Chapter 11. Conduct Invalidating Assent
1. Marjorie has been cared for by her family physician for 35 years. She decides to assume the mortgage on his new
clinic. The contract is automatically invalid because of undue influence.
a. True
b. False
2. At the marriage of her daughter, Lorna is given papers to sign which the catering company says are the invoices for
the food, service, and decorations. Underneath the invoices are a carbon and a contract of sale for a portion of the
failing catering business. As Lorna signs the papers, her signature is applied to the sales contract. This is a void
contract because it was entered by fraud in the execution.
a. True
b. False
3. Pat told her friends that her car got 35 miles to the gallon in the city when in reality it only got 20 miles per gallon.
When Pat decides to sell the car and one of her friends decides to buy it, Pat is under no duty to tell the correct
figure unless asked.
a. True
b. False
4. If an agreement is not voluntary and knowing, it will be either void or voidable.
a. True
b. False
5. Physical compulsion and improper threats are the two basic types of duress.
a. True
b. False
6. The difference between fraud and misrepresentation is that fraud involves malice while nonfraudulent
misrepresentation is always innocent.
a. True
b. False
7. Rescission is usually permitted where the parties to a contract are both mistaken about a material fact.
a. True
b. False
8. Generally, whether or not the parties deal at arm’s length does not affect whether silence alone amounts to fraud.
a. True
b. False
9. Social coercion to enter into a contract cannot be a basis for avoidance of the contract.
a. True
b. False
10. Undue influence is the taking of unfair advantage of a person by reason of a dominant position based upon a
confidential relationship.
a. True
b. False
11. Fraud in the inducement will render an agreement void.
a. True
b. False
12. For a misrepresentation to be actionable as fraud in the inducement, it must be a misrepresentation of an opinion.
a. True
b. False
13. Matt sells bikes at a local discount store. To encourage Bob to buy a more expensive model than he originally
contemplated, Matt tells Bob, “This is the most awesome bike money can buy at this price. You can expect lots of
riding pleasure.” Based on this statement Bob buys the bike. A week later, before his bike is fully paid for, Bob sees
a far superior bike for a lower price at another store. Bob can avoid his contract with Matt because of fraudulent
misrepresentation.
a. True
b. False
14. If a seller occupies a fiduciary relationship with the buyer and fails to make full disclosure to the buyer, then the
latter will be able to avoid the transaction.
a. True
b. False
15. A unilateral mistake of fact is ordinarily grounds for avoiding a contract.
a. True
b. False
16. To sustain a case of fraud in the inducement, the injured party must prove that he actually relied upon the false
representation.
a. True
b. False
17. A famous decision involving mistake as to the meaning of contract terms is Raffles v. Wichelhaus, a case involving
two ships with the same name which were confused by the two parties to the contract.
a. True
b. False
18. Mistake by failure to read a document is grounds to void a contract.
a. True
b. False
19. A party to a contract may be entitled to relief even if he is contributorily negligent in relying on a fraudulent
misrepresentation.
a. True
b. False
20. Historically, courts held that representations of law were statements of fact, but the present trend is to recognize that
they have only the effect of statements of opinion.
a. True
b. False
21. Scienter is the element of fraud that requires that the person who makes the misrepresentation knows that it is false
or has reckless indifference as to its truthfulness.
a. True
b. False
22. The trustee of a trust does not owe a fiduciary duty to the beneficiary of that trust.
a. True
b. False
23. Al owns a farm that he believes is worth $150,000. Betty knows that there is oil under the farm and offers Al
$160,000 for it. Al accepts and sells the farm to Betty. Al later realizes that the land was worth more than $160,000.
