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Business Law
Q:
Which of the following is a remedy for fraud?
A. Rescission of the contract by the buyer.
B. Disaffirming the contract and then suing in tort for damages resulting from the fraud.
C. Ratification of the contract by the buyer.
D. Restitutionary damages.
Q:
When Steve convinces Tom to buy a pre-owned car from him while withholding the fact that the car has a mechanical problem, it indicates:
A. undue influence.
B. duress.
C. mutual mistake.
D. scienter.
Q:
Today, many courts recognize which of the following about the doctrine of "caveat emptor"?
A. That it is a necessary step to prevent a contract from being created.
B. That it enables the seller to rescind a contract.
C. That it often produces unfair results.
D. That it is wholly the duty of the buyer to be aware of all material facts about the subject of the contract.
Q:
"Caveat emptor" is the basic principle of:
A. scienter.
B. fraud by silence.
C. fraud in the execution.
D. undue influence.
Q:
In the sale of real estate:
A. many courts are holding that sellers have a duty to disclose defects that seriously undermine the value of the home.
B. the Truth in Lending Act puts the burden on the buyer to discover defects.
C. the doctrine of caveat emptor applies without exception.
D. courts are increasingly protecting developers, sellers, and their agents.
Q:
On the first day of class, Jane's history professor passes around a blank sheet of paper claiming that she had not yet received the official class roster. All 21 students in the room sign it. That night, she types on the bottom of the roster sheet, "We, the above-signed parties, hereby promise to pay to the order of professor, $50,000 on demand." A month later, when the class pools their money and buys a winning lottery ticket worth $100,000, the professor presents the instrument and demands her money. Which of the following statements is true?
A. The professor is guilty of a misrepresentation because she knowingly said it was a roster sheet, not a potential negotiable instrument.
B. The professor is guilty of undue influence because she induced the students to sign the sheet by virtue of her superior position as the professor.
C. The professor is guilty of a fraud in the execution because she took advantage of her students' trust in her and intentionally said it was a roster sheet.
D. The professor is guilty of causing economic duress because she could have had any student who failed to sign the sheet removed from the class with tuition and other monetary implications arising; so students were forced to sign.
Q:
Which of the following is an example of scienter?
A. A party to a contract disclosing to the other party all the material facts he/she knows about the subject of the contract.
B. Plaintiff knowingly making a misstatement to a defendant who was likely to rely on it.
C. Defendant admitting that he made a false statement with the intent to deceive.
D. Plaintiff taking action to reveal a misstatement.
Q:
Scienter:
A. involves misstatements about the content of something contained in a form.
B. refers to the mental state of the defendant.
C. pertains to an actionable misrepresentation that concerns a present or past fact.
D. is a causal connection between a misrepresentation and the complaining party's entry into the contract.
Q:
Which of the following is an element of fraud?
A. Opinion
B. Undue influence
C. Duress
D. Scienter
Q:
All the elements of misrepresentation, and the fact that the misrepresentation was knowingly made with the intent to deceive, have to be established to prove _____.
A. scienter
B. duress
C. fraud
D. unilateral mistake
Q:
Jimmy J sells Mary an old station wagon and tells her that it is in excellent condition, although he did not bother to check out the statement of the previous owner that the car was idling fast and backfiring a lot. Under these circumstances, Mary could probably contest the agreement on the grounds of:
A. mutual mistake.
B. duress.
C. fraud.
D. misrepresentation.
Q:
If Gilles tampers with the odometer of a car he is trying to sell, he is guilty of:
A. fraud with intent to deceive.
B. fraud by silence.
C. duress.
D. caveat emptor.
Q:
A negligent unilateral mistake is always a ground for rescission.
Q:
"One who waits too long to complain has indicated satisfaction with the agreement despite the initial lack of true consent" is the idea behind the doctrine of:
A. ratification.
B. forbearance.
C. rescission.
D. emancipation.
Q:
The subject of misrepresentation must be:
A. a statement about the future.
B. a statement that amounts to puffing.
C. a knowable fact.
D. a statement of opinion.
Q:
Which of the following statements is true for justifiable reliance?
