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SMC Business Law Sec 1059 Week 4 Chp. 8 Quiz (2015)

Week 4 Chp. 8 Quiz

Grading Summary

Grade Details – All Questions

Question 1. Question : Doctor Jones told his patient, Ms. Redman, the following, ” This procedure will produce the desired result. Now, stop worrying.” Assume that the desired result was not in fact realized. Even though technically an opinion, Dr. Jones’s statement was asserted as a fact and since he’s an expert, a court could conclude that a misrepresentation occurred.

Question 2. Question : Identify which, if any, of the below statements is true with regard to duress:

Student Answer: The classic contract law required proof of threats of imprisonment or serious physical harm in order to establish that duress was present

Modernly, every kind of threat constitutes duress

According to the Restatement, a threat need not be illegal or wrongful, but must be improper

A & C

Question 3. Question : Ace Electrical Co. made a substantial error when preparing a bid that it submitted to George General Contracting Co. (GGCC). The bid was accepted and a contract was thereby formed. Once it realized the error, Ace Electrical requested that the contract be set-aside. GGGC refused. To have a court set-aside this contract based on lack of real consent, Ace Electrical would have to prove:

Student Answer: GGGG was not aware of the mistake

The mistake was the result of a careless error

Both A & B

GGGG was aware of the error because the mistake in the bid was substantial and so obvious (Even though this is a unilateral mistake, a court would be inclined to grant relief if Ace Electric could prove that the mistake was substantial and obvious and GGGG either knew about it or should have known about it. )

None of the above

Question 4. Question : A party who enters into a contract with an awareness of his/her own uncertainty or conscious ignorance of the facts cannot prove mistake when the facts turn out to be other than said party believed them to be.

Student Answer: True


Question 5. Question : Moore Inc. contracted to sell goods to Stephens. Moore Inc. knew that Stephens required the goods to fulfill a contract with the U.S. government and that failure to perform this contract (with the U.S. govt.) would essentially put Stephens out of business. Moore Inc. threatened to withhold delivery unless Stephens agreed to pay a higher price than originally agreed. Stephens, reluctantly agreed. If Stephens sued to have this agreement set-aside, his argument would be based on the theory of:

Student Answer: Fraud

Undue Influence



None of the above

Question 6. Question : To obtain a court decree of rescission, the mistaken party must prove that the extent of the mistake is such (so severe), that it would be unfair for the law to require the mistaken person to perform the contract. An example of such a severe mistake would be Lady’s agreement to purchase a 3.5 carat diamond for 7,500.00 when in fact the stone turned out to be relatively worthless quartz.

Student Answer: True


Question 7. Question : Identify which of the below relationships you would expect to find in a case that involves undue influence.

Student Answer: Lawyer and client

Elderly woman – nurse relationship (in which the elderly woman is quite ill and very dependent upon her nurse)

Husband-wife relationship wherein husband holds dominant psychological power over his wife

All of the above

Question 8. Question : Concealment is always the equivalent of an assertion of fact, while nondisclosure may or may not be so regarded.

Student Answer: True

Question 9. Question : Johnson, an elderly man, is totally dependent on his housekeeper, Jane, to care for him. Jane persuades Johnson to withdraw most of his life savings from the bank and make an interest-free loan to her. Assume that the persuasion was unfair. Johnson could have this transaction voided by a court based on:

Student Answer: Fraud


Undue influence


None of the above

Question 10. Question : Undue influence cases often involve a relationship of trust and confidence between the parties. The nature of this type of relationship is fiduciary.

Student Answer: True


Question 11. Question : Rogers contracts to buy from Jones 50 shares of Maybury Inc. stock. She mistakenly confused Maybury Inc. with Mayberry Inc. whose stock was much more valuable and much less speculative. Jones (the non-mistaken party) was not mistaken about the company’s identify or the stock that he was selling. To avoid this stock-purchase contract, Rogers would either have to prove Jones caused the mistake OR Jones had reason to know of the mistake.

Student Answer: True


Question 12. Question : Misrepresentation and fraud both require that the injured party prove that the other party gave misinformation regarding a material fact. In no case, will a court allow a party to avoid a contract when there been a misstatement about an opinion.

Student Answer: True


Question 13. Question : Which of the following is most likely to constitute fraud?

Student Answer: Stating to the prospective buyer, “I think that this car’s engine has been overhauled.”

Stating to the prospective buyer,

“this is the best used car in town.”

Painting over the water stains on the ceiling at the time the home is placed on the market for the purpose of selling it

Forgetting to disclose a material fact

Question 14. Question : Bender and his wife had two young children. Bender filed for divorce. He told his wife that he intended to sue for sole custody of the kids unless his wife agreed to transfer back to him all of the stock she owned in his company. She agreed. If Wife sued to have this agreement set-aside she would have no chance of winning because Bender had the legal right to sue for custody.

Student Answer: True


Question 15. Question : The Browns sold their home for $4,000,000.00. Prior to listing the home they consulted architects, decorators and an electrician to conduct inspections. They did not however have their home appraised. As it turned out, the Browns sold the home for an amount substantially below its fair market value. Upon realizing this, they sued to have their contract rescinded because “they were mistaken about the market value at the time of the sale.”

Student Answer: The Browns bore the risk of the mistake regarding the value of the home when they sold it

By not first consulting an appraiser or a person experienced in the value of real estate (broker or salesperson), the Browns proceeded with limited knowledge with respect to the value of their home and bore the risk that they under-priced it

Because the Browns bore the risk of mistake, their failure to thoroughly investigate the home’s value would prevent them from being able to rescind their contract

All of the above

Question 16. Question : Under which, if any, of the below circumstances would a court conclude that Jones accepted the risk of his own mistake(s) when he entered into the contract that he is now attempting to rescind?

Student Answer: Jones sold a safe for $10.00 being aware at the time that he had no idea what it contained. It turned out that the safe contained $25,000.00 of jewelry

Jones inherited a family painting but had no idea of its value. Years later he put it on eBay and accepted an offer in the amount of $500.00 which he accepted. It turned out to be a classic worth close to $75,000.00

Both A & B (Courts have the power to determine which party bore the risk of the mistake. In choices A & B, a court would conclude that Jones was in a superior position to know the fact in question and proceeded in conscious ignorance. He therefore could not have the contracts rescinded.)

None of the above

Question 17. Question : Modernly, courts will not consider granting the remedy of rescission to a party claiming that she was mistaken when entering into a contract if there exsits any evidence proving that the mistaken party was at fault in failing to know the facts before entering into the agreement.

Student Answer: True


Question 18. Question : In order for a unilateral mistake to make a contract voidable, either the non-mistaken party must have caused or had reason to know of the mistake, or it must be unconscionable to enforce the contract.

Student Answer: True


Question 19. Question : Which of the following is most likely to constitute undue influence?

Student Answer: A firm’s bribing someone to break a contract with a competitor

A clergyman’s using his position along with his parishioner’s emotional susceptibility to get the parishioner to contract with the clergyman

Threatening to commence a frivolous criminal prosecution against someone, in order to get her to contract with you

Grabbing someone’s hand and forcing him to write a ‘X’ on a contract you have prepared

Question 20. Question : Assume that both parties believe that a particular material fact is true, but as it turns out, the fact is not in accordance with the parties’ beliefs. Also assume that the fact is important and intrinsic to the bargain.

Student Answer: According to the above hypothetical, there has been fraud

According to the above hypothetical, there has been a misrepresentation

According to the above hypothetical, there has been a mutual mistake

According to the above hypothetical, there has been a unilateral mistake

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