Business Law, 8e (Cheeseman)
Chapter 13 Genuineness of Assent and Undue Influence
1) Assent of a party to a contract may be manifested in any manner sufficient to show agreement,
including conduct.
2) Unilateral mistake is a mistake in which only one party is mistaken about a material fact
regarding the subject matter of a contract.
3) An action to undo a contract is called restitution.
4) Mistakes in clerical or mathematical errors which are not the result of gross negligence are
considered unilateral mistakes.
5) In most cases of unilateral mistake, the mistaken party is permitted to rescind the contract.
6) A material fact is a fact that is irrelevant to the subject matter of a contract but pertains to the
conduct of the parties.
7) An ambiguity in a contract may constitute a mutual mistake of a material fact.
8) If there has been a mutual mistake, the contract cannot be rescinded.
9) A unilateral mistake occurs if both parties know the object of the contract but are mistaken as
to its value.
10) When a mutual mistake of value occurs, the contract remains enforceable by either party.
11) Intentional misrepresentation is considered fraud.
12) A misrepresentation of a material fact is actionable as fraud only if it occurs by words.
13) To be actionable as fraud, the misrepresentation must have been the sole factor in inducing
the innocent party to enter into the contract.
14) Predictions about the future generally do not form the basis for fraud.
15) Scienter means knowledge that a representation is false or that it was made without sufficient
knowledge of the truth.
16) A misrepresentation is considered fraud even if it is made without intent to deceive another
party.
17) The measure of damages awarded to the innocent party for fraud is the difference between
the value of the property as represented and the actual value of the property.
18) Fraud in the factum occurs if a person is deceived as to the nature of his or her act and does
not know what he or she is signing.
19) Contracts involving fraud in the inception are void.
20) Fraud in inducement occurs when the party does not know the terms of the contract.
21) Contracts involving fraud in inducement are not voidable.
22) When one party takes specific action to cover a material fact from another party, fraud by
enticement occurs.
23) During the sale of a house, if the seller does not inform the buyer about construction flaws of
the house despite the buyer’s enquiry, the seller is liable for fraud by concealment.
24) If a seller does not disclose legal disputes involving the property being sold, he or she is
liable for silence as misrepresentation.
25) A misrepresentation of law is actionable as fraud as the innocent party cannot know every
legal detail that applies to the situation.
26) Misrepresentation of law is a fraud that occurs when a person makes a statement of fact that
he or she honestly and reasonably believes to be true even though it is not.
27) If an innocent misrepresentation has been made, the aggrieved party may sue for damages.
28) Innocent misrepresentation is treated as a mutual mistake.
29) Duress is a situation in which one party threatens to do a wrongful act unless the other party
enters into a contract.
30) Duress is said to have occurred only where a threat involved a physical harm.
31) Physical duress occurs when there is physical harm to the contractual document, such as
complete or partial destruction or manipulation of content.
32) A threat to bring a civil lawsuit unless someone enters into a contract constitutes duress.
33) Taking advantage of another person’s mental, emotional, or physical weakness and unduly
persuading that person to enter into a contract constitutes duress.
34) If there is a confidential relationship between persons, any contract made by the servient
party that benefits the dominant party is presumed to be entered into under undue influence.
35) For a situation to be considered “undue influence,” the persuasion by the wrongdoer must
overcome the free will of the innocent party.
36) ________ is an action to undo a contract.
A) Rescission
B) Recession
C) Restitution
D) Inception
37) Which of the following is true of a unilateral mistake?
A) Only one mistake or ambiguity is present in the subject matter of the entire contract.
B) Out of several contracts drafted simultaneously between two parties, one has a mistake in its
subject matter that does not concern the other contracts.
C) Only one party is mistaken about a material fact regarding the subject matter of a contract.
D) A single mistake about a material fact in the subject matter of a contract appears several times
in the contract.
38) In which of the following cases of assent is the rescission of a contract unenforceable?
