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1. Spencer, age 18 and of sound mind, has the legal capacity to contract.
a.
True
b.
False
2. Travis had too many beers at the baseball game. Ed realized Travis was so intoxicated he wouldn’t know what he was
doing, so he got Travis to sign a promise to sell his motorcycle to Ed for $50. When Travis gets sober, he can attempt to
void the contract.
a.
True
b.
False
3. Frank suffers from a mental impairment due to a brain injury from a airplane accident. He contracts with Glena to
purchase her dining room furniture. A month later, he tries to void the contract. If he is unable to return the furniture, a
court will not rescind the agreement unless Frank can show that Glena acted in bad faith.
a.
True
b.
False
4. Alice offers to sell her car to Barry for $500, and Barry accepts. Alice's car has a market value of $1,000 but this fact is
unknown to Alice. The contract is enforceable.
a.
True
b.
False
5. In contract law, a minor is someone under the age of 21.
a.
True
b.
False
6. If a minor can cancel a contract, it can be done at any time before the minor reaches the age of majority or within a
reasonable time after reaching majority age.
a.
True
b.
False
7. Roger, a minor, buys a stereo from Tuneland, Inc. Roger uses the stereo for a few months, returns it to Tuneland, and
demands his money back. Roger may rescind the contract, return the stereo and get his money back.
a.
True
b.
False
8. If a salesperson says, "This is a great car and it’s really fun to drive," but the car turns out to be a lemon, the salesperson
has committed fraud.
a.
True
b.
False
9. After her 18th birthday Lora may, by words or action, ratify a contract she made during the previous year.
a.
True
b.
False
10. Mrs. Elsley was an elderly woman who relied on Nancy to visit her every day and prepare her meals. Nancy
convinced Mrs. Elsley that she should give Nancy her house so they could live together and Nancy could better care for
her, although Nancy really just wanted the house and had no intention of moving in to take care of Mrs. Elsley. Although
Mrs. Elsley agreed, she may rescind the contract because of undue influence.
a.
True
b.
False
11. A party injured by fraud generally has the choice of suing for damages or rescinding the contract.
a.
True
b.
False
12. A party to a contract has a duty to investigate the other party's factual statements.
a.
True
b.
False
13. Fraudulent, but not innocent, misrepresentation permits the injured party to rescind a contract.
a.
True
b.
False
14. When fraud is committed during the sale of goods, all states allow the remedy of rescinding a contract while still
allowing the remedy of suing for damages.
a.
True
b.
False
15. Courts will not allow the rescission of a contract due to a unilateral mistake.
a.
True
b.
False
16. Marty, a 16-year-old, contracts with Cream-of-the-Crop Cycles to buy an $8,000 motorcycle. Marty agrees to make
monthly payments until the purchase price plus interest are paid in full. Which of the following is correct?
a.
The contract is voidable by Marty.
b.
The contract is void as soon as it is made.
c.
The contract is voidable by Cream-of-the-Crop Cycles.
d.
The contract is voidable by either Marty or Cream-of-the-Crop Cycles.
17. Marty, a 16-year-old, contracted with Cream-of-the-Crop Cycles to buy an $8,000 motorcycle. He agreed to make
monthly payments until the purchase price plus interest were paid in full. It is three years later and Marty has not
disaffirmed the contract and has made regular payments on the cycle since turning 18. Which of the following is correct?
a.
The contract is void and Marty has no obligation.
b.
The contract is now voidable by Cream-of-the-Crop Cycles.
c.
Marty has ratified the contract and is now bound by its terms.
d.
Marty has ratified the contract but can still get a return of the payments made while he was a minor.
18. When courts consider economic duress, they consider all the following factors EXCEPT
a.
relative bargaining power.
b.
financial distress.
c.
legitimate business purpose.
d.
relative size of the contract.
19. Which of the following is most likely to constitute fraud?
a.
A false prediction that a painting's value will rise.
b.
A false statement that a used car is "the best deal in town."
c.
A false statement that a $30,000 car attracts members of the opposite sex.
d.
Silence as to a toxic waste problem on real property that the buyer would not reasonably find.
20. Angie, a minor, wants to avoid a contract she made with Cumberland Cycles. Which is a valid way for Angie to
disaffirm the contract?
a.
by notifying Cumberland orally that she will not honor the agreement
b.
by filing a lawsuit to have a court formally cancel the contract
c.
by just refusing to perform her obligations under the contract
d.
