long-standing agreement with Jojoba for 20 years. For the first couple of years, due to the huge demand for the microchips, Geometry insisted on timely delivery of the raw material. However, once the demand slumped, Geometry asserted economic duress to avoid the contract. Will Geometry be successful? A. Yes, because Geometry was forced to enter the contract due to Jojoba's monopoly over the supply of the raw material. The consent was not free. B. No, because the facts prove that Jojoba had not caused any undue duress. C. Yes, because there was economic duress and thus the contract is voidable at Geometry & Co.'s discretion. D. No, because Geometry has already taken benefits under the contract for two years.

Q: Martin Nowak, an accountant, entered into a written contract with Jane Gibson to perform certain tax services for Jane. Shortly thereafter, Jane was assessed additional taxes and she wanted to appeal the assessment. Jane was required to appeal immediately and the workpapers held by Martin were necessary to appeal. Martin refused to furnish Jane with the workpapers unless he was paid a substantially higher fee than was set forth in the contract. Jane reluctantly agreed in order to meet the filing deadline. The contract as revised is: A. voidable at Jane's option based on undue influence. B. voidable at Jane's option based on duress. C. void on the ground of undue influence. D. void on the ground of duress.

Q: Morton Reeves, a building subcontractor, submitted a bid for construction of a portion of a high-rise office building. The bid contained material errors in computation. Lago Corp., the general contractor, accepted the bid with the knowledge of Reeves' errors. Reeves: A. must perform the contract unless he can show that Lago acted fraudulently. B. must perform the contract according to the stated terms since his errors were unilateral. C. can avoid liability on the contract only if his errors were not due to his negligence. D. can avoid liability on the contract since Lago knew of his errors.

Q: _____ is a wrongful coercion that induces a person to enter or modify a contract. A. Deceit B. Mistake C. Fraud D. Duress

Q: Which of the following elements establishes a case of duress? A. An assertion was made with knowledge of its falsity. B. There is an untrue assertion of a fact. C. The contract was induced by improper threat. D. There is a mistake about the basic assumption of the contract.

Q: Assuming that the economic condition of the country is progressing, Peter entered into a contract with John for the sale of substantial amount of shares of his company for consideration of $1,000,000. However, due to a slump in the market in the next few months, Peter lost heavily. This would lead to: A. avoidance of the contract. B. enforcement of the contract. C. rescission of the contract. D. reformation of the contract.

Q: Which of the following is a remedy in the case of an erroneous expression of an agreement due to an error in drafting? A. Reformation B. Rescission C. Avoidance D. Tort of deceit

Q: On May 6, Robbie entered into a signed contract with Ed, whereby Robbie was to sell Ed a painting having a fair market value of $350,000 for $130,000. Robbie believed the painting was worth only $130,000. Unknown to either party, the painting had been destroyed by fire on May 4. If Ed sues Robbie for breach of contract, Robbie's best defense is: A. risk of loss had passed to Ed. B. lack of adequate consideration. C. mutual mistake. D. unconscionability.

Q: Which of the following is a ground for avoidance of contract based on a unilateral mistake? A. Both parties are mistaken about a fact. B. Nonmistaken party caused the mistake. C. The mistaken party had reason to know of the mistake. D. Person affected by the mistake does not bear the risk for it.

Q: Paco Corp., a building contractor, offered to sell Roy several pieces of used construction equipment. Roy, engaged in the business of buying and selling equipment, accepted the offer. Paco's written offer had been prepared by a secretary who typed the total price as $10,900, rather than $109,000, which was the approximate fair market value of the equipment. Paco learned of the error in the offer and refused delivery of the equipment unless Roy agreed to pay $109,000. Roy has sued Paco for breach of contract. Which of the following scenarios is the likely outcome? A. Paco will not be liable because there has been a mutual mistake of fact. B. Paco will be able to rescind the contract because Roy should have known that the price was erroneous. C. Roy will prevail because Paco is a merchant. D. The contract is enforceable because Roy had accepted it.