A. Misrepresentation of public facts amounts to justifiable reliance.
B. It cannot lead to rescission of a contract if the victim was aware of the truth.
C. It can lead to rescission of a contract if there is no connection between a misrepresentation and the complaining party's entry into the contract.
D. It is an important element of unilateral mistake.
Q:
Intentional misrepresentation:
A. is otherwise known as duress.
B. requires that the misrepresentation be made by using a threat.
C. is the only element needed to prove fraud.
D. requires intent to deceive.
Q:
A mutual mistake is always a ground for rescission of the contract at the request of either party.
Q:
Statements of opinion serve as a basis for rescission.
Q:
A person who claims to have been victimized by a misrepresentation may cancel the contract only if he/she can show some detriment as a result of the misrepresentation.
Q:
The intent to deceive is also known as capacity.
Q:
The elements of fraud are the same as the elements for the tort of deceit.
Q:
The victim of a fraud may be able to recover punitive damages.
Q:
A contract is voidable even if duress and undue influence are both exerted much later after the contract has been entered into.
Q:
Misrepresentation cannot result from an honest mistake.
Q:
A contract entered into involuntarily is enforceable if present in writing.
Q:
Undue influence renders a contract voidable and is a ground for rescission.
Q:
A person who discovers that he is a victim of fraud has an indefinite amount of time to report his grievance.
Q:
The basic idea of misrepresentation is that one of the parties to a contract created in the mind of the other party a mistaken impression about an important fact or facts concerning the subject of the contract.
Q:
After staying home and raising four children, Quinn got a job at a museum. Ten years later, she realized her marriage was in trouble and began psychological counseling. She later separated from her husband but continued therapy. During a session at which her husband was present, he asked his wife, "What do you want?" She wrote on a piece of paper that she wanted the house, her car, the joint bank accounts, and a computer. The husband took the note to his attorney, who drafted a property settlement on its basis. Quinn, ignoring the advice of her psychologist to hire her own attorney, signed the agreement. She later challenged the agreement on the grounds of incapacity. Will she succeed?
Q:
Explain the test for mental incapacity in contract law.
Q:
When entering into a contract, parties are expected to exercise reasonable judgment.
Q:
Courts will often allow a party to avoid responsibility when the party has made a promise carelessly.
Q:
Explain the limitations on a minor's right to disaffirm a contract.
Q:
Why do the courts require minors to pay the reasonable value of necessaries they receive under a contract they are permitted to disaffirm?
Q:
People lacking mental capacity:
A. can disaffirm their contracts.
B. cannot disaffirm their contracts.
C. are liable for the reasonable value of necessaries.
D. don't need to return any consideration they have received.
Q:
Which of the following statements is true?
A. Minors who have lied about their age can disaffirm their contracts.
B. A comatosed person is regarded as legally having the capacity to contract.
C. For a person adjudicated insane, his/her personal representatives cannot ratify the contract.
D. People who regain their mental capacity can ratify their contracts.
Q:
In cases involving contractual incapacity caused by insanity:
A. the contract is always void.
B. the contract is always estopped.
C. the rules regarding necessaries are basically the same as in the case of minors.
D. the rules state that the person must be accompanied by at least two witnesses at the time of contracting.
Q:
A contract is voidable due to:
A. lack of capacity because of felony.
B. adjudication of insanity.
C. ratification by minors.
D. lack of capacity because of minority.
Q:
Ratification of a contract which is voidable for lack of capacity:
A. must be in writing.
B. can occur at any time after the contract is made.
C. cuts off the right to disaffirm.
D. must always have at least two witnesses present at the time of contracting.
Q:
Dax, 15, bought a diamond ring from a local jewelry store. The jeweler was aware of his age. He made a partial payment on the ring of $100. Ten months later, Dax's girlfriend broke off the engagement, but refused to return the ring. Dax asked the jeweler to repossess the ring, but the jeweler took no action. Dax sought to disaffirm the contract for the ring, and the jeweler argued that he could not do so without returning the ring. Can Dax disaffirm?
