SOLVED

[Scheming ‘Friends’] Richard wants to rent a basement apartment in Eric’s home. Richard threatens to tell Eric’s parents that Eric had been arrested for illegally smoking marijuana unless Eric rents the apartment to him for $100 per month. (The information regarding the arrest is true.) Eric reluctantly agrees to rent the apartment to Richard for $100 per month. Richard also wants to buy Eric’s car. Eric runs back the odometer on the car before Richard looks at it. Richard is impressed by the low mileage and agrees to buy the car. Eric offers to sell Richard a ring for Richard’s fiancée. Eric tells Richard that the ring is a diamond and believes that to be true. After the deal is made, however, a jeweler friend of Eric informs him that the ring is a fake. When Richard shows up with the money, Eric says nothing. He just hands Richard the ring and takes the money. Later, Richard finds out that the odometer was run backwards from another friend in whom Eric confided. Richard also finds out from his girlfriend that the ring is a fake. 61) Which is the correct legal term, if any, for Eric’s action in regard to running back the odometer? A) Active duress. B) Conscious disregard. C) Concealment. D) Nondisclosure. E) There is no legal term because although he acted illegally, Richard had no duty to disclose his action and incriminate himself. 62) Which statement is true regarding Richard’s rights in regards to the car purchase? A) He will not be able to rescind the contract unless he can prove that he expressly asked Eric if the mileage was run backwards on the car, and Eric failed to reveal that the odometer had been altered. B) He will be able to rescind the contract because of the fraudulent misrepresentation on the part of Eric. C) He will be able to rescind the contract because of duress practiced by Eric. D) He will not be able to rescind the contract because Eric made no affirmative statements. E) He will not be able to rescind the contract because the mileage alteration did not affect the engine of the car. 63) Which statement is true regarding Richard’s rights in regards to the ring purchase? A) He will be able to rescind the agreement because Eric was guilty of fraudulent misrepresentation. B) He will not be able to rescind the contract because Eric did not know the ring was a fake when the initial agreement was made. C) He will not be able to rescind the contract because Eric did not make an express false statement regarding the ring. D) He will not be able to rescind the contract unless he can prove that Eric was at least negligent in not realizing the ring was a fake when the initial agreement was made. E) He will be able to rescind the agreement because Eric was guilty of duress. 64) Madison purchased a three-year-old computer from Kami for $300. Kami told her the price seemed fair but she really had no idea what it was worth and just wanted to get rid of it. Madison, who knew little about computers, thought she had a great deal. After Madison returned home, she discovered from a computer expert friend of hers that the computer was not worth as much as she believed. Madison wanted to return the computer claiming that they were both mistaken about value, but Kami said, “No way!” Who should win in the dispute between Madison and Kami and why? A) Kami should win because Madison’s unilateral mistake does not void the contract. B) Kami should win because mistaken beliefs about the subjective value of an item do not affect the validity of a contract. C) Madison should win because there was a mistake of fact at the time the contract was entered. D) Madison should win because mistaken beliefs about the subjective value of an item can affect the validity of a contract. E) Madison should win because there was a unilateral mistake of fact. [Sale of KyRo’s Toys] Ky and Roland owned KyRo’s Toy Distributors together for many years. After years of arguing about sharing an office, they decided they no longer wanted to work together, even though each wanted to remain in the toy distribution business. They asked their accountant, Delia, to separate the accounts equitably, and she prepared a spreadsheet showing the value of KyRo’s accounts, and an equitable division of those accounts. Ky and Roland reviewed the division of accounts and signed a separation agreement that included a phrase that the accounts would be divided 50-50 as per Delia’s spreadsheet attached to the agreement. Both Ky and Roland signed a disclaimer that stated that they had reviewed the attachment. Six months later, when commissions arrived for the two separate companies, Ky noticed that he was making substantially less than one-half of what he made with KyRo, and upon investigation, realized that some of the financial information on which Delia had relied in preparing the spreadsheet had been outdated, and the accounts, were in fact, not divided equally. Ky now wants to rescind the separation agreement, claiming that all three elements of mutual mistake are present, and that the mistake about the division of accounts had a material effect on the agreement because it was not what was intended. 65) Is Ky correct in claiming that the mistake in the division of the accounts is material? A) Yes, because only one party must show that the mistake was not what was intended. B) No, because the mistake was in the financial information. C) Yes, because Ty made a mutual mistake. D) Yes, if it was a basis for Ky’s agreeing to enter into the contract. E) No, because the mistake is not mutual since only Ty, and not Roland, was adversely affected.  Â