A) mutual mistake of value
B) misrepresentation of a material fact
C) silence as misrepresentation
D) innocent misrepresentation
39) Heather chooses to buy a scarf at Macy’s and reads the price on the tag as $50. She uses her
credit card to pay for the scarf, but post-purchase, she notices that the price tag actually says
$500. This is an instance of a(n) ________.
A) bilateral mistake
B) mutual mistake of value
C) innocent misrepresentation
D) unilateral mistake
40) Kevin goes to the store to purchase a fully-automatic washing machine. He browses through
several models of washing machines but does not let the salespersons know that he wants a fully-
automatic model. While signing the sales contract, he does not notice that the model he is
purchasing is a semi-automatic machine. After purchase, which of the following options does
Kyle have?
A) Exchange the machine with a fully-automatic one and sue the store if its does not accept it.
B) Demand a full cash refund from the store for fraud in concealment.
C) Sue the store for its innocent misrepresentation.
D) Keep the semi-automatic washing machine as he made a unilateral mistake.
41) Which of the following constitute a mutual mistake of a material fact?
A) Martha selling her house to Graham and hiding the fact that its first floor is damaged
B) Martha and Graham agreeing on the sale of a house, both referring to different houses
C) Graham buying a house from Martha without asking her details of damages
D) Martha selling Graham an old vase for $20, both of them unaware that it is a valuable antique
collectible
42) ________ is a mistake made by both parties concerning an object that is important to the
subject matter of a contract.
A) Mutual mistake of value
B) Mutual mistake of material fact
C) Elementary unilateral mistake
D) Fraud by concealment
43) A contract in which both parties are mistaken about the value of the object of the contract is
considered ________.
A) unenforceable
B) unconscionable
C) non-rescindable
D) void
44) John buys a watch for $100 at a vintage store. Later, the store learns that the watch was worn
by Sean Connery in a James Bond movie and wishes to rescind the sales contract they have with
John. Which of the following statements is true in this regard?
A) The store can rescind the contract immediately and refund $100 to John.
B) The store can recover from John the difference between the value of the watch and the
amount paid by John.
C) The store can declare the contract void and pay John no money.
D) The store cannot rescind or void the contract.
45) ________ is an event that occurs when one person consciously decides to induce another
person to rely and act on a misrepresentation.
A) Fraudulent misrepresentation
B) Unilateral mistake
C) Bilateral mistake
D) Erroneous misrepresentation
46) Intentional misrepresentation is commonly referred to as ________.
A) erroneous misrepresentation
B) fraud
C) duress
D) undue influence
47) To prove fraud, which of the following elements must be shown?
A) The innocent party knew the wrongdoer.
B) The innocent party was the one who detected fraud.
C) The wrongdoer assumed a false identity.
D) The wrongdoer intended to deceive the innocent party.
48) Which of the following is true of misrepresentation of a material fact?
A) It can occur only by the words of the wrongdoer.
B) A misrepresentation is actionable as fraud only if it is the sole factor in inducing the innocent
party to enter into the contract.
C) It is actionable as fraud if the misrepresentation is of a past or existing material fact.
D) Predictions about the future are considered basis for fraud.
49) What is scienter?
A) knowledge that a representation is false
B) undue influence used on a party to a contract
C) another term for duress
D) damages given to a victim of fraud
50) Which of the following is true of misrepresentation?
A) A misrepresentation is not actionable unless the innocent party relied on the
misrepresentation and acted on it.
B) An innocent party who acts in reliance on a misrepresentation need not justify his or her
reliance.
C) An innocent party must prove that the wrongdoer’s misrepresentation was the sole reason he
or she entered into the contract.
D) An innocent party need not prove economic injury to recover damages for fraud.
51) Jeffrey became a victim of fraud when he entered a pyramid scheme which turned out to be a
scam. In order to claim damages, Jeffrey has to prove which of the following?
A) misrepresentation
B) motive of the fraudster
C) economic injury
D) involvement in the pyramid scheme
52) The measure of damages, recovered from a misrepresentation, is ________.