Q: According to contract law, a(n) _____ is a belief about a fact that is not in accordance with the truth. A. assertion B. concealment C. mistake D. material

Q: Jean agrees to lease Steven the fourth floor of his house. Jean himself resides on the second floor. The person typing the contract strikes the wrong key, and the contract reads the leased portion as the "second floor." Neither Jean nor Steven notices this error when they read and sign the contract. What will the courts do in the case of a dispute? A. Avoid the contract B. Rescind the contract C. Enforce the contract D. Reform the contract

Q: Jim, the CEO of Maple Inc., had to sign a few papers that Amanda, his secretary, presented to him. Unknown to Jim, Amanda had carefully slipped in a contract for the sale of Jim's home to her in the papers which he signed. If Amanda seeks to enforce the contract, Jim's best defense to have the contract declared void would be: A. innocent misrepresentation. B. fraud in the execution. C. mistake. D. duress.

Q: In order to recover on the tort of deceit a party would have to prove what? A. Economic injury by the injured party B. Profit by the offending party C. The Secretary of State was properly notified D. That there was a BFOQ that contributed to the offending party's behavior

Q: In which of the following cases can the remedy of rescission be invoked by the affected party? A. Mistake of tort B. Mistake of contract C. Mistake of law D. Mistake of fact

Q: Joe sells his business to Shirley. During the negotiations, Joe negligently tells Shirley that the business has earned a profit for the last five years. In reality, the business operated at a loss for each of those years. However, Shirley did not hear Joe's misstatement. Shirley cannot rescind the contract because: A. Joe's false statement was negligent rather than intentional. B. Joe's misstatement was not material. C. Shirley did not actually rely on Joe's misstatement. D. an untrue assertion of fact was made.

Q: James has entered into a contract to sell his house to Mikhael. James knows that the house has a bad termite infestation that significantly reduces the value of the house. However, the topic of termites never came up and James did not volunteer any information about the termites. Mikhael is not aware of the termite problem. Under the law of most states, has legal misrepresentation occurred here? A. No, because James made no statement that was false. B. No, because a seller does not have a duty to reveal all faults. C. Yes, because a seller must always inform a buyer about defects that are not obvious. D. Yes, because James is concealing the termite infestation from Mikhael.

Q: Sue wanted to purchase a car. She went to "Honest Bob's" used car sales. She was interested in a classic 1956 Jaguar XK 140 Roadster. Bob told her "this is a great car-it runs like a dream, it is a sweet ride." Bob's statements are legally considered to be: A. opinion statements. B. material representations. C. innocent misrepresentations. D. fraudulent, if they are false.

Q: To establish a cause of action based on fraud in the inducement, one of the elements the plaintiff must generally prove is that: A. it is impossible for the plaintiff to fulfill the terms of the contract. B. the contract is unconscionable. C. the defendant made a false representation of a material fact. D. there has been a mutual mistake of a material fact by the plaintiff and defendant.

Q: David entered into a contract to sell Ruth a parcel of land fully aware that Ruth's intention of purchase was to construct a high-rise commercial building. David was also aware that the subsurface soil condition of the property would prevent such construction. The soil condition was not readily discoverable in the course of normal inspections or soil evaluations. David did not disclose the existence of the condition to Ruth, nor did Ruth make any inquiry of David as to the suitability of the land for the intended development. David's silence as to the soil condition: A. renders the contract voidable at Ruth's discretion. B. entitles Ruth only to monetary damages. C. makes the contract a case of a mutual mistake. D. does not affect the validity of the contract.

Q: A person who seeks to recover damages for deceit has to establish, apart from the elements of rescission, an additional element of: A. injury. B. injustice. C. fraud. D. materiality.

Q: Which of the following must a person prove to rescind a contract if the misrepresentation was innocent? A. That the fact was asserted B. That the fact was disclosed C. That the fact was material D. That the fact was ratified

Q: Which of the following is most likely to constitute a misstatement that can give rise to fraud or misrepresentation liability? A. A broker says to his client, "I think that this car's engine has been overhauled." B. A customer sales representative of the most popular brand of car says to the customer, "This is the highest selling car in town." C. An owner of a house gets his ceiling painted to conceal a leaking roof and says, "I got the ceiling painted recently." D. The owner of an unencumbered horse states, "I am selling the horse to raise funds for my ranch."

Q: A fact is considered to be material in a misrepresentation case when: A. the misrepresentation is considered to be innocent. B. it plays an important role in inducing a person to enter into a contract. C. it is relied upon by a person, even though it could not possibly be true. D. it is similar to an opinion or promise about some future happening.