Q:
When a person has been adjudicated insane:
A. the court rules that the person is of unsound mind but has lucid moments.
B. most states hold that the contracts of such persons are voidable.
C. the court appoints a guardian or conservator for the person's estate.
D. the court says that such a person is liable for any value of necessaries.
Q:
In most states, the agreements of people who have been adjudicated insane are ____.
A. valid
B. void
C. voidable
D. unenforceable
Q:
_____ means that a general hearing was held on the person's mental competency, and the court determined that the person was of unsound mind and appointed a guardian or conservator of the person's estate.
A. Emancipation
B. Adjudication
C. Incapacitation
D. Ratification
Q:
People who regain their mental capacity:
A. can disaffirm for a reasonable time after regaining mental capacity.
B. can ratify their contracts.
C. are still considered to be insane for a reasonable period of time.
D. cannot ratify their contracts.
Q:
A person lacking mental capacity must return the other party to status quo when:
A. the other party was aware of the person's lack of mental capacity.
B. the person lacking mental capacity has already enjoyed the product of the agreement.
C. the other party was unaware of the person's lack of mental capacity.
D. the person lacking mental capacity has passed on the product of agreement to someone else.
Q:
If a court later finds that a person lacked mental capacity at the time a contract was entered into, that contract is:
A. still valid.
B. voidable.
C. automatically void.
D. disaffirmed.
Q:
According to the theory of incapacity, people are presumed to lack the capacity to contract if they are _____.
A. mentally ill
B. obese
C. felons
D. diabetic
Q:
Under which of the following situations can a person suffering from mental impairment have the legal capacity to contract?
A. If the contract is for necessaries provided by parents.
B. If the person is married.
C. If the person is intoxicated from drugs or alcohol, but is not mentally retarded.
D. If the person entered a binding contract during a lucid moment.
Q:
Whether an item can be considered "necessary":
A. depends on the circumstances of the agreement.
B. depends on the minors' station in life.
C. doesn't depend on who provides for it.
D. doesn't depend on the minors' age.
Q:
Under which of the following circumstances can minors disaffirm a contract?
A. The minor has not ratified the contract upon reaching majority.
B. The contract is for real estate.
C. The minor has given a false statement about his/her age.
D. The minor is required to place the adult in status quo.
Q:
What is the term used to describe the termination of a parent's right to receive services and wages from a child and to generally control him?
A. Emancipation
B. Disaffirmation
C. Ratification
D. Incapacity
Q:
In which of the following ways do courts prevent minors, who misrepresent their age, from defrauding adults?
A. By requiring the minor to place the adult in status quo.
B. By holding the minor to his/her spoken statements which clearly indicate intent to be bound by the contract.
C. By ratifying the minor before he/she turns adult.
D. By proving them incapable of being held in a contract.
Q:
_____ is/are essential to a minor's continued existence and general welfare.
A. Considerations
B. Emancipation
C. Forbearance
D. Necessaries
Q:
Jessica, a minor, rented an apartment in Greenwich Village for $800 a month. She signed a one-year lease. After living there for three months, Jessica decided to move to another apartment complex. She is liable for the reasonable value of three months' rent at Greenwich Village, but not for the remaining nine months' rent. This is in accordance with the _____ provision of capacity to contract by minors.
A. disaffirmation
B. necessaries
C. emancipation
D. adjudication
Q:
A minor's contract for necessaries is:
A. unenforceable.
B. estoppable.
C. voidable.
D. binding on a quasi contract theory.
Q:
"Status quo ante" means:
A. that minors can lose the right to disaffirm if they fraudulently misrepresent their age.
B. "the condition beforehand," or the position one would be in if a given contract had never come into existence.
C. "the state sets the ante," or that the basic risks of entering into contracts are not protected by the state.
D. that a minor is totally protected by law on all counts of misbehavior.
Q:
Under the common law, minors:
A. are entitled to the return of their property given as consideration only upon attaining majority.
B. are entitled to the return of their property given as consideration even if they have been ratified.
C. are entitled to the return of their property given as consideration, even if that property is possessed by a third party at the time of disaffirmation.
