Chapter 7. Misrepresentation, Duress and Undue Influence (159-177)

Question 1

A, who is not C’s agent, induces B by duress to contract with C to sell land to C. C, in good faith, promises B to pay the agreed price. Is the contract voidable?

Answer 1

The contract is not voidable by B. Restatement 2d of Contracts § 175(e)

Question 2

A, seeking to induce B to make a contract to buy a used car, turns the odometer back from 60,000 to 18,000 miles. B makes the contract. Does A’s conduct constitute a misrepresentation?

Answer 2

A’s conduct in setting the odometer is a misrepresentation. Whether the contract is voidable by B is determined by the rule stated in § 164. Restatement 2d of Contracts § 159(a)

Question 3

A, seeking to induce B to make a contract to lease a particular generator, writes B a letter with the intention of describing its output correctly as “1200 kilowatts.” Because of an error of A’s typist, unnoticed by A, the letter states that the output of the generator is “2100 kilowatts.” B makes the contract. Does A’s conduct constitute a misrepresentation?

Answer 3

A’s statement is a misrepresentation. Whether the contract is voidable by B is determined by the rule stated in § 164. Restatement 2d of Contracts § 159(a)

Question 4

A, seeking to induce B to make a contract to buy land, tells B that his title to the land has been upheld in a court decision. A knows that the decision has been appealed but does not tell this to B. B makes the contract. Does A’s conduct constitute a misrepresentation?

Answer 4

A’s statement omits matter necessary to prevent the implied assertion that A’s title is clearly established, and this assertion is a misrepresentation. Whether the contract is voidable by B is determined by the rule stated in § 164. Restatement 2d of Contracts § 159(b)

Question 5

A, seeking to induce B to make a contract to buy an apartment house, tells B that the apartments are all rented to tenants at $200 a month. A knows that the rent of $200 has not been approved by the local rent control authorities and that without this approval it is illegal but does not tell this to B. B makes the contract. Does A’s conduct constitute a misrepresentation?

Answer 5

A’s statement omits matter needed to prevent the implied assertion that the rent is legal, and this assertion is a misrepresentation (see § 170). Whether the contract is voidable by B is determined by the rules stated in § 164. Restatement 2d of Contracts § 159(b)

Question 6

A, seeking to induce B to make a contract to buy land, promises B to build an expensive house on an adjoining tract. A knows that he neither owns nor has such an interest in the tract that he can perform the promise, although he hopes to perform it. B makes the contract. Does A’s conduct constitute a misrepresentation?

Answer 6

A’s promise implies an assertion that he owns the tract or has such an interest in the adjoining tract that he can perform his promise, and this assertion is a misrepresentation. Whether the contract is voidable by B is determined by the rule stated in § 164. Restatement 2d of Contracts § 159(c)

Question 7

A, seeking to induce B to buy a furnace, tells B that it will give a stated amount of heat while consuming only a stated amount of fuel. A knows that the furnace is not capable of such efficiency. B makes the contract. Does A’s conduct constitute a misrepresentation?

Answer 7

A’s statement implies an assertion that the furnace has an existing capability of such efficiency, and this assertion is a misrepresentation. Whether the contract is voidable by B is determined by the rule stated in § 164. Restatement 2d of Contracts § 159(c)

Question 8

A, seeking to induce B to make a contract to buy his house, paints the basement floor in order to prevent B from discovering that the foundation is cracked. B is prevented from discovering the defect and makes the contract. Does A’s conduct constitute a misrepresentation?

Answer 8

The concealment is equivalent to an assertion that the foundation is not cracked, and this assertion is a misrepresentation. Whether the contract is voidable by B is determined by the rule stated in § 164. Restatement 2d of Contracts § 160(b)

Question 9

A, seeking to induce B to make a contract to buy his house, convinces C, who, as A knows, is about to tell B that the foundation is cracked, to say nothing to B about the foundation. B is prevented from discovering the defect and makes the contract. Does A’s conduct constitute a misrepresentation?

Answer 9

A’s conduct is equivalent to an assertion that the foundation is not cracked, and this assertion is a misrepresentation. Whether the contract is voidable by B is determined by the rule stated in § 164. Restatement 2d of Contracts § 160(b)

Question 10

A makes to B, a credit rating company, a true statement of his financial condition, intending that its substance be published to B’s subscribers. B summarizes the information and transmits the summary to C, a subscriber. Shortly thereafter, A’s financial condition becomes seriously impaired, but he does not disclose this to B. C makes a contract to lend money to A. Does A’s conduct constitute a misrepresentation?

Answer 10

A’s non-disclosure is equivalent to an assertion that his financial condition is not seriously impaired, and this assertion is a misrepresentation. Whether the contract is voidable by B is determined by the rule stated in § 164. Restatement 2d of Contracts § 161(c)

Question 11

A, seeking to induce B to make a contract to buy a thoroughbred mare, tells B that the mare is in foal to a well-known stallion. Unknown to A, the mare has miscarried. A learns of the miscarriage but does not disclose it to B. B makes the contract. Does A’s conduct constitute a misrepresentation?

Answer 11

A’s non-disclosure is equivalent to an assertion that the mare has not miscarried, and this assertion is a misrepresentation. Whether the contract is voidable by B is determined by the rule stated in § 164. Restatement 2d of Contracts § 161(c)

Question 12

A, in casual conversation with B, tells B that a tract of land owned by A contains thirty acres. A knows that it contains only twenty-nine acres but misstates its area because he does not regard the figure as important. A’s statement is not fraudulent because it is not made with the intention of inducing B to buy the land (§ 162(1)). B later offers to buy the tract from A. A does not disclose its true area to B, for fear that B will not buy it, and accepts B’s offer. Does A’s conduct constitute a misrepresentation?

