National American University

BUSINESS L 3100

Chapter 14-CAPACITY AND GENUINE ASSENT

TRUE/FALSE

1)Certain persons cannot make contracts that will bind them.

 

                                           

 

2. Contractual capacity can exist even though a party does not understand every provision of the contract.

 

                                           

 

3. Ordinarily, every party to a contract is presumed to have contractual capacity until the contrary is shown.

 

                                           

 

4. Discriminatory and punitive incapacities have largely disappeared.

 

                                           

 

5. Factual incapacity is imposed because of the class or group to which a person belongs.

 

                                           

 

6. A factual incapacity may exist when, because of a mental condition caused by medication, drugs, alco- hol, illness, or age, a person does not understand that a contract is being made or understand its general nature.

 

                                           

 

7. Generally, when a person of legal age makes a contract with a minor, the contract is voidable by either party.

 

                                           

 

8. When a minor avoids contracts, the minor always must return the other contracting parties to their original financial positions.

 

                                           

 

9. The "necessaries" of minors are precisely defined by law.

 

                                           

 

10. When necessary medical care is provided to a minor, a parent is liable at common law for the medical expenses provided the minor child.

 

                                           

11. At common law, a minor cannot be held contractually liable for his or her necessary medical expenses when the parent is unable or unwilling to pay.

 

                                           

 

12. Ratification consists of any words or conduct of a former minor manifesting an intent to be bound by the terms of a contract made while a minor.

 

                                           

 

13. A contract made by an incompetent person after a guardian has been appointed is voidable.

 

                                           

 

14. An incompetent person may ordinarily avoid a contract in the same manner as a minor.

 

                                           

 

15. A person who has drunk too much alcohol at a party and signs a contract may be able to rescind that contract.

 

                                           

 

16. A unilateral mistake as to a fact does not affect the contract when the mistake is unknown to the other contracting party.

 

                                           

 

17. The seller of a painting is not bound by the sales contract if the painting purchased was considered of little value and only later discovered to be valuable to the surprise of both buyer and seller.

 

                                           

 

18. A party who speaks with a reckless disregard for the truth not knowing of the falsity of his or her words cannot be liable for fraud.

 

                                           

 

19. Fraud requires a misstatement of either a fact or an opinion.

 

                                           

 

20. Fraud requires intent that the listener rely on the false statement of fact.

 

                                           

 

21. In order for fraud liability to arise, the listener must actually rely on the false statement of fact.

 

                                           

 

22. Ordinarily, a party to a contract has no duty to volunteer information to the other party.

 

                                           

23. As a general rule, the nondisclosure of information that is not asked for does not impose fraud liability or impair the validity of a contract.

 

                                           

 

24. A claim of undue influence will be unsuccessful unless the contracting parties have a close relationship of trust.

 

                                           

 

25. A contract obtained by physical duress is void.

 

                                           

 

MULTIPLE CHOICE

 

1. Contractual capacity is the ability to:
   1. read and write.
   2. sign a written contract.
   3. understand that a contract is being made and to understand its general nature.
   4. understand the legal meaning of the contract being made.     
2. A person lacks contractual capacity if:
   1. the person is a chronic alcoholic.
   2. the person is a drug addict.
   3. because of mental impairment, the person does not comprehend that a contract is being made or understand its consequences.
   4. all of the above.

                                           

 

3. The key time for determining whether a party lacked contractual capacity is:
   1. the time the contract was made.
   2. the time the value of the bargain becomes clear.
   3. the time set for performance of the contract.
   4. the time the plaintiff expresses dissatisfaction with the contract terms.            
4. The maximum amount of time that a minor has to disaffirm a contract is:
   1. one year from the date of the agreement.
   2. 30 days from learning of his or her right to disaffirm.
   3. the age of majority.
   4. a reasonable period of time after reaching the age of majority.
5. A minor cannot avoid a contract to purchase a car if the:
   1. car has been destroyed.
   2. car has been damaged.
   3. car is used for non-commercial purposes.
   4. minor is able to return the car but does not do so.

 

 

6. A minor cannot avoid a contract that has been:
   1. ratified.
   2. signed.
   3. processed.
   4. disallowed by the court.

                                           

 

7. When a minor avoids a contract to purchase a car:
   1. the parents of the minor are liable for the purchase price.
   2. a relative who cosigned the contract is liable for the purchase price.
   3. a friend to whom the minor loaned the car is liable for the purchase price.
   4. the automobile insurance company is liable for the purchase price.     
8. The obligation of a cosigner is discharged by:
   1. the minority status of one of the parties.
   2. the majority status of one of the parties.
   3. the court's declaration of the contract's provision of necessaries.
   4. the payment of the debt.

 

 

9. In which of the following cases is a contract between A and B binding?
   1. A makes a mistake of material fact, and the mistake is unknown by B.
   2. A and B make the same mistake of material fact.
   3. A recklessly but honestly misrepresents a material fact.
   4. A innocently misrepresents a material fact.     
10. An agreement is not binding when:
    1. one party makes a mistake regarding a material fact.
    2. both parties make a mistake regarding a material fact.
    3. one party makes a mistake of law.
    4. all of the above.

                                           

 

11. A contract based on a mutual mistake in judgment is:
    1. voidable by the adversely affected party.
    2. not voidable by the adversely affected party.
    3. void ab initio.
    4. none of the above.

                                           

 

12. All of the following statements refer to an element of fraud except:
    1. the defendant desired to obtain a financial benefit.
    2. the defendant made a false statement.
    3. the defendant knew that the statement was false or was recklessly indifferent regarding its truth.
    4. the defendant intended for the other party to rely on the false statement.

                                           

 

13. Jack sells Jim a used car that Jack falsely described as having been driven only 12,000 miles. Fraud has occurred if:
    1. Jim bought the car solely because of its color.
    2. Jim knew that the mileage was more than 12,000 miles.
    3. Jim relied upon Jack's statement.
    4. Jack is a merchant.

                                           

 

14. I believe that I own a very valuable vase. I tell you this information and state that I will sell it to you for $800. I sell the vase to you, and you later find out that the vase is worth only $200. Fraud:
    1. has occurred.
    2. has not occurred.
    3. can always be based upon a statement of opinion or value.
    4. none of the above.

                                           

 

15. A finding of undue influence would most likely not occur in a contract between:
    1. parent and child.
    2. attorney and client.
    3. neighbor and neighbor.
    4. guardian and war

                                           

 

16. An apparently voluntary agreement may in fact not be voluntary if:
    1. undue influence is present.
    2. physical duress is present.
    3. economic duress is present.
    4. all of the above.

 

 

CASE

 

1. John, a 17-year-old, purchased a ping-pong table and four new ping-pong paddles. A week after he turned 18, John tried to return the ping-pong paddles. He told the seller that he had decided to keep the table. Can John avoid the contract in this way?

 

 

 

2. Roberta, an educated person, purchased real estate from Maurice. Roberta did not read entirely the contract that she signed. As a result, she did not notice the provision in the contract about the interest imposed on the unpaid portion of the purchase price. She refused to pay the interest specified in the contract. Maurice sued her. Could he recover?