70. A minor‘s right to disaffirm a contract is conditioned on:
a. the ability to return the contract consideration.
b. whether the minor misrepresented his/her age.
c. a time limit of six months.
d. none of the above
71. Which of the following statements (if later established as untrue) would constitute a misrepresentation defense to
contract formation?
a. “You are going to love this house as we have.”
b. “This farm’s well is adequate for household, ranch, and crop needs.”
c. “The school system here is very fine.”
d. “Our buyers are the happiest customers around.”
72. If entered into by a minor, which of the following contractual situations may be enforceable against the minor?
a. Student loan agreements
b. Military obligations
c. Payment for reasonable value for necessities
d. All of the above
73. Paddock Pools constructed a swimming pool and deck for the Jensens‘ home. Paddock installed the wrong trim on
the pool. It would cost $2800 to change the trim – one–fifth the total cost of the pool. The Jensens refuse to pay
anything for the pool. Paddock’s best defense is:
a. duress.
b. substantial performance.
c. mistake.
d. failure of conditions.
74. Dana Riley purchased a home in the Brentwood area of Los Angeles. After she purchased the home, she learned
that the home had been the residence of a long-time drug dealer. She experienced many late-night visitors and often
noticed cars parked outside near the street curb with the drivers and passengers studying the home. The former
owner has been convicted of drug charges. Dana has become uncomfortable with the visitors and the surveillance.
She just wants out of the house. Which of the following statements is true?
a. Dana has no grounds for rescinding her agreement.
b. The information about the drug dealer was material and should have been disclosed to her.
c. Withholding information about the former drug–dealer owner is not misrepresentation.
d. none of the above
75. Dana Riley purchased a home in the Brentwood area of Los Angeles. After she purchased the home, she learned
that the home had been the residence of a long-time drug dealer. She experienced many late-night visitors and often
noticed cars parked outside near the street curb with the drivers and passengers studying the home. The former
owner has been convicted of drug charges. Dana has become uncomfortable with the visitors and the surveillance.
She just wants out of the house. Suppose that the listing agent was aware of the home’s history and the drug
dealer’s arrest and conviction. The agent told the neighbors to cooperate by not disclosing any information to Dana.
“Look,” the agent told them, “you can get the house sold and keep your values up or let it sit there and have the old
druggies come by and destroy it.” Which of the following statements is true?
a. The real estate agent has committed fraud.
b. The real estate agent is under no obligation to disclose the information.
c. The most the real estate agent has committed is misrepresentation.
d. none of the above
76. Alice, age 17, purchased a 2005 Kia auto at the Tempe Autoplex. After driving the vehicle for three months, Alice
returned to the Autoplex for her money. She did not, however, have the Kia. “It was stolen at school last week.”
Which of the following statements is true?
a. Alice may not rescind the agreement.
b. Alice may rescind the agreement only if the stolen Kia is found.
c. Alice may rescind the agreement regardless of whether she has the car.
d. none of the above
77. The Hoffmans were having their home remodeled by All-Right Contractors. The roof had to be removed in order to
build the second story the Hoffmans had contracted and designed to build. After All-Right had removed the roof,
but before a covering was placed over the exposed half of the home, All-Right’s foreman said the job would cost an
additional $12,500. The Hoffmans refused to agree to the additional fees and All-Right‘s foreman said, “Suit
yourselves. Looks like rain for the next day or two,” and left. The Hoffmans called All-Right and agreed to pay the
$12,500 extra and went in to sign the paperwork. Which of the following statements is true?
a. The contract for the additional $12,500 is valid and binding.
b. The contract for the additional $12,500 is invalid because of duress.
c. The contract was not valid because of duress, but the Hoffmans signed anyway – so there is a valid and
enforceable agreement.
d. none of the above
78. The court in the case involving Turnitin (iParadigms) held that:
a. duress was clearly involved.
b. the Clickwrap acceptance was valid.
c. the owners of Turnitin have unlimited liability to the students submitting papers.
d. the plaintiffs’ infancy defense was successful.
