Exam 15: Mistakes,fraud,and Voluntary Consent

Fact Pattern 15-B3 (Questions B14-B15 apply) In selling a commercial building,Birdie tells Colt that the property has a certain capacity,making it suitable for a nightclub.Birdie knows nothing about the capacity of the building,but it is not as she specifies.Colt buys the building. -Refer to Fact Pattern 15-B3.On learning the truth,Colt confronts Birdie,who says she was not trying to fool him-she was only trying to make a sale.This is

A material fact is a fact that a reasonable person would consider important when determining his or her course of action.

A negligent misrepresentation is not a basis for rescinding a contract.

ApartmentsRUs,a property management firm,presents a standard-form lease for an apartment to Barnaby,a potential tenant.ApartmentsRUs does not pressure Barnaby to sign the lease,but offers it on a take-it-or-leave-it basis.Barnaby signs the lease,but later wants to withdraw from the contract.He is most likely to avoid enforcement of the lease on the ground of

Ray buys a rural vineyard from Sergio,who claims that it would be a prime site for a housing subdivision.Ray later learns that the law does not permit the land to be used for housing.Ray may

Kari,a real estate agent,assures Linc that a certain parcel of commercial property fronts on the most highly trafficked street in Metro City.Linc buys the property and then discovers that the street has no more traffic than any other in its vicinity.Linc is most likely a victim of

Misrepresentation can occur by words or actions,but not by silence.

Raven,the owner of Strawberry Fields,contracts to sell its harvest to Tender Fruits,Inc.When Raven refuses to perform,Tender Fruits files a suit to enforce the contract.Raven and Tender Fruits are in a state that does not recognize the doctrine of unconscionability.To defend successfully against enforcement of the contract on similar grounds,Raven might rely on traditional notions of

Misrepresentation of a material fact cannot occur through conduct alone.

Any party who does not receive what he or she considers a fair bargain can argue mistake.

A unilateral mistake is a mistake made by both parties to a contract.

Words or terms in contracts that are subject to more than one reasonable interpretation can lead to bilateral mistakes.

Fact Pattern 15-B1 (Questions B1-B2 apply) Digital Storage,Inc.,offers to sell provide cloud-computing services to Entrepreneur Enterprises,Inc.,but mistakenly transposes some of the digits in the price so that $15,400 appears in the offer as $14,500.Entrepreneur Enterprises accepts the written offer. -Refer to Fact Pattern 15-B1.Entrepreneur Enterprises' best argument in favor of enforcement of the contract is that

An innocent party does not need to suffer an injury to collect damages as a result of a misrepresentation.

Generally,a unilateral mistake affords the mistaken party a right to relief from the contract.

Seth offers to buy a house from Tia for less than Tia paid for it,stating that he would "hate to see anything bad happen to Tia or her house." Tia agrees to sell.Regarding this agreement,a court would likely

Many courts have broadened the concept of unconscionability to apply it in situations other than sales of goods.

Garth owns two all-terrain vehicles (ATVs),worth $1,000 and $500,respectively.Helen agrees to buy "Garth's ATV" for $750.Garth believes,in good faith,that he is selling the $500 ATV.Helen believes,in good faith,that she is buying the $1,000 ATV.In this situation

In some states,the courts prefer to rely on traditional notions of fraud,undue influence,and duress rather than the concept of unconscionability.

Niles,an accountant,certifies several audit reports on Optimal Operational Processes,Inc.,Niles's client,knowing that the company intends to use the reports to borrow money from Prime Business Lending Company to buy new equipment.Niles believes that the reports are true and does not intend to deceive Prime Business,but does not check the reports before certifying them.Can Niles be held liable to Prime Business