Answer 12

A’s non-disclosure is equivalent to a new assertion that the tract contains thirty acres, and this assertion is a fraudulent misrepresentation (§ 162(1)). Whether the contract is voidable by B is determined by the rule stated in § 164. Restatement 2d of Contracts § 161(c)

Question 13

A, seeking to induce B to make a contract to buy land, knows that B does not know that the land has been filled with debris and covered but does not disclose this to B. B makes the contract. Does A’s conduct constitute a misrepresentation?

Answer 13

A’s non-disclosure is equivalent to an assertion that the land has not been filled with debris and covered, and this assertion is a misrepresentation. Whether the contract is voidable by B is determined by the rule stated in § 164. Restatement 2d of Contracts § 161(d)

Question 14

A, seeking to induce B to make a contract to buy A’s house, knows that B does not know that the house is riddled with termites but does not disclose this to B. B makes the contract. Does A’s conduct constitute a misrepresentation?

Answer 14

A’s non-disclosure is equivalent to an assertion that the house is not riddled with termites, and this assertion is a misrepresentation. Whether the contract is voidable by B is determined by the rule stated in § 164. Restatement 2d of Contracts § 161(d)

Question 15

A, seeking to induce B to make a contract to buy a food-processing business, knows that B does not know that the health department has given repeated warnings that a necessary license will not be renewed unless expensive improvements are made but does not disclose this to B. B makes the contract. Does A’s conduct constitute a misrepresentation?

Answer 15

A’s non-disclosure is equivalent to an assertion that no warnings have been given by the health department, and this assertion is a misrepresentation. Whether the contract is voidable by B is determined by the rule stated in § 164. Restatement 2d of Contracts § 161(d)

Question 16

A, seeking to induce B to make a contract to sell land, knows that B does not know that the land has appreciably increased in value because of a proposed shopping center but does not disclose this to B. B makes the contract. Does A’s conduct constitute a misrepresentation?

Answer 16

Since B’s mistake is not one as to a basic assumption (see Comment b to § 152 and Comment b to § 261), A’s non-disclosure is not equivalent to an assertion that the value of the land has not appreciably increased, and this assertion is not a misrepresentation. The contract is not voidable by B. See Illustration 13 to § 161. Rst. 161(d)

Question 17

In response to B’s invitation for bids on the construction of a building according to stated specifications, A submits an offer to do the work for $150,000. A believes that this is the total of a column of figures, but he has made an error by inadvertently omitting a $5,000 item, and in fact the total is $155,000. B knows this but accepts A’s bid without disclosing it. Does B’s conduct constitute a misrepresentation?

Answer 17

B’s non-disclosure is equivalent to an assertion that no error has been made in the total, and this assertion is a misrepresentation. Whether the contract is voidable by A is determined by the rule stated in § 164. See Illustrations 1 and 2 to § 153. See also Comment a to § 167.Rst. 161(d)

Question 18

In answer to an inquiry from “J.B. Smith Company,” A offers to sell goods for cash on delivery. A mistakenly believes that the offeree is John B. Smith, who has an established business of good repute, but in fact it is a business run by his son, with whom A has refused to deal because of previous disputes. The son learns of A’s mistake but accepts A’s offer without disclosing his identity. Does the son’s conduct constitute a misrepresentation?

Answer 18

The son’s non-disclosure is equivalent to an assertion that the business is run by the father, and this assertion is a misrepresentation. Whether the contract is voidable by A is determined by the rule stated in § 164. See Illustration 11 to § 153. See also Comment a to § 167.Rst. 161(d)

Question 19

A, seeking to induce B to make a contract to sell A land, learns from government surveys that the land contains valuable mineral deposits and knows that B does not know this, but does not disclose this to B. B makes the contract. Does A’s conduct constitute a misrepresentation?

Answer 19

A’s non-disclosure does not amount to a failure to act in good faith and in accordance with reasonable standards of fair dealing and is therefore not equivalent to an assertion that the land does not contain valuable mineral deposits. The contract is not voidable by B.Rst. 161(d)

Question 20

The facts being otherwise as stated in Illustration 10, A learns of the valuable mineral deposits from trespassing on B’s land and not from government surveys. Does A’s conduct constitute a misrepresentation?

Answer 20

A’s non-disclosure is equivalent to an assertion that the land does not contain valuable mineral deposits, and this assertion is a misrepresentation. Whether the contract is voidable by B is determined by the rule stated in § 164. Restatement 2d of Contracts § 161(d)

Question 21

A, seeking to induce B to make a contract to sell a tract of land to A for $100,000, makes a written offer to B. A knows that B mistakenly thinks that the offer contains a provision under which A assumes an existing mortgage, and he knows that it does not contain such a provision but does not disclose this to B. B signs the writing, which is an integrated agreement. Does A’s conduct constitute a misrepresentation?

Answer 21

A’s non-disclosure is equivalent to an assertion that the writing contains such a provision, and this assertion is a misrepresentation. Whether the contract is voidable by B is determined by the rule stated in § 164. Whether, at the request of B, the court will decree that the writing be reformed to add the provision for assumption is determined by the rule stated in § 166. See Illustration 4 to § 166. Restatement 2d of Contracts § 161(e)

Question 22

A, who is experienced in business, has raised B, a young man, in his household, and B has habitually followed his advice, although A is neither his parent nor his guardian. A, seeking to induce B to make a contract to sell land to A, knows that the land has appreciably increased in value because of a planned shopping center but does not disclose this to B. B makes the contract. Does A’s conduct constitute a misrepresentation?

Answer 22

A’s non-disclosure is equivalent to an assertion that the value of the land has not appreciably increased, and this assertion is a misrepresentation. Whether the contract is voidable by B is determined by the rule stated in § 164. See Illustration 7 to § 161. Restatement 2d of Contracts § 161(f)

Question 23

A makes to B, a credit rating company, a statement of his financial condition that he knows is untrue, intending that its substance be published to B’s subscribers. B summarizes the information and transmits the summary to C, a subscriber. C is thereby induced to make a contract to lend money to A. Does A’s conduct constitute a misrepresentation?