All of the answers are correct.
21. Deborah purchased a boat from Sun ‘N Surf Marine. She later learned that the salesman had made misrepresentations
to induce her to make the purchase. Under UCC Section 2-721, Deborah can rescind the contract
a.
only if the misrepresentation was fraudulent.
b.
and sue for damages if the misrepresentation was fraudulent.
c.
but cannot sue for damages even if the misrepresentation was fradulent.
d.
but must forego all other remedies.
22. Mark's home had burned to the ground. When he met with his insurance adjuster, she accused him of burning down
the house, and said she would have him criminally prosecuted if he didn't settle the claim for much less than the house
was worth. Mark agreed to the settlement. If he changed his mind, he can probably rescind the settlement on the basis of
a.
fraud.
b.
duress.
c.
undue influence.
d.
mistake.
23. Larson entered Forrester's Auto Mart to purchase a used car. Larson found a vehicle with a sales price of $11,000.
After Forrester answered all of Larson's questions, Forrester and Larson agreed to a sale. As Larson was leaving to get the
money to pay for the car, Forrester told Larson that he thinks Robert Redford formerly owned the car. Larson later learned
that Robert Redford had never owned the car. If Larson seeks to rescind the deal based on Forrester’s statement, Larson
will
a.
win because he relied on the misrepresentation.
b.
win because there was a misrepresentation of a material fact.
c.
lose because he will not be able to prove reliance on the misrepresentation.
d.
lose because Forrester made a unilateral mistake.
24. Which of the following terms designates the legal ability of a party to enter into a contract?
a.
Consent
b.
Affirmation
c.
Materiality
d.
Capacity
25. Ryan, a minor, contracted to sell his auto to Ed, a 28-year-old. Ryan later refused to complete the sale. If Ed sues to
enforce the contract, Ed will
a.
win because Ryan was the seller.
b.
win because minors can only avoid contracts for the sale of land.
c.
lose, as the contract is void.
d.
lose, because the contract is voidable by Ryan.
26. Ron, a minor, goes to the hospital for treatment of the flu. On the new-patient form Ron signs, he agrees to pay for any
care or treatment he receives. When billed for the treatment
a.
Ron must pay for the value of the benefit he received, because medical care is a necessary.
b.
Ron must pay for the benefit he received because the contract is fully executory.
c.
Ron must pay for the benefit he received because he ratified the contract.
d.
Ron does not have to pay for the benefit he received.
27. Mentally infirmed Sasha contracts to purchase a piano for $2,500 in 60 monthly installment payments. Six months
later she tries to void the contract on grounds of mental impairment. A court will
a.
normally void the contract without requiring anything further on Sasha’s part.
b.
normally void the contract but will require Sasha to return the piano.
c.
ordinarily not void the contract unless Sasha had a court-appointed guardian at the time she entered into the
contract.
d.
not void the contract unless Sasha agrees to have the court appoint a guardian for her.
28. Peter, a minor, purchased a car from ACME Motors. Using a fake ID, he misrepresented his age to be 18. The contract
is fully executed. Which of the following is correct?
a.
Peter cannot disaffirm the contract because a car is a necessary.
b.
Peter cannot disaffirm the contract because of his misrepresentation.
c.
Peter can disaffirm the contract, because a minor must be saved from his own poor judgment, including his lie.
d.
Either b or c may be applicable depending on the law of the jurisdiction in which the contract was formed.
29. A(n) _______ contract is illegal from the beginning and may not be enforced by either party; a(n) _______ contract is
legal but permits one party to escape, if he or she so wishes.
a.
disaffirmed; affirmed
b.
void; voidable
c.
affirmed; disaffirmed
d.
voidable; void
30. Which of the following is NOT a true statement about fraud?
a.
The plaintiff must prove that the defendant has knowledge of the falsity of his or her statement.
b.
It is necessary for the plaintiff to show that he or she has suffered some type of detriment or injury because of
his or her reasonable reliance on the defendant's false statement.
c.
The defendant made the statement with the intent to induce the plaintiff to enter into the contract.
d.