Al can have the contract avoided based upon fraud.
a. True
b. False
24. Al owns a farm that he believes is worth $150,000. Betty knows that there is oil under the farm and offers Al
$160,000 for it. Al is suspicious and asks her why she wants to buy the place. She says she would like to live in the
country. Al then asks her if she thinks there might be valuable minerals under the land. Betty laughs and says she
doubts that very much, so Al sells her the farm for $160,000. Al later realizes that the land was worth more than he
was paid. Betty’s statement to Al was a misrepresentation requisite for fraud.
a. True
b. False
25. The most uncommon type of duress involves the use of physical compulsion.
a. True
b. False
26. To obtain relief for negligent or innocent misrepresentation, all the remaining elements of fraud must be present and
the misrepresentation must be material.
a. True
b. False
27. For a misrepresentation to be fraud in the inducement, it need not be material.
a. True
b. False
28. An arm’s-length transaction is one in which the parties owe each other special duties.
a. True
b. False
29. The test for duress is objective and the act must be classified as a tort or a crime in order to be wrongful.
a. True
b. False
30. An act that is contrary to public policy or is morally reprehensible may constitute duress.
a. True
b. False
31. If the act or threat would affect a person of average strength and intelligence, then and only then will the act
constitute duress.
a. True
b. False
32. If a confidential relationship exists between parties to a contract, the law presumes that undue influence exists if it
appears that the dominant party has gained at the other party’s expense, but the presumption can be rebutted by
evidence that it was not exercised.
a. True
b. False
33. A seller’s promise to service a sewing machine free for the next 90 days when she has no intention of doing so is
actionable as a false representation of a fact if the other elements of fraud are present.
a. True
b. False
34. There are two distinct types of fraud.
a. True
b. False
35. For a misrepresentation to be material, it must be likely to induce a reasonable person to manifest assent or the
maker must know that it would be likely to induce the recipient to do so.
a. True
b. False
36. A basic element of fraud is a false representation or a misrepresentation.
a. True
b. False
37. Nonfraudulent representation is made without scienter.
a. True
b. False
38. A collection agency threatened to sue Martha for the unpaid hospital bills from her heart operation. She signed a
promissory note at a high but not illegal rate of interest. What result?
a. The note is valid because she signed it.
b. The threat to bring a civil suit to collect money owed is permissible.
c. The note is invalid because she signed under duress.
d. The note is invalid because the agency put her under undue pressure.
39. Tommy’s parents died in a plane crash and he went to live with his guardian, Aunt Rose. Rose had a very small
house and did not have a separate bedroom and bath for 12-year-old Tommy. She and Tommy decided to use some
of his inheritance to pay for an addition to the house. He had some shares of stock transferred into Rose‘s name so
that she could sell them when the money was due to be paid. The stock transfers are:
a. presumed voidable unless Rose can show no unfair advantage was taken.
b. presumed valid unless it can be proven that Tommy was taken advantage of.
c. null and void because of undue influence.
d. presumed void because of duress.
40. Eliza was an antique expert. She went to a tea party at Grandma Jones’ house and saw a magnificent Queen Anne
table out on the back porch. She asked Grandma about it and was told it was in the way so they were going to store
it in the barn. Eliza offered to buy it from her for $200. The next week, Grandma saw it in Eliza’s store on sale for
$3,000. Grandma:
a. can get the table back because of fraudulent concealment of the value.
b. can get the true value, because it would not be fair otherwise.
c. cannot rescind the contract because Eliza did not have a duty to tell her the value of the table.
d. cannot rescind the contract because she did not rely on Eliza to give her a fair price.
41. James threatens to hit Kenneth on the head with a baseball bat unless Kenneth signs a contract agreeing to pay
James $900 for a motor. If, because of the threat, Kenneth signs the contract:
a. the contract is voidable at Kenneth‘s option.
b. James has committed physical duress against Kenneth.
c. this is an example of economic duress.
d. All of these.
42. Which of the following does not exemplify a relationship that typically leads to scrutiny of a contract for undue
influence?
a. Wife and husband
b. Clergy and parishioner
c. Brother and sister
d. Parent and child
43. The remedies of damages and rescission are available for:
a. fraudulent misrepresentation.
b. negligent misrepresentation.
c. innocent misrepresentation.
d. All of these.
44. Which of the following results in a void, rather than voidable, agreement?
a. Duress by improper threat
b. Fraud in the execution
c. Fraud in the inducement
d. Undue influence