Answer 23

A’s statement is a fraudulent misrepresentation and the contract is voidable by C under the rule stated in § 164. Restatement 2d of Contracts § 162(a)

Question 24

2. A, seeking to induce B to make a contract to buy his house, tells B that the plumbing is of pipe of a specified quality. A does not know the quality of the pipe, and it is not of the specified quality. B is induced by A’s statement to make the contract. Does A’s conduct constitute a misrepresentation?

Answer 24

The statement is a fraudulent misrepresentation, both because A does not have the confidence that he implies in its truth, and because he knows that he does not have the basis for it that he implies. The contract is voidable by B under the rule stated in § 164. Restatement 2d of Contracts § 162(b)

Question 25

A, while negotiating with B for the sale of A’s race horse, tells him that the horse has run a mile in a specified time. A is honestly mistaken, and, unknown to him, the horse has never come close to that time. B is induced by A’s assertion to make a contract to buy the horse. Does A’s conduct constitute a misrepresentation?

Answer 25

A’s statement, although not fraudulent, is a material misrepresentation, and the contract is voidable by B under the rule stated in § 164. Restatement 2d of Contracts § 162(c)

Question 26

A, while negotiating with B for the sale of A’s race horse, tells him that the horse was bred in a specified stable. A is honestly mistaken, and, unknown to him, it was bred in another stable of better reputation. The specified stable was, unknown to A, founded by B’s grandfather, and B is therefore induced by A’s assertion to make a contract to buy the horse. Does A’s conduct constitute a misrepresentation that renders the contract voidable by B?

Answer 26

A’s misrepresentation is neither fraudulent nor material, and the contract is not voidable by B. Restatement 2d of Contracts § 162(c)

Question 27

A, while negotiating with B for the sale of A’s race horse, tells him that the horse was bred in a specified stable. A knows that the named stable was founded by B’s grandfather and that B would like to own a horse bred there. Does A’s conduct constitute a misrepresentation that renders the contract voidable by B?

Answer 27

A’s misrepresentation, although not fraudulent, is material, and the contract is voidable by B under the rule stated in § 164. Restatement 2d of Contracts § 162(c)

Question 28

A, seeking to induce B to make a contract to sell him goods on credit, tells B that he is C, a well-known millionaire. B is induced by the statement to make the proposed contract with A. Is B’s assent effective? Is the contract voidable by B?

Answer 28

B’s apparent manifestation of assent is effective. However, the contract is voidable by B under the rule stated in § 164(1). Contrast Illustrations 2 and 4 to § 163. Restatement 2d of Contracts § 163(a)

Question 29

A and B reach an understanding that they will execute a written contract containing terms on which they have agreed. It is properly prepared and is read by B, but A substitutes a writing containing essential terms that are different from those agreed upon and thereby induces B to sign it in the belief that it is the one he has read. Is B’s assent effective?

Answer 29

B’s apparent manifestation of assent is not effective. Restatement 2d of Contracts § 163(b)

Question 30

A and B reach an understanding that they will execute a written contract containing terms on which they have agreed. A prepares a writing containing essential terms that are different from those agreed upon and induces B to sign it by telling him that it contains the terms agreed upon and that it is not necessary for him to read it. Is B’s assent effective? Is the contract voidable by B?

Answer 30

B’s apparent manifestation of assent is effective if B had a reasonable opportunity to read the writing. However, the contract is voidable by B under the rule stated in § 164. See Illustration 3 to § 164. In the alternative, at the request of B, the court will decree that the writing be reformed to conform to their understanding under the rule stated in § 166. See Illustration 1 to § 166. Restatement 2d of Contracts § 163(b)

Question 31

A and B reach an understanding that they will execute a written contract containing terms on which they have agreed. A prepares a writing containing essential terms that are different from those agreed upon. B is blind and gets C to read the writing to him, but C, in collusion with A, reads it wrongly. Is B’s assent effective?

Answer 31

B’s apparent manifestation of assent is not effective. Restatement 2d of Contracts § 163(b)

Question 32

A, seeking to induce B to make a contract to buy a tract of land at a price of $1,000 an acre, tells B that the tract contains 100 acres. A knows that it contains only 90 acres. B is induced by the statement to make the contract. Is the contract voidable by B?

Answer 32

Because the statement is a fraudulent misrepresentation (§ 162(1)), the contract is voidable by B, regardless of whether the misrepresentation is material. Restatement 2d of Contracts § 164(b)

Question 33

A, seeking to induce B to make a contract to buy a tract of land at a price of $1,000 an acre, tells B that the tract contains 100 acres. A is mistaken and does not know that the tract contains only 90 acres. Is the contract voidable by B?

Answer 33

Because the statement is not a fraudulent misrepresentation, the contract is voidable by B only if the misrepresentation is material (§ 162(2)). Restatement 2d of Contracts § 164(b)

Question 34

A and B agree that A will buy a tract of land from B for $100,000 and will assume an existing mortgage of $50,000. In reducing the agreement to writing, A intentionally omits the provision for assumption but tells B that the writing correctly expresses their agreement. B does not notice the omission and is induced by A’s statement to sign the writing. Is the contract voidable by B?

Answer 34

The misrepresentation is both fraudulent and material, and the contract is voidable by B. Compare Illustration 1 to § 166 and see Illustration 10 to § 161. Restatement 2d of Contracts § 164(b)

Question 35

A, who is not C’s agent, induces B by a fraudulent misrepresentation to make a contract with C to sell land to C. C promises to pay the agreed price, not knowing or having reason to know of the fraudulent misrepresentation. Is the contract voidable by B?

