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Exam 8: Grounds Upon Which a Contract May Be Set Aside: Mistake and Misrepresentation

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Question 1

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The cooling-off period is a time during which a consumer may cancel or rescind a contract without any reason whatsoever.

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Question 2

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If rescission is unavailable in a case of innocent misrepresentation,and the misstatement was an important inducement,and the aggrieved party has suffered substantial loss,the court may look at the misrepresentation as

A) negligent,and award damages.
B) a contractual nuisance.
C) an obligation in tort.
D) a breach of contract.
E) a term to the agreement.

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Question 3

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Both rescission and damages are available remedies for misrepresentation only when the misrepresentation is

The most fundamental mistake that radically changes the nature of the bargain of the parties is a mistake about the existence of the subject matter of the contract.

An innocent party can lose her or his right to repudiate a contract formed as a result of undue influence by

Jack really needs money to pay off his mortgage before the bank forecloses.He goes to "Shark" who agrees to lend Jack the money if Jack will pay 100 percent interest.This is an example of undue influence.

James says to Jack,"I am selling my Toyoda for $500.Would you like to buy it?" Jack,believing that James was referred to his automobile,replies,"Yes,I'll buy your Toyota for $500." Jack pays $500 and James presents him with a Japanese doll called Toyoda.Jack asks for his money back because he misunderstood James.Should this matter go to court,the court will most likely find that

You are going to lend money to a corporation owned by Mr.X.You are requiring that Mr.X and his wife,Ms.Y,sign personal guarantees agreeing to be responsible in case of default.Why might you be concerned about your ability to enforce the guarantee against Ms.Y,and how should you protect your position?

Use this fact situation to answer the related questions that follow it. A and B are negotiating a settlement under which A is to give B money and in return B is to give A his house and his car.The negotiations are by faxes back and forth between A and B,who agree to put the settlement in writing.A prepares the written settlement agreement,which,unfortunately,does not refer to his house,so B quickly signs it. In this situation,if A argues that the house was part of the settlement and was left out by mistake,

If,at the time a contract was made,the subject matter did not exist,without the knowledge of the seller,the contract is

Donna Brown owned a flower shop,which she was anxious to sell.Charles Blue visited her shop and discussed a possible purchase.During those discussions,Donna stated that she was sure 2013 sales would exceed $400 000 and that sales for 2012 were more than $360 000.Charles was impressed with those figures and offered to purchase the flower shop for $110 000 cash.The sale was completed one week later (November 24,2012)and was documented with a brief written agreement that did not include anything about past sales.In April 2013,Charles had the 2012 financial statement for the flower shop prepared and discovered that actual sales for 1997 were $320 000.In addition,Charles knew that 2013 sales were 5 percent below sales for the same period a year earlier.Charles confronted Donna with those figures and Donna was evasive and refused to accept any responsibility,saying only that the written agreement contained no mention of sales figures.Charles asks you the following questions: a.Do I have a right to sue Donna,and if so,what is the legal basis for my action? What must I prove and what are my chances of success? b.What remedies could I seek,and do I have different remedies from which I can choose?

Some consumer protection legislation provides for a cooling-off period.What is a cooling-off period and how does it benefit consumers?

Use the fact situation in Q33 to answer the related question that follows. Referring to the above fact situation,in a lawsuit by Alice against Marvin,Alice will seek

Ryan Thompson,a lawyer,was approached by a client who wished to sell him shares in a business he owned.Ryan accepted the offer by purchasing the shares.The business is a tremendous success.Later the client claims that he sold the shares to Ryan because of Ryan's undue influence over him.What must the client prove in order to be successful in his action?

Which of the following is not a condition that must be met by a plaintiff who request rectification of a contract?

A agrees to buy 1000 shares in a telephone company from B for $3.00 a share.A believes that the value of the shares in the company is going to go up to $15.00 in a day or two.However,B believes that the value of the shares is going to go down to $1.50 and wants to get as much money as he can.Unknown to either A or B,at the time of the agreement,the value of the company and thus the shares has dropped below $1.50,to $0.75.A now wishes to get out of the agreement.In this case,

Contracts between parties of unequal bargaining power that are unfairly advantageous to the powerful parties have long been considered

Damages are not generally awarded in cases of innocent misrepresentation; however,"out-of-pocket" expenses might be awarded.These are referred to as

Benny,who owns a classic car,lives in an apartment with a disabled roommate.Benny is approached by Dick Albert,who advises Benny that if he does not sell his classic car for $2000 (a fraction of its value),the roommate "will have both his arms broken." Benny then signs the contract and Dick pays him the $2000.Benny was never threatened at any time during the transaction.What remedies can Benny pursue and what must he do in order to pursue those remedies? What is the likelihood of success?

Misrepresentation never gives rise to damages for torts as well as rescission in contract.