Contracts and Sales Multistate Bar Practice Exam

Under what circumstances can a contract be deemed voidable due to misrepresentation?

1. Only when both parties agree to terminate the contract

2. When one party provides misleading information that the other justifiably relies upon

3. If there is mutual dissatisfaction with the terms of the contract

4. When the contract is signed under pressure or duress

The correct answer is: When one party provides misleading information that the other justifiably relies upon

A contract can be deemed voidable due to misrepresentation specifically when one party provides misleading information that the other party justifiably relies upon. This situation typically arises in contexts where one party makes a false statement that induces the other party to enter into the contract. The reliance on this misinformation must be justifiable; that is, the misled party must reasonably believe the false information provided and act upon it. If the misrepresentation is significant enough to affect the decision-making process, the injured party may have the right to void the contract. In contrast, the other options suggest scenarios that do not directly pertain to misrepresentation. It is not enough for both parties to simply agree to terminate a contract for it to be voidable; there must be elements of misrepresentation involved. Mutual dissatisfaction with the contract's terms does not alone justify voiding it, as dissatisfaction does not equate to misleading information or reliance on it. Additionally, while contracts signed under pressure or duress may also be voidable, this scenario relates more to coercion than misrepresentation. The criterion of misleading information is central to understanding why the correct answer focuses on justifiable reliance on misinformation.