Answer 35

Since C’s promise to pay is value, the contract is not voidable by B. The contract would be voidable by B if C learned or acquired reason to know of the fraudulent misrepresentation before promising to pay the price. Restatement 2d of Contracts § 164(e)

Question 36

A, who is not C’s agent, induces B by a fraudulent misrepresentation to sign a pledge by which B promises C, a charitable corporation, to contribute a sum of money. C does not know or have reason to know of the fraudulent representation. Is the contract voidable by B?

Answer 36

B’s promise, although binding under § 90(2), is voidable by B. B’s promise would not be voidable if C materially changed its position in reliance on B’s promise before learning or acquiring reason to know of the fraudulent misrepresentation. Restatement 2d of Contracts § 164(e)

Question 37

A, seeking to induce B to make a contract to buy land, tells B that the land is unencumbered. A knows that the land is subject to a lien. B is induced by A’s statement to make the proposed contract. A then removes the lien. How might the contract not be voidable by B?

Answer 37

If B has not been harmed by the misrepresentation, the contract is no longer voidable by B. Restatement 2d of Contracts § 165(a)

Question 38

A, seeking to induce B to make a contract to buy land from C, tells B that he has authority from C to sell land. A knows that he has no such authority. B is induced by C’s statement to make the proposed contract. C later ratifies A’s sale of the land. How might the contract not be voidable by B?

Answer 38

If B has not been harmed by the misrepresentation, the contract is no longer voidable by B. Restatement 2d of Contracts § 165(a)

Question 39

A and B agree that A will buy a tract of land from B for $100,000 and will assume an existing mortgage of $50,000. In reducing the agreement to writing, A intentionally omits the provision for assumption and tells B that the writing correctly expresses their agreement. B does not notice the omission and is induced by A’s fraudulent misrepresentation to sign the writing, which is an integrated agreement. What recourse does B have?

Answer 39

At the request of B, the court will reform the writing to add the provision for assumption. Compare Illustration 3 to § 164. See Illustration 1 to § 155. Restatement 2d of Contracts § 166(a)

Question 40

A, seeking to induce B to make a contract to sell a tract of land to A for $100,000, makes a written offer to B and tells B that it includes a provision under which A assumes an existing mortgage. A knows that the writing does not contain such a provision. B does not notice the omission and is induced by A’s fraudulent misrepresentation to sign the writing, which is an integrated agreement. What recourse does B have?

Answer 40

At the request of B, the court will reform the writing to add the provision for assumption. Restatement 2d of Contracts § 166(a)

Question 41

A, seeking to induce B to make a contract to sell a tract of land to A for $100,000, makes a written offer to B and tells B that the legal effect of a particular provision is that A assumes an existing mortgage. A, who is a lawyer, knows that this is not the legal effect of the provision. B does not realize that the legal effect of the provision is not as asserted and is induced by A’s fraudulent misrepresentation to sign the writing, which is an integrated agreement. See § 170. What recourse does B have?

Answer 41

At the request of B, the court will reform the writing to add the provision for assumption. Restatement 2d of Contracts § 166(a)

Question 42

A, seeking to induce B to make a contract to sell a tract of land to A for $100,000, makes a written offer to B. A knows that B mistakenly thinks that the offer contains a provision under which A assumes an existing mortgage and that it does not contain such a provision, but does not disclose this to B for fear that B will not accept. B is induced by A’s non-disclosure to sign the writing, which is an integrated agreement. Does A’s conduct constitute a misrepresentation? What recourse does B have?

Answer 42

A’s non-disclosure is equivalent to an assertion that the writing contains such a provision (§ 161(e)) and amounts to a fraudulent misrepresentation. At the request of B, the court will reform the writing to add the provision for assumption. See Illustration 13 to § 161. Restatement 2d of Contracts § 166(a)

Question 43

A, seeking to induce B to make a contract to buy a tract of land at a price of $100,000, makes a written offer to B and tells B that the tract contains 100 acres. A knows that it contains only 90 acres. B is induced by A’s fraudulent misrepresentation to sign the writing. What recourse does B have?

Answer 43

The court will not, at the request of B, reform the writing because the mistake of the parties was not one as to the contents or effect of the writing. B’s right to avoidance is governed by the rule stated in § 164(1). See Illustration 1 to § 164 and Illustration 5 to § 155. Restatement 2d of Contracts § 166(b)

Question 44

A, seeking to induce B to make a contract to buy land, makes a fraudulent misrepresentation. Although he believes A’s assertion, B wishes to confirm it and therefore inspects the land and inquires of third persons. B then makes the contract. The misrepresentation substantially contributes to his decision to make the contract, although he is also induced to do so by his investigation and inquiries. Is the contract voidable by B?

Answer 44

B’s manifestation of assent is induced by the misrepresentation, and the contract is voidable by B. Restatement 2d of Contracts § 167(a)

Question 45

A, seeking to induce B to make a contract to buy land, makes two statements to B about the land, one a true assertion and one a fraudulent misrepresentation. B makes the contract. The fraudulent misrepresentation substantially contributes to his decision to make the contract, although he is also induced to do so by the true assertion. Is the contract voidable by B?

Answer 45

B’s manifestation of assent is induced by the misrepresentation, and the contract is voidable by B. Restatement 2d of Contracts § 167(a)

Question 46

A, seeking to induce B to make a contract to buy his race horse, tells him that the horse has run a mile in a specified time. A is honestly mistaken, and, unknown to him, the horse has never come close to that time. B makes the contract. Is the contract voidable by B?

Answer 46

Because A’s misrepresentation is material, it will be assumed, in the absence of facts showing the contrary, that B attached importance to its truth in deciding to make the contract. The contract is therefore voidable by B. See Illustration 3 to § 162. Restatement 2d of Contracts § 167(b)

Question 47

A, seeking to induce B to make a contract to buy his race horse, tells him that the horse was bred in a particular stable. A knows that it was bred in another stable. B makes the contract. Is the contract voidable by B?