Q: The main difference between concealment and nondisclosure is that: A. concealment is always regarded as an assertion of fact, while nondisclosure may or may not amount to such an assertion. B. a tort suit is possible in a concealment case, but not in a nondisclosure case. C. punitive damages are available in a nondisclosure case, but not a concealment case. D. nondisclosure is always regarded as an assertion of fact, while concealment may or may not be an assertion of fact.

Q: Which of the following statements, if false, is most likely to create liability for fraud or misrepresentation? A. "This rare antique chair probably is worth $10,000." B. "This crane will lift a 10,000-pound load." C. "This car is a perfect gem." D. "In my opinion, this car is in flawless mechanical condition."

Q: Identify the difference between a case involving intentional fraud and innocent misrepresentation. A. The contractual remedy of rescission is not available in a misrepresentation case. B. A person committing innocent misrepresentation is liable for punitive damages for the tort of deceit. C. Reasonable reliance of the complaining party is not required in a fraudulent case. D. Materiality is not required in a fraudulent case.

Q: Which of the following is often taken to be the equivalent of an assertion? A. Oversight B. Concealment C. Reliance D. Materiality

Q: The primary distinction between an action based on innocent misrepresentation and an action based on common law fraud is that, in the former, a party need not allege and prove: A. that there has been a false representation. B. the materiality of the misrepresentation. C. reasonable reliance on the misrepresentation. D. that the party making the misrepresentation had actual or constructive knowledge that it was false.

Q: A party to a contract who seeks to rescind the contract because of that party's reliance on the unintentional but materially false statements of the other party will assert: A. reformation. B. actual fraud. C. misrepresentation. D. constructive fraud.

Q: A person who rescinds a contract is entitled to the return of what? A. Everything that person has given the other party B. 50% of the items that the person has given the other party C. 75% of the items that the person has given the other party D. Nothing is returned to the person from the other party

Q: Which of the following ends the right to rescind a voidable contract? A. Acquiescence B. Ratification C. Concealment D. Assertion

Q: One of the differences between fraud and misrepresentation is that: A. there is a requirement of materiality in fraud cases. B. in fraud cases, the injured party has the option of suing for monetary damages. C. misrepresentation requires scienter. D. a false statement of opinion cannot be the basis for a claim of misrepresentation.

Q: Which of the following is true of the remedies for misrepresentation and fraud? A. All states allow a victim of fraud to rescind and sue for damages. B. A person can claim punitive damages for fraud under the tort of misrepresentation. C. The contractual remedy for innocent misrepresentation is rescission. D. Ratification enables the right to rescind a contract.

Q: A person who commits fraud may be liable for punitive damages for the tort of: A. deceit. B. fraud. C. misrepresentation. D. assertion.

Q: Threatening to breach a contract unless the party agrees to modify the terms of a contract is an example of economic duress.

Q: Undue influence cases often involve a relationship of trust and confidence between the contracting parties.

Q: Duress involves threats and coercion while undue influence involves persuasion to susceptible individuals.

Q: Contracts that are induced by misrepresentation are considered: A. voidable. B. enforceable. C. material. D. fraudulent.

Q: The threat to institute a criminal prosecution against another party in order to force that party into a contract is almost always duress.

Q: Generally, if there is a good faith dispute over a matter, a person's threat to file a lawsuit to resolve that dispute is considered to be improper.

Q: When one of the parties offers a disproportionately small amount of money in settlement of a debt and refuses to pay more, it is a form of economic duress.

Q: While economic pressure may amount to undue influence, it cannot constitute duress.

Q: Threats to institute legal actions cannot be considered improper threats that constitute duress.

Q: Reliance means that an individual acts because of an assertion of another party.

Q: Mutual mistake is more likely to make a contract voidable than is unilateral mistake.

Q: In order for a unilateral mistake to make a contract voidable, either the nonmistaken party must have caused or had reason to know of the mistake, or enforcement of the contract must be unconscionable.

Q: A mistake in the principle of law will not justify a recession in a contract.

Q: A party injured by fraud in a contract for the sale of goods can both rescind the contract and sue for damages.

Q: A contract may be voidable even if the person making the misrepresentation believes in good faith that what he/she says is true.

Q: Concealment involves the active hiding of a fact, whereas nondisclosure is the failure to volunteer information.

