BUL 3310 Ch12

Which of the following types of contracts is not among the types of contracts and clauses that are often held to be contrary to public policy?

A commercial contract.

Caroline tells her friend Mario that she's been having back problems. Mario offers to help put her back "into alignment" if she comes to him every week for a period of eight weeks. Though Mario is not a licensed professional, he "does this for his friends all the time." Caroline is between jobs and does not have health insurance, so she agrees to see Mario for a discounted fee. After the eight weeks, Caroline's back is worse. She is forced to see a doctor, who determines that Mario's ministrations have exacerbated the problem and made it necessary for Caroline to have surgery. Caroline sues Mario for her medical expenses. What will be the outcome?

Because the licensing purpose in this case is one of public protection, the contract is unenforceable. Caroline, therefore, will not be able to recover from Mario.

Kevin and Mike make a bet on a boxing match. Mike has the match fixed so that he wins the bet. Kevin sues Mike for breach of contract. What will be the outcome?

Because this is an illegal contract, it is considered void. The court will not aid Kevin, regardless of the fault involved.

Which is the following is a contract contrary to statute?

Contract to commit a crime.

All of the following are examples of contracts contrary to public policy except:

Contracts to sell property one does not own.

Blue sky laws, which allows certain people to enforce a contract that is in violation of a statute, are enacted to protect:

Investors.

An adhesion contract:

Is a type of unconscionable contract.

A doctor makes an agreement with a charitable organization to turn over her unused medicine samples to them for shipment to people in need in developing countries. After the agreement is made, a law is passed making this drug transaction illegal. The contract:

Is discharged by law.

Jason enters into an insurance contract with SafeWest Insurance Co. in order to insure his home and personal property in Oklahoma. Unbeknownst to Jason, the insurance contract violates an Oklahoma state statute that regulates the sale of insurance. Soon after, his home is damaged by fire and Jason files a claim with SafeWest. SafeWest refuses to pay on the insurance claim. The contract:

Is enforceable because Jason is a member of a protected class that permits enforcement of a contract in violation of a statute.

Lilly is contacted by telephone from an individual seeking investors to purchase 8-liner gaming machines that will be placed in bars around the country. She is told that the investment is perfectly legal, so she invests $5,000. She contracts with a broker to invest the last of her pension funds in the stock market. The year goes badly, and she loses $50,000. She is too ill to return to work and will be penniless if she cannot avoid the contract. Which of the following applies?

She has no legal recourse.

Bob owns a local consulting business and wants his employees to sign a covenant not to compete. Which of the following situations would be considered reasonable for a covenant not to compete?

The employees cannot start a competing consulting business in the same city for one year.

In the case of an illegal contract:

There are circumstances in which one party may sue another for breach.

Jerome is hired by a manufacturing company that requires him to sign an employment contract. The contract states that the company will not be liable for any injuries Jerome sustains on the job, regardless of whether the injury is caused by the company's negligence. Which of the following is true?

This part of the contract is unenforceable due to the unconscionable exculpatory clause.

William, a 27-year-old with a third-grade reading level, buys a used 32" LCD flat-screen TV from a local pawn shop for $1,750. Because he has limited funds as a welfare recipient, the pawn shop agrees to finance the purchase with a 42% interest rate and a $100 monthly payment. William makes five payments and then stops on the advice of a friend. A court would find that the contract is:

Unconscionable.

Jackson enters into a contract with Celia. Knowing that Celia is new to the country and only has a basic grasp of English, Jackson writes the contract with inflated language and complicated legal jargon. When Celia fails to uphold her part of the contract, Jackson sues for breach. The court will find the contract:

Unenforceable for procedural unconscionability.

Nicole is a senior accounting major at ABC University with two semesters to go before she graduates. She decides to look for an internship with a small accounting firm to gain experience prior to graduating, and obtains an internship with a two-person accounting firm. Her responsibilities are assigned as follows: (1) Assists with administrative work; (2) Assists with client contact; and (3) Provides administrative support to the accountants and staff. Approximately a week after beginning her internship, one of the accountants approaches her with a seven-page document and asks her to sign it. He states that it is a requirement for all individuals working for the accounting firm. She notices the title of the document: "Non-Compete Agreement." She vaguely remembers reading something about a non-compete agreement in her business law class, but does not have an idea of what it really is. The owner, noticing her hesitation, tells her, "This is just to protect the firm." With that, she signs the agreement and goes back to her work. After graduation, she obtains a job at another accounting firm as an accountant. The accounting firm where she interned sends her a letter claiming that she breached her non-compete agreement by working for another accounting firm and is threatening to sue her. A court would most likely hold that the non-compete agreement is:

Unenforceable, because it is an unreasonable restraint on trade.

A contract involving the service of an unlicensed physician would likely be:

Unenforceable, because the purpose of the license is to protect the public from unauthorized practitioners.

Charging an interest rate that exceeds the maximum rate set by state statute, and is thus illegal, is called:

Usury.

Town Trust grants Marcia a loan at 20 percent interest. The state maximum interest rate is 8 percent. This is:

Usury.

A covenant not to compete in the sale of an ongoing business is:

Valid.

Regan contracted to loan Ray $10,000 so that Ray could place a bet on next Sunday's football game with his bookie. Ray lost the entire amount and refused to repay Regan on the loan contract. Regan then filed a lawsuit in a Kentucky state court against Ray for breaching the contract. Ray claimed that he did not have to repay the loan because gambling was illegal in Kentucky and therefore their contract was void. The court most likely found that the contract was:

Void, because the contract was for an illegal purpose.

An illegal contract is:

Void.

Brandt and Jenni create a Web site to sell raffle tickets for $1 for a chance to win their house. They sell 250,000 lottery tickets. Andy buys a ticket and wins. Brandt and Jenni then change their minds and decide to not give Andy their house. If Andy sues Brandt and Jenni, the court:

Will find that the contract is illegal and will not enforce it.

Adam files a lawsuit against Larry, a landowner on whose property Adam was injured. Larry believes that Greg is a lawyer and hires Greg to defend him in the lawsuit. Greg is not a lawyer, so the contract between Larry and Greg:

Will not be enforced.