Tajeash and Faye Entered into a Contract

question 73

Multiple Choice

Tajeash and Faye entered into a contract.Before either party began to perform, however, Tajesh successfully claimed that the contract is void.Which of the following statements provides the best explanation for that outcome?

• A)Faye was drunk when the contract was created.
• B)Tajesh is the name of a chartered corporation, and the contract dealt with non-essential goods.
• C)Faye sold a shotgun to Tajesh even though Tajesh, who is a minor, lacked the necessary licence to purchase a shotgun.
• D)Tajesh, a 82 year-old, sometimes acts unreasonably, as Faye knew when the parties signed the contract.
• E)Tajesh is not a citizen of Canada, and the contract was made in this country.

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Definitions:

Adverse Selection

A situation where asymmetric information leads to the selection of poor risks or unwanted results, commonly discussed in insurance markets and financial services.

Moral Hazard

The situation where one party is more likely to take risks because the negative consequences of those risks will be felt by another party.

Asymmetric Information

Occurs when one party in a transaction has more or superior information compared to another, affecting decision-making.

Moral Hazard

A situation in economics and finance where one party takes more risks because another party bears the cost of those risks.