The plaintiff must show that although the defendant acted in good faith, the statement was material because
the defendant expected the plaintiff to rely on it and enter into the contract.
31. Which of the following statements, if made by a seller who knows the statement to be untruthful, would NOT be
misrepresentation of material fact resulting in a cause of action for fraud?
a.
"This horse is only six years old."
b.
"There is no better car in the world."
c.
"The tires have less than 5,000 miles on them."
d.
"This car gets 28 miles per gallon. "
32. Pamela is planning to sell her home decorating store to her daughter. Pamela has
a.
a greater duty to reveal problems in the business because her daughter assumes she will be honest.
b.
no duty to disclose hidden defects in the business.
c.
a lesser duty to reveal problems in the business because she has a relationship of trust with the buyer.
d.
a duty to report only any latent defects she knows about that her daughter should not be expected to discover
herself.
33. A minor can undo a contract that has already been completed by having a court _______ the contract to formally
cancel it.
a.
affirm
b.
rescind
c.
disaffirm
d.
ratify
34. Duress occurs when
a.
the enforcement of a contract results in unconscionability.
b.
an improper threat is made to force another party to enter into a contract.
c.
both parties contract based on the same factual error.
d.
a party gives notice of refusal to be bound by an agreement.
35. As it applies to minors, which of the following is LEAST likely to be regarded as a necessary?
a.
Rent
b.
Food
c.
Medical expenses
d.
Educational expenses
36. Which of the following is the MOST accurate statement regarding economic duress?
a.
It is never grounds for rescission.
b.
It is always grounds for rescission.
c.
It is a UCC concept only.
d.
It may be grounds for rescission.
37. Vince has begun forgetting things and is becoming very difficult to get along with. He is 85, has been ill, and is very
fond of his housekeeper Annie. He gives a deed to Annie for all of his real property. At Vince's death, his children, who
got only his photograph albums according to the will, ask that the deed be set aside and the land be put back in the estate
for purposes of division among all the children. What will be the probable result in this case?
a.
Since Vince was 85 he was probably incompetent and the court would rule for the children.
b.
Clearly Annie used her position of dominance to persuade Vince to deed her the property, and it will be set
aside.
c.
Unless the children can prove that Vince was unable to understand what he was doing, or that Annie used her
position to improperly influence Vince, Annie can keep the property.
d.
Annie will not be able to keep the property since she is not a family member.
38. If Jane persuades Linda to buy her horse by telling Linda that the horse runs "like the wind," then Jane's statement is
a.
fraud.
b.
reckless misrepresentation.
c.
a unilateral mistake.
d.
puffery.
39. Jeff was a subcontractor, bidding on a contract for ACE Corp., the general contractor. When adding up the total of
materials and labor, Jeff's secretary mistakenly moved the decimal point one place, ending up with a bid of $3500 rather
than $35,000. ACE Corp. accepted Jeff's bid, mostly because all the other bids were over $30,000. When Jeff learned of
the mistake, he tells ACE Corp. that he cannot do the job for $3500. If ACE Corp. sues to enforce this contract, what is
the most likely result?
a.
The contract is enforceable, since there was an offer, acceptance, and consideration.
b.
This is a bilateral mistake, so the contract can be rescinded by either party.
c.
This is a unilateral mistake, so the contract cannot be rescinded by Jeff.
d.
This is a unilateral mistake, but one where ACE Corp. knew that a mistake had been made. Jeff should be able
to rescind the contract.
40. An example of the type of relationship required to find undue influence would be
a.
a salesperson-purchaser relationship.
b.
a bartender-customer relationship.
c.
a doctor-patient relationship.
d.
a neighbor-neighbor relationship.
41. Reed, a 15-year-old, has run out of money while on a trip away from home. Martha gives him food, a place to sleep,
and his bus fare home, in exchange for Reed's promise to pay $200 after he got home. Is Reed's promise enforceable?
42.
Discuss the meaning of "material fact" in fraud situations.
43. Describe legal capacity and discuss how it applies to minors entering into and cancelling contracts.
44. Adrianna wants to purchase a ten-acre tract of land. Under what circumstances would the seller be required to divulge
information Adrianna does not possess?
45. What is the difference between an unilateral mistake and a mutual mistake? Under what circumstances will a court
refuse to rescind a contract based on the defense of a "mistake"?