79. Which of the following statements would be a basis for claiming misrepresentation?
a. This car is a real honey.
b. This car has the finest road performance going.
c. This car has the fastest zero to 60 acceleration on the planet.
d. This car represents status.
e. All of the above could be a basis for misrepresentation.
80. Andy Seagroves purchased a computer from Best Buy. Best Buy did not disclose to him that the computer was a
return item. There was no indication of any price difference between the computer Andy bought and the unopened
computers. Andy experiences significant difficulties with the computer and returns it to Best Buy. Andy indicates
that he would like to have a new computer and that the price is now $150 more. Best Buy indicates that it is happy
to take the return on the computer and credit Andy‘s account, but that it has no further liability.
a. Best Buy’s position is correct.
b. Andy has no damages since Best Buy took back the computer.
c. Andy is entitled to recover the price difference so that he can replace the computer.
d. Andy is entitled to the return, but no additional damages.
e. none of the above
81. Angela, age 17, is injured in a car accident and receives $5,200 in medical treatment at the emergency room. The
hospital sends a bill to Angela, who signed the admitting form in which she agreed to pay for the treatment. Angela:
a. is a minor and need not pay the bills.
b. is liable for the bill as a necessity.
c. can rescind the agreement.
d. none of the above
82. Suppose, with reference to #81 above, that Angela turned 18 between the time of the accident and when she
received the bill. Angela:
a. is a minor and need not pay the bills.
b. is liable for the bill as a necessity.
c. can rescind the agreement.
d. none of the above
83. Which of the following would not be a basis for misrepresentation?
a. These shrubs will survive in direct sunlight.
b. This lawnmower has a safety turn-off switch.
c. This soft water system will add five years to the life of your washing machine.
d. All of the above are a basis for misrepresentation.
84. Ralph Deuschle owned an ice sculpture company. Ralph provides ice sculptures for private weddings, parties, and
receptions. The Canasta Resort was a large hotel located near Ralph that was not satisfied with its current catering
company’s ice sculptures and its events manager liked Ralph’s work. The events manager approached Ralph and
indicated the Canasta would like to have an ongoing supply contract but that its needs would require Ralph to
expand his business, both with additional space and 3 new employees. Ralph entered into a supply contract with the
Canasta and the events manager told a lending officer at the bank where Ralph got his construction mortgage for
the business expansion that the Canasta would be sending all of its business to Ralph. The Canasta then began to
rethink its events focus and marketing and decided to cut back on ice sculptures. Ralph could not use the additional
space and the three employees had to be laid off. The Canasta:
a. has no liability to Ralph for the downturn in amount of ice sculptures ordered if it did not guarantee a
minimum amount to be purchased.
b. may be liable to Ralph under a theory of a lack of good faith.
c. is entitled to refocus its business and has not breached its contract.
d. none of the above
85. Sue and Kevin Kellman signed a contract for the construction of a cabin near Pinetop. In building the $562,000
cabin, the builder discovered that it had to put the vent for the heating system in the area where the hall closet is
located. The result was that the Kellman’s had a half-closet there instead of a full-length closet that was open to
the floor. The Kellmans:
a. need not pay for the cabin because of this material breach.
b. can be compensated under the doctrine of force majeure.
c. can be compensated under the doctrine of commercial impracticability.
d. can be compensated under the doctrine of substantial performance.
86. RaeAnn and Rick Telford purchased an existing home in a neighborhood of multi-million-dollar homes. After moving
in, the Telfords learned that the home had been owned formerly by a couple that was indicted for drug trafficking.
The home had been raided by DEA agents, and there had been a shoot-out before the couple was taken into
custody. The couple’s youngest child was killed in the house during the shoot-out. RaeAnn and Rick:
a. have no recourse if there is nothing physically wrong with the house.
b. have a remedy of damages or rescission if this information was withheld from them.
c. have no remedy because neither sellers nor brokers are required to disclose psychological issues with
properties.
d. none of the above
87. Costco, Inc. had a contract to purchase 300,000 electric mini-Mercedes from HUMBENZ Toy Co. The toy cars
were to be delivered by November 1. On October 23, the Consumer Product Safety Commission announced a
recall of the toy cars as well as a ban on their sales because of electrical shorts and a high risk of fire in the cars.