D. are not entitled to the return of their property given as consideration.
Q:
Chuck Olson, aged 17, bought a used car from Bobby Duncan on September 15, 2006, agreeing to pay Duncan $200 a month for 12 months. On October 6, 2006, Olson was involved in an accident that damaged the car. On October 7, 2006, Olson told Duncan he wanted to disaffirm the contract for the purchase of the car. Olson attained the age of majority on October 8, 2006. If Duncan sues Olson, in most states he will:
A. win, because Olson did not disaffirm until after reaching the age of majority.
B. win, because Olson was unable to return the car.
C. lose, even though Olson cannot return the car.
D. lose, because Olson did not ratify the contract on the day he attained majority.
Q:
Hans bought a stylish sports car when he was 15. Two weeks after he turned 18, he sold the car to his neighbor. In this scenario:
A. Hans may disaffirm the contract even after he sold the car.
B. Hans can disaffirm the contract as it was never a valid ownership.
C. Hans may recover the cost of the car from the dealer who sold it to him when he was 15.
D. Hans cannot disaffirm the contract because he sold the car.
Q:
What is the term used for the willingness of adults who indicate an intent to be bound by contracts entered while still minors?
A. Ratification
B. Disaffirmance
C. Emancipation
D. Forbearance
Q:
Under the Uniform Commercial Code, minors who disaffirm their contracts involving goods:
A. can reclaim the goods even from third parties.
B. can no longer reclaim those goods from innocent third parties.
C. have to return consideration even if the goods have been consumed.
D. have to return consideration even if it has been stolen from them.
Q:
Which of the following is true for a contract made by a minor?
A. It is voidable.
B. It cannot be disaffirmed during minority.
C. It is barred from ratification.
D. A minor's capacity to contract is never presumed.
Q:
In a contract made by a minor:
A. adult parties to the contract can disaffirm.
B. the minor has the right to disaffirm.
C. his/her siblings who are also minors can disaffirm the contract on his/her behalf.
D. the minor can disaffirm the contract anytime even after attaining majority.
Q:
When a minor reaches the age of majority, he/she:
A. may disaffirm a contract for a reasonable time after reaching majority.
B. can no longer be ratified.
C. must put his intent to disaffirm in writing shortly before reaching majority.
D. should renew his contract in order to disaffirm the contract legally.
Q:
A minor can disaffirm a contract made for ____.
A. real estate
B. life insurance
C. educational training
D. bank accounts
Q:
A person could be medically insane but still have the legal capacity to contract.
Q:
In most states, the agreements of persons who have been adjudicated insane are void.
Q:
Once a mentally impaired person regains his mental capacity, he may ratify a contract he made while he was impaired.
Q:
If a person is adjudicated insane, his/her personal representative cannot ratify the contract.
Q:
Emancipation gives a minor the capacity to contract.
Q:
Minors are generally held liable on a quasi contract basis for the reasonable value of necessaries furnished to them.
Q:
Minors are liable for the value of necessaries they have purchased under a contract but have not received at the time they disaffirm.
Q:
Many states treat intoxicated persons like people who lack mental capacity if, at the time they entered the agreement, they were so intoxicated that they were unable to understand the nature of the business at hand.
Q:
Performing a part of the contract after attaining majority, such as making payments or accepting some performance under the contract, is not enough for ratification.
Q:
Minors who successfully disaffirm a contract are not entitled to the return of any consideration they have given the adult party to the contract.
Q:
Minors are entitled to the return of their property given as consideration, even if that property is possessed by a third party at the time of disaffirmance.
Q:
Explain with an example how promissory estoppel affects consideration?
Q:
If either party entering a contract lacks the capacity to contract, the contract is void or voidable.
Q:
Capacity to contract is presumed and a party claiming incapacity bears the burden of proof.