Q: A famous journalist predicted the result of an NBA match between the LA Groves and LA Phantoms in favor of the Phantoms, based on the present form of Groves. Accordingly, Mark placed a huge bet on the Phantoms and lost heavily. This is an example of misrepresentation of a material fact of a contract.

Q: Misrepresentations can either be innocent or fraudulent.

Q: A party who has the right to rescind a contract may do so at any time.

Q: Ratification ends the right to rescind a contract.

Q: The term rescind means to end a contract.

Q: The legal term for innocent misrepresentation is "scienter."

Q: Mr. Green is a local mobster who makes Mr. Blue pay $100 not to have his business burned to the ground. What is the status of the contract between Mr. Green and Mr. Blue? A. There is no contract because Mr. Green gave inadequate consideration B. There is a contract as long as Mr. Green registers the contract with the Secretary of State C. There is a contract as long as $100 is a reasonable profit for not burning down the business D. There is a contract as long as a court reviews the terms within 30 days

Q: Can a local businessman pay a police officer $50 a week to watch the business more closely? A. Yes, as long as the contract is registered with the Secretary of State B. No, Public Officials cannot give consideration on duties already supposed to perform C. Yes, as long as $50 is reasonable amount to watch the business D. Yes, as long as a court reviews the contract within 30 days

Q: The general common law rule on contract modifications holds that an agreement to modify an existing contract requires a(n): A. necessary increase in the value of the exchange. B. inclusion of a new party to the contract. C. new and independent consideration. D. economic exchange of substantial value.

Q: A contract that involves obligations on the part of manufacturers and distributors is called a(n): A. requirements contract. B. composition agreement. C. output contract. D. exclusive dealing contract.

Q: An agreement in which a party promises to supply all the other party's needs for a particular commodity is called a(n): A. requirements contract. B. composition agreement. C. output contract. D. nominal consideration.

Q: Joe and Jack have a written contract whereby Joe agrees to sell Jack a plot of land for $100,000. Later, without terminating the first contract, the parties modify the deal so that Joe sells Jack the same plot of land for $125,000. The second agreement is not a contract because: A. the first contract was not terminated. B. there is no consideration for Jack's promise. C. Joe's promise is illusory. D. written contracts for the sale of land cannot be modified.

Q: Sigmund enters into a contract with Carl. The terms are that Sigmund will purchase all the gasoline that he wants to purchase in 2011, at a price of $2.50 per gallon, and Carl agrees to sell on those terms. This is an example of a(n): A. valid contract. B. illusory contract. C. voidable contract. D. implied contract.

Q: Daniel owes Casey a debt, the amount of which is subject to a good faith dispute. The parties agree to settle the debt, with Daniel promising to pay Casey $15,000 and Casey promising to release Daniel on a $25,000 debt. The settlement agreement: A. is supported by consideration. B. lacks consideration because Casey is not giving Daniel any legal value. C. lacks consideration because Daniel is promising to perform a preexisting legal obligation. D. is binding under UCC section 2-209 even though there is no consideration.

Q: James owns Great Expectations, a trendy restaurant in Manhattan. He enters into a contract with Mary, who makes and sells pastries. The contract states that Mary will "supply all of Great Expectation's needs" for pastries for the next year. Is this contract enforceable? A. Yes, because this is a requirements contract. B. Yes, but only if James buys all of the pastries produced by Mary in the next year. C. No, because the promise fails to specify the quantity of goods to be purchased. D. No, because James might not need any pastries in the next year.

Q: Contracts in which one party to the agreement agrees to buy all of the other party's production of a particular commodity is called a(n): A. requirements contract. B. composition agreement. C. output contract. D. nominal consideration.

Q: Dan, President of BAZ Co., is happy with the extraordinary performance of Naomi, a BAZ Co. senior accountant. Dan informs Naomi that because of her superlative work in the past fiscal year, he is going to give her a 5 percent raise effective next month. Naomi, who has never heard of anyone at BAZ Co. getting a raise, is thrilled and thanks Dan. Later that day, Dan realizes that giving Naomi this raise might cause all senior accountants to demand salary increases. Dan decides not to give Naomi a raise after all. He believes that his promise to give her a raise is not legally binding. Dan is correct because: A. there was no bargained-for exchange for the raise. B. of the "preexisting duty" rule. C. past consideration is not an act or promise. D. past consideration is not liquidated.

