LAW4

Contracts that are induced by misrepresentation are considered:

• voidable

• enforceable

Which of the following ends the right to rescind a voidable contract?

• Ratification

• Assertion

One of the differences between fraud and misrepresentation is that:

• in fraud cases, the injured party has the option of suing for monetary damages.

• misrepresentation requires scienter.

Which of the following is often taken to be the equivalent of an assertion?

• Concealment

• Oversight

Which of the following is most likely to constitute a misstatement that can give rise to fraud or misrepresentation liability?

• An owner of a house gets his ceiling painted to conceal a leaking roof and says, "I got theceiling painted recently."

• The owner of an unencumbered horse states, "I am selling the horse to raise funds for myranch."

A fact is considered to be material in a misrepresentation case when:

• it plays an important role in inducing a person to enter into a contract.

• it is similar to an opinion or promise about some future happening.

The main difference between concealment and nondisclosure is that:

• concealment is always regarded as an assertion of fact, while nondisclosure may or may not amount to such an assertion.

• nondisclosure is always regarded as an assertion of fact, while concealment may or maynot be an assertion of fact.

Which of the following statements, if false, is most likely to create liability for fraud or misrepresentation?

• "This crane will lift a 10,000-pound load."

• "This rare antique chair probably is worth $10,000."

Joe sells his business to Shirley. During the negotiations, Joe negligently tells Shirley that the business has earned a profit for the last five years. In reality, the business operated at a loss for each of those years. However, Shirley did not hear Joe's misstatement. Shirley cannot rescind the contract because:

• . Shirley did not actually rely on Joe's misstatement.

• Joe's misstatement was not material.

James has entered into a contract to sell his house to Mikhael. James knows that the house has a bad termite infestation that significantly reduces the value of the house. However, the topic of termites never came up and James did not volunteer any information about the termites. Mikhael is not aware of the termite problem. Under the law of most states, has legal misrepresentation occurred here?

• Yes, because James is concealing the termite infestation from Mikhael.

• Yes, because a seller must always inform a buyer about defects that are not obvious.