REVIEW QUESTIONS TRUE/FALSE QUESTIONS (CIRCLE THE CORRECT ANSWER)

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1 REVIEW QUESTIONS TRUE/FALSE QUESTIONS (CIRCLE THE CORRECT ANSWER) 1. T F When a court or legislature protects a class, this protection extends to all members of that class in every contractual transaction. 2. T F A contracting party who is not in a protected class may still be protected from the overreaching of another party. 3. T F The terms of a contract of adhesion will be enforced because there was a manifestation of assent. 4. T F All contracts of adhesion are unenforceable. 5. T F The terms of an adhesion contract will not be enforced because of the imposition of will by one party upon another party during contract formation. 6. T F An adhesion contract may be a nonstandardized contract or a standardized contract. 7. T F All adhesion contracts are unconscionable. 8. T F To determine whether a contract or a contract term is unconscionable, evaluate it as of the time of the allegation of unconscionability. 9. T F Unconscionability has been defined by the UCC as an absence of meaningful choice on the part of one of the parties together with contract terms that are unreasonably favorable to the other party. 10. T F Absence of meaningful choice has two components: (1) The imbalance in bargaining power (2) Lack of knowledge of the terms 11. T F A gross inequality of bargaining power will not lead to the conclusion of absence of meaningful choice if the other party had knowledge of the terms. 12. T F A party could lack knowledge of the terms of a contract if the contract is written in English and the buyer can read only Spanish. 13. T F A contract is unconscionable if one party lacked meaningful choice and the other party had no knowledge of that fact. 14. T F Determining whether a contract term is reasonable or fair will be done without considering the circumstances at the time the contract was made. 15. T F If a case involves a sale of goods, the court must consider whether or not UCC applies when the issue of unconscionability arises.

2 16. T F If a case does not involve a sale of goods, the court may not consider whether the contract or a term in the contract was unconscionable at the time of contract formation. 17. T F Unconscionability is a question for the jury. 18. T F Under section 2 302(2) of the UCC, the court may, of its own accord, raise the issue of unconscionability. 19. T F Unconscionability may be used both as a defense to a breach of contract action and as an action for breach of contract. 20. T F Fraud and misrepresentation are interchangeable terms. 21. T F An assertion must be fraudulent to be a misrepresentation. 22. T F A misrepresentation is an assertion that is not in accord with the facts. 23. T F A statement a speaker intends as truthful may be a misrepresentation due to ignorance or carelessness. 24. T F A statement a speaker intends as truthful but which is a misrepresentation due to ignorance or carelessness is still fraud. 25. T F A fraudulent misrepresentation may be either fraud in the factum or fraud in the essence. 26. T F Fraud in the factum occurs when one party tricks the other into signing a promissory note that the other believes is merely a receipt. 27. T F A typical case of fraud in the inducement involves a seller s misrepresentation of the quality of the goods. 28. T F A party who has relied on a misrepresentation made because of ignorance or carelessness may not disaffirm the contract. 29. T F The power to disaffirm a contract protects innocent parties from misrepresentations that are either careless or fraudulent. 30. T F Duress encompasses more than physical force. 31. T F Duress by threat has two elements: (1) There must be a threat. (2) The threat must be sufficiently grave to induce the victim to assent. 32. T F Duress by threat includes economic duress. 33. T F Duress does not take away a contracting party s free will. 34. T F Undue influence is the same thing as duress. 35. T F Undue influence requires a special relationship between the parties. 36. T F Undue influence requires threats and deception. 37. T F Undue influence involves unfair persuasion by a party who is in either a position of dominance or a position of trust and confidence.