HUMBENZ has not delivered the cars to Costco. HUMBENZ:
a. has breached its contract with Costco.
b. has a void contract with Costco because the subject matter is now illegal.
c. must still deliver the cars because its contract predated the recall and ban.
d. none of the above
88. The Jameses were negotiating the purchase of the Smith’s home but requested a termite inspection. The inspection
came back clear from ABC Bug, Inc. The Jameses bought the house and immediately began to notice signs of
termite infestation. They called Goodbye Bug, Inc., and their technician confirmed significant termite infestation and
damage. The technician said he had inspected the home for the Smiths just a few weeks earlier, but was never
asked to repair and exterminate. The Jameses want out of the house and the contract. Do they have a basis?
89. Weldon Newfield was having a custom home built. He had a list of certain materials the contractor was to use in
building the $270,000 home. Newfield was in Europe and the contractor could not find “Reading Copper Pipe” – one
of the required materials. Since Newfield could not be reached and the contractor was under a time schedule, the
decision was made to use another brand of copper pipe. When Newfield returned and learned of the problem, he
refused to pay any remaining amounts due on the contract ($235,000). Can Newfield do that?
90. Ann wrote a $500 check to Art as a deposit on Art’s 240Z car. The memo section of the check read: “Deposit on
1978 240Z car of Art Mole. Sale price $4500.” Art initialed the memo section. When Ann returned the next day
with the remaining $4000, Art said, “Sorry, I sold the car for $4,000 cash yesterday and sent your check back.” The
cheapest 240Z Ann can find is $5200. What are Ann’s rights? Discuss the following:
a. Was a contract formed?
b. Are there statute of frauds problems?
c. Could Ann collect damages? If so, what?
91. A weight-loss ad claims, “Lose up to five pounds per week.” Is this statement a basis for misrepresentation?
92. Dee’s Caterers contracted with Glen Allen Peanut Farms for the purchase of a one year’s supply of peanuts for
Dee’s business. The price was $1.21 per pound. The Glen Allen Peanut Farms was hit by a frost that damaged
most of its crops and left what remained with an odd taste. Because other peanut farms also fell victim to the frost,
the price of peanuts rose to $3.37 per pound. Dee’s demanded delivery. Glen Allen said it would cost too much to
perform. Must Glen Allen perform? What damages would Dee’s have?
93. Discuss the students’ use of the infancy defense in the Turnitin (iParadigms) case.
94. Explain the purpose of a force majeure clause.
95. Regulation Z provides the details of compliance with the Fair Credit Billing Act.
a. True
b. False
96. The three-day-cooling-off period applies to all credit transactions.
a. True
b. False
97. Home equity loans do not carry a rescission period.
a. True
b. False
98. The Fair Credit Reporting Act regulates creditors.
a. True
b. False
99. There are no limitations on credit-agency disclosures, if the debtor is applying for a loan of more than $50,000.
a. True
b. False
100. The FCRA does not give the debtor a right of correction.
a. True
b. False
101. Under the FCRA, the 100-word statement allows debtors to clarify their past credit experiences.
a. True
b. False
102. The Fair Debt Collections Practices Act applies to both commercial and consumer debt.
a. True
b. False
103. The FDCPA applies to collection agencies and original creditors.
a. True
b. False
104. Under the FDCPA, collectors identified as such can use postcards to contact debtors.
a. True
b. False
105. The FDCPA places time limits for the placement of calls.
a. True
b. False
106. The maximum wage garnishment for general debts is 50 percent.
a. True
b. False
107. Garnishment is an example of judgment execution.
a. True
b. False
108. The Consumer Credit Protection Act puts limitations on garnishments.
a. True
b. False
109. The FDCPA is not applicable to the collection of judgments.
a. True
b. False
110. The FDCPA does not apply to lawyers who are collecting bills for clients.
a. True
b. False
111. The FCRA prohibits the disclosure of a bankruptcy that occurred eight years ago.
a. True
b. False
112. The FCRA permits the disclosure of an embezzlement for which probation was completed ten years ago.
a. True
b. False