Business Law And The Regulation Of Business 11th Edition By Richard – Test Bank

Chapter 11—Conduct Invalidating Assent

TRUE/FALSE

1. Marjorie has been cared for by her family physician for 35 years. She decides to assume the mortgage on his new clinic. The contract is automatically invalid because of undue influence.

ANS: F DIF: Difficulty: Moderate
NAT: BUSPROG: Reflective Thinking STA: AICPA: BB-Critical Thinking
TOP: A-Head: Undue Influence KEY: Bloom’s: Application

2. At the marriage of her daughter, Lorna is given papers to sign, which the catering company says are the invoices for the food, service, and decorations. Underneath the invoices are a carbon and a contract of sale for a portion of the failing catering business. Lorna signs the papers; her signature is transferred to the sales contract. This is a void contract because it was entered by fraud in the execution.

ANS: T DIF: Difficulty: Easy
NAT: BUSPROG: Reflective Thinking STA: AICPA: BB-Critical Thinking
TOP: A-Head: Fraud KEY: Bloom’s: Application

3. Pat told her friends that her car got 35 miles to the gallon in the city when in reality it only got 20 miles per gallon. If Pat decides to sell the car and one of these friends decides to buy it, Pat is under no duty to tell the correct figure unless asked.

ANS: F DIF: Difficulty: Moderate
NAT: BUSPROG: Reflective Thinking STA: AICPA: BB-Critical Thinking
TOP: A-Head: Fraud KEY: Bloom’s: Knowledge

4. Physical compulsion and improper threats are the two basic types of duress.

ANS: T DIF: Difficulty: Easy NAT: BUSPROG: Analytic
STA: AICPA: BB-Critical Thinking TOP: A-Head: Duress
KEY: Bloom’s: Knowledge

5. Threats of resorting to a civil lawsuit to recover a debt does not constitute duress.

ANS: T DIF: Difficulty: Easy NAT: BUSPROG: Analytic
STA: AICPA: BB-Critical Thinking TOP: A-Head: Duress
KEY: Bloom’s: Knowledge

6. The law requires that to form a valid contract the agreement must be voluntary and knowing.

ANS: T DIF: Difficulty: Easy NAT: BUSPROG: Analytic
STA: AICPA: BB-Critical Thinking TOP: A-Head: Duress
KEY: Bloom’s: Knowledge

7. Acts constituting duress are necessarily crimes or torts in themselves.

ANS: F DIF: Difficulty: Easy NAT: BUSPROG: Analytic
STA: AICPA: BB-Critical Thinking TOP: A-Head: Duress
KEY: Bloom’s: Knowledge

8. Harry was told that he had to pay $50 for filing his claim in small claims court. He did. If the fee is really $40, he cannot recover the $10 because it is a unilateral mistake of fact.

ANS: F DIF: Difficulty: Moderate
NAT: BUSPROG: Reflective Thinking STA: AICPA: BB-Critical Thinking
TOP: A-Head: Mistake KEY: Bloom’s: Application

9. Economic duress, such as that found in the case of Berardi v. Meadowbrook Mall Company, renders a contract void.

ANS: F DIF: Difficulty: Easy NAT: BUSPROG: Analytic
STA: AICPA: BB-Critical Thinking TOP: A-Head: Duress
KEY: Bloom’s: Application

10. Undue influence is the taking of unfair advantage of a person by reason of a dominant position based upon a confidential relationship.

ANS: T DIF: Difficulty: Easy NAT: BUSPROG: Analytic
STA: AICPA: BB-Critical Thinking TOP: A-Head: Undue Influence
KEY: Bloom’s: Knowledge

11. Fraud in the inducement will render an agreement void.

ANS: F DIF: Difficulty: Easy NAT: BUSPROG: Analytic
STA: AICPA: BB-Critical Thinking TOP: A-Head: Fraud
KEY: Bloom’s: Knowledge

12. For a misrepresentation to be actionable as fraud in the inducement, it must be a misrepresentation of opinion.

ANS: F DIF: Difficulty: Easy NAT: BUSPROG: Analytic
STA: AICPA: BB-Critical Thinking TOP: A-Head: Fraud
KEY: Bloom’s: Knowledge