Answer 47

If A’s misrepresentation is not material, it will not be assumed that B attached importance to its truth in deciding to make the contract. Unless other evidence shows that B relied on the misrepresentation, the contract is not voidable by B. See Illustration 4 to § 162. Restatement 2d of Contracts § 167(b)

Question 48

A, seeking to induce B to make a contract to buy goods, tells B that he paid $10,000 for them. A knows that he paid only $8,000 for the goods. Does A’s conduct constitute an opinion?

Answer 48

The statement is not one of opinion. Restatement 2d of Contracts § 168(c)

Question 49

A, seeking to induce B to make a contract to buy goods, tells B that that the goods are worth $10,000. Does A’s conduct constitute an opinion?

Answer 49

The statement is one of opinion. Restatement 2d of Contracts § 168(c)

Question 50

A, seeking to induce B to make a contract to buy real property, tells B that the sewage system is “good.” A knows that the sewage system is unworkable. B interprets A’s statement of opinion as an assertion that the facts known to A are not incompatible with his opinion and is induced by this assertion to make the contract. Is the contract voidable by B?

Answer 50

B’s interpretation is reasonable, the assertion is a fraudulent misrepresentation, and the contract is voidable by B. Restatement 2d of Contracts § 168(d)

Question 51

A, seeking to induce B to make a contract to buy real property, tells B that the sewage system is “good.” A knows that the sewage system is not very good but is workable. Is the contract voidable by B?

Answer 51

There is no misrepresentation because the facts known to A are not incompatible with his opinion, and the contract is not voidable by B. Restatement 2d of Contracts § 168(d)

Question 52

A, seeking to induce B to make a contract to become A’s partner in A’s business, tells B that the business is “a moneymaker.” A knows that the business has been unprofitable since its inception. B interprets A’s statement of opinion as an assertion that the facts known to A are not incompatible with his opinion and is induced by this assertion to make the contract. Is the contract voidable by B?

Answer 52

B’s interpretation is reasonable, the assertion is a fraudulent misrepresentation, and the contract is voidable by B. Restatement 2d of Contracts § 168(d)

Question 53

A, who is knowledgeable in financial matters, seeking to induce B, who is also knowledgeable in such matters, to make a contract to buy A’s shares of stock in C Corporation, tells B that within five years the shares will pay dividends that will amount to the purchase price of the stock. Neither A nor B has information about the finances of C, which is, in fact, hopelessly insolvent. B interprets A’s statement of opinion as an assertion that A knows facts sufficient to justify him in forming that opinion and is induced by this assertion to make the contract. Is the contract voidable by B?

Answer 53

B’s interpretation is reasonable, the assertion is a fraudulent misrepresentation, and the contract is voidable by B. Restatement 2d of Contracts § 168(d)

Question 54

A, seeking to induce B to make a contract to buy land, tells B, “There is water under this land and if you dig a well anywhere on the land, you will strike it.” A does not know whether there is water under the land, and there is none. B knows that no water survey has been made and that A has no information concerning the presence or absence of subterranean water, but interprets A’s statement of opinion as an assertion that A knows facts sufficient to justify him in forming that opinion and is induced by this assertion to make the contract. Is the contract voidable by B?

Answer 54

B’s interpretation is not reasonable, and the contract is not voidable by B. See also § 169. Restatement 2d of Contracts § 168(d)

Question 55

A, professing friendship, offers to advise B, an elderly widow inexperienced in business, concerning her investments. He does so for five years, giving her good advice and acquiring her trust and confidence. At the end of this time he advises her to buy his worthless shares of stock, telling her that in his opinion it is a “good investment.” B is induced by A’s statement to make the contract. Is the contract voidable by B?

Answer 55

B’s reliance on A’s statement is justified, and the contract is voidable by B. Restatement 2d of Contracts § 169(c)

Question 56

A, the proprietor of a dance studio, seeking to induce B, a 60-year-old widow with no background in dancing, to make a contract for dance lessons, tells B that she has “dance potential” and would develop into a “beautiful dancer.” A knows that B has little aptitude as a dancer. B is induced by A’s statement of opinion to make the proposed contract. Is the contract voidable by B?

Answer 56

B’s reliance on A’s statement of opinion is justified, and the contract is voidable by B. Restatement 2d of Contracts § 169(d)

Question 57

A, seeking to induce B to make a contract to buy land, tells B that C, a local businessman, shortly before his death offered him $50,000 for the land. A knows that C offered only $40,000 for the land. B infers from A’s statement that in C’s opinion the land was worth $50,000 and, believing that C had special objectivity, is induced by the statement to make the contract. Is the contract voidable by B?

Answer 57

B’s reliance is justified, and the contract is voidable by B. Restatement 2d of Contracts § 169(d)

Question 58

A, seeking to induce B, who is particularly inexperienced and gullible, to make a contract to buy property, tells B that its value is $35,000. A knows that it is practically worthless. B is induced by A’s statement to make the contract. Is the contract voidable by B?

Answer 58

If B’s reliance is justified because his inexperience and gullibility make him particularly susceptible to such a misrepresentation, the contract is voidable by B. Restatement 2d of Contracts § 169(e)

Question 59

A, seeking to sell goods to B, tells B that the government authorities have not fixed a maximum price for such goods. A knows that the authorities have fixed a maximum price for the goods. Is the contract voidable by B?

Answer 59

The assertion is a fraudulent misrepresentation, and the contract is voidable by B. Restatement 2d of Contracts § 170(a)

Question 60

2. A, seeking to induce B to make a contract to buy land from him tells B, “I have good title to this land.” Unknown to A, the person from whom he purchased the land had no title to it. B interprets A’s statement as an assertion that he knows of conveyances sufficient to vest good title in him and is induced to make the contract. Is the contract voidable by B?