Q: Chica, a women's clothing store, held a "prize drawing" for a $500 shopping spree on Saturday that it had advertised throughout the week. Participation in the drawing required being at the store by noon and completing an application form that included personal information and placing it in a box. The information would then be put into a database for marketing purposes. Fashion consultants offering merchandise for sale greeted customers arriving at the store on Saturday morning. Joy was the winner of the drawing. Has she given consideration for the prize? A. No, she gave no legal value to Chica. B. No, unless she purchased an item from one of the fashion consultants. C. Yes, she came to the store and gave information that was for the store's use. D. Yes, unless the store was conveniently located.

Q: Jack went to the ABC Casino to gamble. ABC offers its customers one free spin of the Million Dollar Wheel if they fill out an application form. Jack filled out the form, spun the Million Dollar Wheel, and won. However, now ABC refuses to pay, claiming that because Jack did not purchase his chance at the Million Dollar Wheel, Jack gave no consideration and therefore, no contract was formed. Identify the accurate statement. A. No contract was formed because Jack paid no money for his chance at the Million Dollar Wheel. B. No contract was formed because ABC did not sign any written contract as an obligation to do so. C. A contract was formed because filling out an application can constitute legal consideration. D. A contract was formed because no consideration is needed when a customer takes advantage of a "free" offer.

Q: Mr. White contracts with his wife Ms. White to watch their kids, Joe and Jimmy, for $50 for night. What is the status of the contract between Mr. Smith and Ms. White? A. There is no contract because Ms. White gave inadequate consideration B. There is a contract as long as Mr. White registers the contract with the Secretary of State C. There is a contract as long as $50 is a reasonable profit for watching the kids D. There is a contract as long as a court reviews the terms within 30 days

Q: John promised the other co-owners of the ship Sea Fairy that he would insure the ship for an upcoming voyage. However, John fails to insure the ship. The ship is shipwrecked in a turbulent sea. The co-owners sue John for breach of contract. Will they succeed? A. Yes, because there was a valid and binding contract between the co-owners. B. No, because it was a purely gratuitous promise. C. No, because an intervening cause absolved John's liability. D. Yes, because of promissory estoppel.

Q: Which of the following is true of consideration? A. A promise cannot be deemed a consideration in a bilateral contract. B. The legal value of a consideration must be equal to the actual value in a consideration. C. Gross inadequacy of consideration can give rise to an inference of fraud for setting aside a contract. D. A preexisting moral obligation is deemed a consideration.

Q: Consideration can be a(n) _____ in the case of a bilateral contract. A. act B. promise C. exchange D. gift

Q: Which of the following is often used by agreements that try to make gratuitous promises look like true bargains? A. Nominal consideration B. Past consideration C. Composition agreement D. Requirements contract

Q: Daniel is a senior at State University. Brian, Daniel's father, is concerned about Daniel's study habits, given that Daniel spends most of his evenings at the campus pub instead of the library. Brian promises Daniel that he will send him on an expense-paid trip to Europe after his graduation if Daniel spends at least five evenings a week studying in the campus library for the remainder of his senior year. After returning home from his graduation, Daniel asks Brian about the European trip. Brian replies, "Your education was your reward. I don't owe you a trip to Europe." Brian is: A. correct; Daniel has already gained the benefit of the bargain. B. correct; Daniel did not give anything of legal value. C. incorrect; Brian owes Daniel a trip to Europe because Daniel's acts are consideration. D. incorrect, but only if Daniel's acts are adequate consideration for such an expensive trip.

Q: Bill is 25 years old. His uncle had promised in writing to pay him $2,000 if Bill would refrain from drinking alcohol for one year. Bill refrained from drinking alcohol for one year. However, his uncle now refuses to pay Bill as agreed-upon. The uncle claims that because Bill suffered no detriment by refraining from alcohol, his non-drinking does not constitute legal consideration and therefore no contract was formed. If Bill sues his uncle, Bill will: A. win because Bill had a legal right to drink alcohol. B. lose because consideration must have monetary value. C. win because no consideration is needed in this contract. D. lose because refraining from an action can never be considered legal consideration.

Q: Which of the following meets the requirements of consideration? A. A promise not to engage in a crime or tort B. A promise without a binding obligation C. A promise that involves the exchange of a legal value D. A promise to do a preexisting duty