A) the actual value of the property
B) the represented value of the property
C) the difference between the value of the property as represented and the actual value of the
property
D) twice the actual value of the property which includes punitive damages
53) ________ occurs if a person is deceived as to the nature of his or her act and does not know
what he or she is signing.
A) Fraud in the inducement
B) Fraud in the factum
C) Fraud by concealment
D) Fraud by suppression
54) Millie receives a parcel from her aunt in Indonesia. The delivery man asks her to sign an
authorization document to receive the parcel. Millie signs without reading the document, as she
is in a hurry. However, on the other side of the document are contract terms that transfer all of
Millie’s property to the delivery man. This is an instance of ________.
A) fraud in the inception
B) fraud in the inducement
C) fraud by concealment
D) misrepresentation of law
55) ________ occurs when the party knows what he or she is signing but has been fraudulently
been led into the contract.
A) Fraud in the factum
B) Fraud in the inducement
C) Fraud by concealment
D) Misrepresentation of law
56) Alice offers Richard a chance to work in her affiliate marketing program which, she claims,
will make him a millionaire in three months. Richard makes the “mandatory investment” of
$12,000 and becomes an affiliate. Soon, he realizes that such a program does not exist and that
Alice has disappeared with the money. This is an instance of ________.
A) misrepresentation of law
B) fraud in the factum
C) fraud in inducement
D) duress
57) Contracts involving fraud in inducement are ________.
A) valid
B) void
C) voidable
D) non-rescindable
58) Melissa Harrison, a realtor, sells a house to the Smiths. Before the sale is finalized, Mr.
Smith asks Melissa for details of repairs the house has undergone over the years. Melissa gives
him details of minor repairs but hides all documents regarding a major plumbing defect that was
repaired last year. Three months after the Smiths moved in, the defect reappeared that caused the
first floor to flood, damaging their expensive carpet and furniture. Melissa is liable for which of
the following frauds?
A) fraud in the inception
B) fraud in the inducement
C) fraud by concealment
D) fraud in the factum
59) Which of the following occurs when one party intentionally hides a material fact from
another party?
A) fraud in the inducement
B) fraud in concealment
C) silence as misrepresentation
D) misrepresentation of law
60) Joe buys a trailer from a used-car dealership. On enquiry, the dealer tells him that the trailer
is in great condition. However, three days later, the trailer breaks down. Investigation by Joe
reveals that the trailer had seven previous owners and that the engine has been replaced thrice.
An automobile expert tells Joe that the trailer is dangerous. Which of the following frauds would
the dealer be liable for?
A) fraud in the factum
B) fraud in the inducement
C) silence as misrepresentation
D) misrepresentation of law
61) Which of the following is not actionable as fraud?
A) misrepresentation of law
B) silence as misrepresentation
C) marriage to obtain rights of immigration
D) identity theft
62) Which of the following is true of misrepresentation?
A) Innocent misrepresentation is grounds for the aggrieved party to sue for damages.
B) Misrepresentation of law is not actionable as fraud.
C) Innocent misrepresentation cannot be treated as a mutual mistake.
D) Misrepresentation of law can never be grounds for rescission of the contract.
63) Leona drove into an eatery and ordered Volcano Chicken. Harry, who took her order, was a
new employee who had started working in the eatery the same day. When asked if the chicken
she ordered was very spicy, Leona was informed by Harry—who was not aware of all details of
the eatery yet—that it was not. However, when Leona took a bite, she found the hot sauce
extremely spicy which resulted in her choking on the piece of chicken and requiring medical
help. Which of the following statements is true in this context?
A) Harry can be sued for fraud in inducement.
B) Harry’s employment can be terminated for having committed fraud in inception.
C) Harry can be sued for innocent misrepresentation.
D) Harry cannot be sued for innocent misrepresentation.
64) While signing a contract, one of the parties misinterpreted a legal clause. Neither of the
parties is a legal professional. Which of the following statements holds well in this scenario?
A) The party who misinterpreted the law is actionable for fraud.
