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Exam 11: Capacity and Legality

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Question 21

Multiple Choice

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Which of the following must a mutual mistake involve in order for a mutual mistake to interfere with legal consent?

A) A basic assumption about the subject matter of the contract.
B) A material effect on the agreement.
C) A basic assumption about the subject matter of the contract and an adverse effect on a party who did not agree to bear the risk of mistake at the time of the agreement, but not a material effect on the agreement.
D) A basic assumption about the subject matter of the contract, an adverse effect on a party who did not agree to bear the risk of mistake at the time of the agreement, and a material effect on the agreement.
E) An admission by one of the parties that a misrepresentation occurred.

F) A) and D)
G) A) and E)

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Question 22

Multiple Choice

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Which of the following is involved in a situation in which a person refuses to perform according to a contract unless the other person either signs another contract with the one making the threat or pays that person a higher price than was specified in the original agreement?

A) Fraudulent duress
B) Contractual duress
C) Negligent duress
D) Economic duress
E) Specific duress

F) A) and C)
G) C) and D)

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Question 23

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A[n] _____________ mistake is the result of an error by one party about a material fact.

Reference - Pet Pig Farm. Marcy wanted to buy Lucy's land and use it to breed small pigs to be kept as pets. Marcy told Lucy that having water on the property was very important. Lucy assured her that a spring ran through one corner of the property. Therefore, Marcy agreed to buy the farm. Although she did not ask Lucy anything about it, Marcy, who loved pigs, assumed that the neighbors would be pleased with the pigs being in the area. In a separate contract, Lucy also agreed to sell Marcy a used truck for $5,000. After the contract for the land sale was entered into, it was discovered that actually the spring did not run through the corner of Lucy's property. The area in which the spring ran actually belonged to a neighbor. Additionally, when Lucy brought Marcy the used truck, Marcy said, "That's not the truck!" It was discovered that Lucy, who had two trucks, thought that Marcy had bought the older truck when Marcy thought she had purchased the newer truck. Marcy was also surprised when she received a petition signed by all surrounding landowners objecting to the presence of the pigs and threatening to sue Marcy for nuisance. Assuming that Lucy fraudulently made a misrepresentation regarding the spring running through the corner of the farm knowing the statement was not correct, considering only the lack of a spring issue, which of the following is true if Marcy does not want to go through with the sale of the farm?

In legal terms nondisclosure involves the active hiding of the truth about a material fact.

A mistake is an erroneous belief about the facts of the contract at the time the contract is concluded.

Set forth the three reasons referenced in the text that would permit a court to invalidate a contract on grounds of unilateral mistake.

Which of the following is available to a party who was misled by a false statement contained in an innocent misrepresentation?

Maurice contracted with Suzanne to feed and walk her Corgi mix dog, Baby, for $100 while Suzanne was on vacation for one week. One day before Suzanne was to leave, Maurice came over and said that Baby would be a significant amount of trouble and that he would have to receive $150 in order to walk and feed Baby. Suzanne reluctantly agreed. When she returned from vacation, she handed Maurice $100 and refused to pay more. Maurice threatens to take her to small claims court. What would be the likely result?

A negligent misrepresentation results when the party making the statement would have known the truth about the fact had he used reasonable care to discover or reveal it.

Mistakes in contract law result from untrue statements made by one party to the contract.

Reference - Scheming Friends. Willy very much wants to rent a basement apartment in Weaver's home. Willy threatens to tell all Weaver's friends that he and Weaver had been arrested for illegally smoking marijuana unless Weaver rents the apartment to him for $100 per month. Weaver reluctantly agrees to rent the apartment to Willy for that amount. Willy also wants to buy Weaver's car. Weaver runs back the odometer on the car before Willy test drives it. Willy is impressed by the low mileage and agrees to buy the car. Finally, Weaver offers to sell Willy a ring for Willy's fiancée. Weaver tells Willy that the ring is a diamond and believes that to be true. After the deal is made, however, a jeweler friend of Weaver's informs him that the ring is a fake. When Willy shows up with the money, Weaver says nothing. He just hands Willy the ring and takes the money. Later, Willy finds out that the odometer was run backwards from another friend to whom Weaver confided. Willy also finds out from his girlfriend that the ring is a fake. Of which of the following is Willy guilty in threatening to tell friends about the arrest unless Weaver rents the apartment?

George offers to sell Penelope a ring that George found in his yard. He and Penelope look at the ring and decide that they are not sure what it is, probably just a shiny stone. Penelope pays George $10 for the ring. The ring turns out to be a diamond worth much more than $10. George wants the ring back, and Penelope refuses. What is the most likely result?

Bruce runs back the odometer on his car to make it appear as if it had fewer miles. Wally buys the car. When he checks back through past sale reports through his state's title office, Wally discovers that the car had fewer miles when Bruce sold it to him than it had when a previous owner sold it to Bruce. In legal terms, in selling the car knowing that he had tempered with the odometer, Bruce is said to have had _____________.

Maurice offered to sell his used computer to Mike for $300, and Mike accepted. Both Maurice and Mike believed that the computer was one year old. When the receipt was found, however, it was discovered that the computer was actually 18 months old. Mike wants out of the agreement based on mutual mistake. Which of the following is Maurice's best position in an attempt to enforce the contract?

A[n] _____________ misrepresentation results from a false statement about a fact material to an agreement that the person making the statement believed to be true.

For fraudulent misrepresentation to be the basis for a contract rescission, the statement of fact need not be an actual assertion.

Reference - Scheming Friends. Willy very much wants to rent a basement apartment in Weaver's home. Willy threatens to tell all Weaver's friends that he and Weaver had been arrested for illegally smoking marijuana unless Weaver rents the apartment to him for $100 per month. Weaver reluctantly agrees to rent the apartment to Willy for that amount. Willy also wants to buy Weaver's car. Weaver runs back the odometer on the car before Willy test drives it. Willy is impressed by the low mileage and agrees to buy the car. Finally, Weaver offers to sell Willy a ring for Willy's fiancée. Weaver tells Willy that the ring is a diamond and believes that to be true. After the deal is made, however, a jeweler friend of Weaver's informs him that the ring is a fake. When Willy shows up with the money, Weaver says nothing. He just hands Willy the ring and takes the money. Later, Willy finds out that the odometer was run backwards from another friend to whom Weaver confided. Willy also finds out from his girlfriend that the ring is a fake. Which of the following is true regarding Willy's rights in regards to the car purchase?

What is the result of a contract being rescinded?

Bob offered to sell Teresa his used motorcycle. She took a look at it and asked Bob how it ran to which Bob replied that it was in good shape. Teresa thought the motorcycle was two years old when she purchased it. A few days later, she discovered that it was actually five years old. She asks Bob to take back the motorcycle. He tells her no way, that he thought she knew the age of that model, and that she should have asked him if she had any uncertainty. If Teresa sues, who is likely to win and why?