Answer 60

Although A’s statement is in the form of a legal conclusion, B’s interpretation is reasonable, the assertion is a material misrepresentation, and the contract is voidable by B. See § 168(2). Restatement 2d of Contracts § 170(b)

Question 61

A, the owner of a real estate development, seeking to induce B to make a contract to buy a lot in it, tells B that he intends to construct a golf course in the development. A has no such intention. B is induced by A’s statement to make the contract. Is the contract voidable by B? How might the outcome be otherwise?

Answer 61

The contract is voidable by B. If, however, B knows that the terrain is not suitable for a golf course, that there is not enough land for it, and that it could only be constructed by purchase of a large quantity of additional land quite beyond A’s means, B’s reliance is not justified, and the contract is not voidable by B. Restatement 2d of Contracts § 171(a)

Question 62

A, seeking to induce B to make a contract to sell a tract of land, tells B that he intends to hold the tract as an investment. A intends instead to combine the tract with others as part of a large development but declines to tell B this in order to prevent B from asking a higher price. B is induced by A’s statement to make the contract. How might the contract not be voidable by B?

Answer 62

If the court concludes that, in all the circumstances, A’s statement was not contrary to reasonable standards of dealing, the contract is not voidable by B. Restatement 2d of Contracts § 171(a)

Question 63

A, seeking to induce B to make a contract to sell a tract of land, tells B that he intends to use the tract for the construction of a residence. A intends instead to use it for the construction of an industrial building but declines to tell B this because B owns an adjacent tract that will be adversely affected if A carries out his real intention. B is induced by A’s non-disclosure to make the contract. Is the contract voidable by B?

Answer 63

The contract is voidable by B. Restatement 2d of Contracts § 171(a)

Question 64

A, seeking to induce B to make a contract to have work done on his house, and to make a part payment of $1,000, promises to do the work for a stated price. A does not intend to perform the contract. B is induced by A’s promise to make the contract and the part payment. Is the contract voidable by B?

Answer 64

B may interpret A’s promise as an assertion of his intention to perform. This assertion is a fraudulent misrepresentation, and the contract is voidable by B. Restatement 2d of Contracts § 171(b)

Question 65

A and B reach an understanding that they will execute a written contract containing terms on which they have agreed. A prepares a writing containing essential terms different from those agreed upon and induces B to sign it by telling him that it contains the agreed terms and that it is not necessary for him to read it. Is the contract voidable by B?

Answer 65

Although B’s apparent manifestation of assent is effective if he had a reasonable opportunity to read the writing (see Illustration 3 to § 163), his reliance is justified since his fault does not amount to a failure to act in good faith and in accordance with reasonable standards of fair dealing. The contract is voidable by B. In the alternative he may have the writing reformed. Restatement 2d of Contracts § 172(a)

Question 66

A, seeking to induce B to make a contract to buy land, tells B that the land is free from encumbrances. Unknown to either A or B, C holds a recorded and unsatisfied mortgage on the land. B could easily learn this by walking across the street to the register of deeds in the courthouse but does not do so. B is induced by A’s statement to make the contract. Is the contract voidable by B?

Answer 66

B’s reliance is justified since his fault does not amount to a failure to act in good faith and in accordance with reasonable standards of fair dealing, and the contract is voidable by B. Restatement 2d of Contracts § 172(b)

Question 67

A, seeking to induce B to make a contract to buy furniture for B’s house, hands B a printed order form and tells B that the total price for the furniture is $550 and that this is stated in the form. A knows that in the form additional furniture is described and that the total price stated is $1,050. B is induced by A’s statement to sign the form without reading it, and A accepts B’s offer. Is the contract voidable by B?

Answer 67

B’s reliance is justified since his fault does not amount to a failure to act in good faith and in accordance with reasonable standards of fair dealing. The contract is voidable by B. In the alternative he may have the writing reformed. Restatement 2d of Contracts § 172(b)

Question 68

A, the executor of a will under which a tract of land has been devised to B, makes a contract with B to buy the tract from him. Before making the contract, A tells B all relevant facts about the transaction. Is the contract voidable by B? How might the court find otherwise?

Answer 68

The contract is voidable by B unless the court concludes that it is on fair terms. Restatement 2d of Contracts § 173(b)

Question 69

A presents to B, who is physically weaker than A, a written contract prepared for B’s signature and demands that B sign it. B refuses. A grasps B’s hand and compels B by physical force to write his name. Is there a contract?

Answer 69

B’s signature is not effective as a manifestation of his assent, and there is no contract. Restatement 2d of Contracts § 174(a)

Question 70

A makes an improper threat to commence civil proceedings against B unless B agrees to discharge a claim that B has against A. In order to avoid defending the threatened suit, B is induced to make the contract. Is the contract voidable by B?

Answer 70

Defense of the threatened suit is a reasonable alternative, the threat does not amount to duress, and the contract is not voidable by B. Restatement 2d of Contracts § 175(b)

Question 71

A makes an improper threat to commence a civil action and to file a lis pendens against a tract of land owned by B, unless B agrees to discharge a claim that B has against A. Because B is about to make a contract with C for the sale of the land and C refuses to make the contract if the levy is made, B agrees to discharge the claim. Is the contract voidable by B?

Answer 71

B has no reasonable alternative, A’s threat is duress, and the contract is voidable by B. Restatement 2d of Contracts § 175(b)

Question 72

A, with whom B has left a machine for repairs, makes an improper threat to refuse to deliver the machine to B, although B has paid for the repairs, unless B agrees to make a contract to have additional repair work done. B can replevy the machine, but because he is in urgent need of it and delay would cause him heavy financial loss, he is induced by A’s threat to make the contract. Is the contract voidable by B?