B) The party who misinterpreted the law may rescind the contract.
C) The party who misinterpreted the law is not actionable for fraud.
D) The contract is declared unenforceable as the law has been misinterpreted.
65) ________ is a situation in which one party threatens to do a wrongful act unless the other
party enters into a contract.
A) Scienter
B) Duress
C) Battery
D) Assault
66) Which of the following constitutes duress?
A) an event that occurs when one person consciously decides to induce another person to rely
and act on a misrepresentation
B) a situation in which one person takes advantage of another person’s mental, emotional, or
physical weakness and unduly persuades that person to enter into a contract
C) a threat to commit extortion unless someone enters into a contract
D) the knowledge that a representation is false or that it was made without sufficient knowledge
of the truth
67) What is physical duress?
A) physically damaging the contract documents
B) signing a contract without the knowledge that it represents fraudulent information
C) threatening to physically harm someone if he or she does not sign a contract
D) persuading a person to rescind a valid contract by misrepresenting the facts
68) Gary and Mary are siblings involved in a legal tangle over who gets possession of their
ancestral home. Gary threatens to kill Mary’s husband if she does not sign papers declaring
Gary’s sole ownership of their home. This is an instance of ________.
A) scienter
B) battery
C) undue influence
D) duress
69) Which of the following constitutes duress?
A) a plaintiff threatening the defendant that he will not drop the lawsuit until the defendant pays
him a certain amount of money
B) a teacher threatening a student that he will be expelled if he is found with cigarettes again
C) a wife threatening to commit suicide if her abusive husband does not stop beating her
D) a father using his dominant and fiduciary position to unduly influence his son into committing
a crime
70) Which of the following is true of duress?
A) It is liable for fraud.
B) A threat should involve physical harm for it to be actionable as duress.
C) It is a threat issued to make another person sign a contract.
D) Intoxicating a person to sign a contract is considered duress.
71) Lucy wants a divorce from her husband but he wants to stay in the marriage. She threatens to
bring a false criminal lawsuit claiming physical abuse from him if he doesn’t sign the divorce
papers. This is an instance of ________.
A) fraud
B) duress
C) undue influence
D) scienter
72) ________ is a situation in which one person takes advantage of another person’s mental,
emotional, or physical weakness and unduly persuades that person to enter into a contract.
A) Duress
B) Undue influence
C) Fraud
D) Scienter
73) Which of the following is true of undue influence in entering contracts?
A) Undue influence need not require the overcoming of the innocent party’s free will.
B) Undue influence is not grounds for prosecution, as the innocent party has complete freedom
to evaluate the terms of the contract.
C) A contract that is entered into because of undue influence is not voidable.
D) A fiduciary or confidential relationship must have existed between the parties for undue
influence to be proven.
74) When Stella Finman got to know that she was terminally ill, she drafted a will leaving all her
property to her son. During her period of illness, Stella was financially and emotionally
supported by her lawyer as her son was mostly away. When the will was read upon her death, it
said that her lawyer would get a 20 percent stake in Finman Corp., a company Stella owned.
Upon investigation, it was revealed that Stella’s lawyer took advantage of Stella’s weakness and
persuaded her to change the contractual terms. This is an instance of ________.
A) undue influence
B) battery
C) duress
D) fraud
75) Which of the following scenarios makes Tim liable for undue influence?
A) Tim uses a false identity, borrows $10,000 from Kelly, and disappears with the money.
B) Tim threatens to kill Carlos if Carlos does not sign a contract that transfers all his property to
Tim.
C) Tim takes advantage of his grandmother’s illness and persuades her to sign a will leaving all
her property to him.
D) Tim threatens to bring a lawsuit against David if David does not make him a partner in his
firm.
76) How is a mistake different from fraud?
77) Explain the three kinds of mistakes that can be made by either party while entering a
contract. When are contracts involving mistakes rescinded?
78) What should be shown to prove fraud?
79) Describe a case that involves fraud in the inducement.
80) Explain undue influence with an example.