3 38. T F A contracting party who has been adversely affected by a mistake in a basic assumption of fact may disaffirm the contract. 39. T F A contracting party may disaffirm a contract in which the mistake in a basic assumption of fact involves quality or value. 40. T F A contracting party may not disaffirm a contract in which the mistake in a basic assumption of fact involves the identity or existence of the subject matter. FILL-IN-THE-BLANK QUESTIONS 1.. A contract formed by one party imposing his or her will upon an unwilling, or even unwitting, party. 2.. Occurs when contract negotiations are not between equals, when there is no opportunity to bargain over the terms, or when one party is unfamiliar with the terms. 3.. The imposition by one party of an unreasonably favorable contract or term on the other party who lacked a meaningful choice. 4.. The determiner of unconscionability. 5.. The UCC section that pertains to unconscionability. 6.. An assertion that is not in accord with the facts. 7.. A misrepresentation that is a statement of fact known or believed to be false by the party making the statement with the intent of influencing the other party, who believes and relies on the statement, to act or refrain from acting, and the statement is sufficiently material to induce the relying party to accept the offer. 8.. A fraudulent misrepresentation that involves the very character of the proposed contract. 9.. A fraudulent misrepresentation that typically involves the quality of the goods Protects contracting parties from deliberately dishonest statements The use of any wrongful act or threat as a means of influencing a party to contract Wrongfully threatening a party with severe economic loss if the threatened party does not enter the proposed contract Unfair persuasion by a party who is in either a position of dominance or a position of trust and confidence.

4 14.. A mistake that involves a situation where both parties believed they were bargaining for something different from the thing for which they actually contracted. MULTIPLE-CHOICE QUESTIONS (CIRCLE ALL THE CORRECT ANSWERS) 1. The definition of unconscionable is found in which of the following? (a) Article 1 of the UCC (b) Article 2 of the UCC (c) Case law (d) Both Article 2 of the UCC and case law (e) Article 2A of the UCC 2. Unconscionability is defined as which of the following? (a) Absence of meaningful choice on the part of one of the parties (b) Gross inequality of bargaining power (c) Unreasonably favorable terms (d) Deceptive sales practices (e) Absence of meaningful choice on the part of one of the parties coupled with unreasonably favorable terms on the part of the other 3. Under UCC 2 302, the court may (a) refuse to enforce the contract. (b) delete the unconscionable term and enforce the remaining terms of the contract. (c) reform the unconscionable term so it no longer produces an unconscionable result. (d) ask the jury to decide whether the contract was unconscionable. (e) award damages. 4. Which of the following are the elements of fraud that must be established for a court to find a contract unenforceable? (a) The misrepresentation must be a statement of fact. (b) The statement must be false. (c) The party making the statement must know or believe the statement to be false and, by making the statement, must intend to influence the other party to act or refrain from acting. (d) The person to whom the statement is made must believe and rely on the statement. (e) The statement must be sufficiently material to induce the party relying on the statement to accept the offer. 5. Undue influence differs from duress in that (a) undue influence requires neither threats nor deception. (b) undue influence requires deception but not threats. (c) undue influence requires threats and deception. (d) undue influence requires a special relationship between the parties.

5 (e) undue influence requires the party influenced to be susceptible (i.e., the presence of either a mental or physical weakness). 6. Travers contracted to sell Come from Behind, a racehorse, to Bishop. At the time of contracting, both parties believed Come from Behind to be alive and well. Unknown to the parties, Come from Behind had recently been severely injured by a careless groom. Bishop could disaffirm the contract under the following theory: (a) Unconscionability (b) Fraud in the factum (c) Fraud in the inducement (d) Undue influence (e) Mistake in a basic assumption of fact 7. At birth, Simon suffered a brain injury which resulted in an IQ of 79. He lived with his brother, Larry, on the family farm that had been left to Simon by his parents. Larry told Simon that he would have to move to a group home if he did not sell the farm to Larry. Simon signed the documents conveying the farm to Larry. Simon could disaffirm the contract under the following theory: (a) Unconscionability (b) Fraud in the factum (c) Fraud in the inducement (d) Undue influence (e) Mistake in a basic assumption of fact SHORT-ANSWER QUESTIONS 1. Unconscionability is defined as an absence of meaningful choice on the part of one party coupled with unreasonably favorable terms on the part of the other. Discuss what constitutes absence of meaningful choice. 2. State the four elements of duress by threat.

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Contract Law for Paralegals: Chapter 8 Chapter 8

Contract Law for Paralegals: Chapter 8 Chapter 8 Tab Text CHAPTER 8 Contract Enforceability: Protecting a Party Against Overreaching Chapter 8 deals with the second group of contract enforcement problems-ad