Answer 72

B has no reasonable alternative, A’s threat amounts to duress, and the contract is voidable by B. Restatement 2d of Contracts § 175(b)

Question 73

A, who has promised B to vacate leased premises in return for $10,000 in order to permit B to demolish the building and construct another, refuses to do so unless B agrees to purchase his worthless furniture for $5,000. B can resort to regular eviction proceedings, but because this will materially delay his construction schedule and cause him heavy financial loss, he is induced by A’s threat to make the contract. Is the contract voidable by B?

Answer 73

B has no reasonable alternative, A’s threat amounts to duress, and the contract is voidable by B. Restatement 2d of Contracts § 175(b)

Question 74

A, who has contracted to sell goods to B, makes an improper threat to refuse to deliver the goods to B unless B modifies the contract to increase the price. B attempts to buy substitute goods elsewhere but is unable to do so. Being in urgent need of the goods, he makes the modification. See Uniform Commercial Code § 2-209(1). Is the contract voidable by B?

Answer 74

B has no reasonable alternative, A’s threat amounts to duress, and the modification is voidable by B. Restatement 2d of Contracts § 175(b)

Question 75

The facts being otherwise as stated in Illustration 5, B could buy substitute goods elsewhere but does not attempt to do so. Is the contract voidable by B?

Answer 75

The purchase of substitute goods and a claim for any damages is a reasonable alternative, the threat does not amount to duress, and the contract is not voidable by B. Restatement 2d of Contracts § 175(b)

Question 76

A, who has contracted to pay for goods delivered by B, makes an improper threat to refuse to pay B unless B modifies the contract to reduce the price. B attempts to borrow money elsewhere but is unable to do so. Being in urgent need of cash to avoid foreclosure of a mortgage, he makes the modification. See Uniform Commercial Code § 2-209(1). Is the contract voidable by B?

Answer 76

B has no reasonable alternative, A’s threat amounts to duress, and the modification is voidable by B. Restatement 2d of Contracts § 175(b)

Question 77

A, seeking to induce B to make a contract to sell land to A, threatens to poison B unless B makes the contract. The threat would not be taken seriously by a reasonable person, but B is easily frightened and attaches importance to the threat in deciding to make the contract. Is the contract voidable by B?

Answer 77

The contract is voidable by B. Restatement 2d of Contracts § 175(c)

Question 78

A seeks to induce B, A’s wife, who has a history of severe emotional disturbances, to sign a separation agreement on unfavorable terms. B has no lawyer, while A does. A tells B that if she does not sign the agreement he will charge her with desertion, she will never see her children again and she will get back none of her personal property, which is in A’s possession. B signs the separation agreement. Is the agreement voidable by B?

Answer 78

The agreement is voidable by B. Restatement 2d of Contracts § 175(c)

Question 79

A, who is not C’s agent, induces B by duress to contract with C to sell land to C. C learns of the duress before he promises to pay the agreed price. Is the contract voidable by B?

Answer 79

The contract is voidable by B. Restatement 2d of Contracts § 175(e)

Question 80

A is a good faith purchaser for value of a valuable painting stolen from B. When B demands the return of the painting, A threatens to poison B unless he releases all rights to the painting for $1,000. B, having no reasonable alternative, is induced by A’s threat to sign the release, and A pays him $1,000. Is the release voidable by B?

Answer 80

The threatened act is both a crime and a tort, and the release is voidable by B. Restatement 2d of Contracts § 176(b)

Question 81

A threatens B that he will kill C, an employee of B, unless B makes a contract to sell A a tract of land that B owns. B, having no reasonable alternative, is induced by A’s threat to make the contract. Is the contract voidable by B?

Answer 81

The threatened act is both a crime and a tort, and the contract is voidable by B. Restatement 2d of Contracts § 176(b)

Question 82

A, a pawnbroker, has possession of a valuable heirloom pledged by B. B offers to redeem the pledge, but A threatens not to surrender it unless B signs a promissory note in compromise of another claim, the validity of which is in dispute. B, having no reasonable alternative, is induced by A’s threat to sign the note. Is the note voidable by B?

Answer 82

The threatened act is a tort, and the note is voidable by B. Restatement 2d of Contracts § 176(b)

Question 83

A, who believes that B, his employee, has embezzled money from him, threatens B that a criminal complaint will be filed and he will be prosecuted immediately unless he executes a promissory note for $5,000 in satisfaction of A’s claim. B, having no reasonable alternative, is induced by A’s threat to sign the note. Is the note voidable by B?

Answer 83

The note is voidable by B. A may, however, have a claim against B for restitution of any money embezzled. See Comment d to § 175. Restatement 2d of Contracts § 176(c)

Question 84

A is the payee of a valid $5,000 promissory note executed by B for the repayment of money embezzled by B. A makes a threat to C, a friend of B, that a criminal complaint will be filed and B will be prosecuted immediately unless C becomes a surety on the note in consideration of an extension of time for its payment. C is induced by A’s threat to become a surety. Is the suretyship voidable by B?

Answer 84

The suretyship contract is voidable by C. Restatement 2d of Contracts § 176(c)

Question 85

A threatens to commence a civil action and file a lis pendens against a tract of land owned by B, unless B makes a contract to discharge a disputed claim that B has against A. A knows that the threatened action is without foundation. B, having no reasonable alternative, is induced by A’s threat to make the contract. Since A does not believe that there is a reasonable basis for the threatened process, his threat is made in bad faith. Is the contract voidable by B? How might the court find otherwise?

Answer 85

A’s threat is improper, and the contract is voidable by B. If, however, A believes that there is a reasonable basis for the threatened process and if the proposed contract is not exorbitant, the threat is not improper, and the contract is not voidable by B. Restatement 2d of Contracts § 176(d)

Question 86

A, who has a valid claim for damages against B, threatens to attach a shipment of perishable goods unless B makes a contract to sell a machine to A. As A knows, other non-perishable goods are available for attachment. B, having no reasonable alternative, is induced by A’s threat to make the contract. Is the contract voidable by B?

Answer 86

Since A knows that the threatened attachment would involve a misuse of that process to force a settlement rather than to preserve assets, his threat is made in bad faith. A’s threat is improper and the contract is voidable by B. Restatement 2d of Contracts § 176(d)

Question 87

A contracts to excavate a cellar for B at a stated price. A unexpectedly encounters solid rock and threatens not to finish the excavation unless B modifies the contract to state a new price that is reasonable but is nine times the original price. B, having no reasonable alternative, is induced by A’s threat to make the modification by a signed writing that is enforceable by statute without consideration. Is the modification voidable by B?

Answer 87

A’s threat is not a breach of his duty of good faith and fair dealing, and the modification is not voidable by B. See Illustration 1 to § 89. Restatement 2d of Contracts § 176(e)

Question 88

A contracts to excavate a cellar for B at a stated price. A begins the excavation and then threatens not to finish it unless B makes a separate contract to excavate the cellar of another building. B, having no reasonable alternative, is induced by A’s threat to make the contract. Is the contract voidable by B?

Answer 88

A’s threat is a breach of his duty of good faith and fair dealing, and the proposed contract is voidable by B. See Illustration 5 to § 175. Restatement 2d of Contracts § 176(e)

Question 89

A contracts to sell part of a tract of land to B. B, solely to induce A to discharge him from his contract duty on favorable terms, threatens to resell the land to a purchaser whose industrial use will have an undesirable effect on A’s remaining land, unless A releases B in return for a stated sum. A, having no reasonable alternative, signs the release. Is the contract voidable by A?

Answer 89

B’s threat is a breach of his duty of good faith and fair dealing, and the modification is voidable by A. Restatement 2d of Contracts § 176(e)

Question 90

A makes a threat to discharge B, his employee, unless B releases a claim that he has against A. The employment agreement is terminable at the will of either party, so that the discharge would not be a breach by A. B, having no reasonable alternative, releases the claim. Is the contract voidable by B?

Answer 90

A’s threat is a breach of his duty of good faith and fair dealing, and the release is voidable by B. Restatement 2d of Contracts § 176(e)

Question 91

A makes a threat to B, his former employee, that he will try to prevent B’s employment elsewhere unless B agrees to release a claim that he has against A. B, having no reasonable alternative, is thereby induced to make the contract. How might the contract be voidable by B?

Answer 91

If the court concludes that the attempt to prevent B’s employment elsewhere would harm B and would not significantly benefit A, A’s threat is improper and the contract is voidable by B. Restatement 2d of Contracts § 176(f)

Question 92

A, who has sold goods to B on several previous occasions, intentionally misleads B into thinking that he will supply the goods at the usual price and thereby causes B to delay in attempting to buy them elsewhere until it is too late to do so. A then threatens not to sell the goods to B unless he agrees to pay a price greatly in excess of that charged previously. B, being in urgent need of the goods, makes the contract. How might the contract be voidable by B?

Answer 92

If the court concludes that the effectiveness of A’s threat in inducing B to make the contract was significantly increased by A’s prior unfair dealing, A’s threat is improper and the contract is voidable by B. Restatement 2d of Contracts § 176(f)

Question 93

A, who has sold goods to B on several previous occasions, merely discovers that B is in great need of the goods and that they are in short supply but does not mislead B into thinking that he will supply them. A then threatens not to sell the goods to B unless he agrees to pay a price greatly in excess of that charged previously. B, being in urgent need of the goods, makes the contract. Is the contract voidable by B?

Answer 93

A’s threat is not improper, and the contract is not voidable by B. Restatement 2d of Contracts § 176(f)

Question 94

A operates a fur storage concession for customers of B’s store. A becomes bankrupt and fails to pay C $1,000 for charges for storing furs of B’s customers. C makes a threat to B not to deliver the furs to B’s customers unless B makes a contract to pay C the $1,000 plus $2,000 that A owes C for storage of other furs. B, afraid of offending its customers and having no reasonable alternative, makes the contract. How might the contract be voidable by B?

Answer 94

If the court concludes that C’s threat to B is a use for illegitimate ends of its power as against B to retain the furs for the $1,000 owed for the storage of furs for B’s customers, C’s threat is improper and the contract is voidable by B. Restatement 2d of Contracts § 176(f)

Question 95

A, a municipal water company, seeking to induce B, a developer, to make a contract for the extension of water mains to his development at a price greatly in excess of that charged to those similarly situated, threatens to refuse to supply to B unless B makes the contract. B, having no reasonable alternative, makes the contract. Is the contract voidable by B?

Answer 95

Because the threat amounts to a use for illegitimate ends of A’s power not to supply water, the contract is voidable by B. Restatement 2d of Contracts § 176(f)

Question 96

A, who is not experienced in business, has for years been accustomed to rely in business matters on the advice of his friend, B, who is experienced in business. B constantly urges A to make a contract to sell to C, B’s confederate, a tract of land at a price that is well below its fair value. A is thereby induced to make the contract. Is the contract voidable by A?

Answer 96

Even though B’s conduct does not amount to misrepresentation, it amounts to undue influence because A is justified in assuming that B will not act in a manner inconsistent with his welfare, and the contract is voidable. Restatement 2d of Contracts § 177(b)

Question 97

A, an elderly and illiterate man, lives with and depends for his support on B, his nephew. B tells A that he will no longer support him unless A makes a contract to sell B a tract of land. A is thereby induced to make the proposed contract. Is the contract voidable by A?

Answer 97

Even though B’s conduct does not amount to duress, it amounts to undue influence because A is under the domination of B, and the contract is voidable by A. Restatement 2d of Contracts § 177(b)