BUS 115 Chapter 13 Legality
An insurance contract is not considered to be a legalized form of gambling because: a. one must have an insurable interest in the person being insured. b. insurance contracts are underwritten by reputable companies. c. insurance activities are regulated by the state department of insurance. d. All of the above.
A
Barb has been a children's day care provider for several years in the small town of Sallton. She has decided to give it all up and move to the big city for excitement and adventure. She sells her business to Ken, agreeing not to open a competing business within five miles of Sallton for a period of nine months. After five months of the big city life, Barb is broke and moves back to Sallton. She opens a small day care business. Ken sues on the noncompete clause. What is the most likely result? a. Ken wins. The agreement is enforceable. b. Barb wins. The agreement is denying her the right to do the only thing she knows how to do. c. Barb wins. The agreement is not enforceable because it is not ancillary to a legitimate bargain. d. Barb wins. The agreement is not reasonable as to time.
A
In the case of Worldwide Insurance v. Klopp, the Supreme Court of Delaware found that: a. a contract provision requiring arbitration and then permitting appeal by either party was void as unconscionable. b. the contract provision requiring arbitration was clear, unambiguous, and fair to both parties. c. the arbitration clause in Klopp's auto insurance contract was valid because it furthered the state policy favoring the use of arbitration to resolve disputes. d. the automobile insurance policy was governed by UCC, Article 3.
A
Judith is a CPA with an excellent reputation and client base. She sells her tax preparation business to Shawn, and the sales contract includes a noncompete clause restricting Judith from opening a similar business for two years within a 10-mile radius of her former office. If she opens a tax preparation office five miles away after one year, a court would probably: a. grant an injunction barring her from operating the new office. b. order confiscation of all of her new client files and turn them over to Shawn. c. refuse to become involved, as the noncompete clause was illegal. d. refuse to enforce the noncompete clause, as it is unreasonable regarding time and geographic area.
A
The Tavern's secret recipe for its pizza sauce would be considered: a. a trade secret, and an employment noncompete clause would be enforceable to protect it. b. a trade secret, and an employment noncompete clause would NOT be enforceable to protect it. c. just a secret recipe and not something the Tavern could protect in a noncompete clause. d. an exculpatory clause and not enforceable.
A
Which of the following exculpatory clauses will most likely be enforceable? a. An exculpatory clause that relieves a riding stable of negligence. b. An exculpatory clause that relieves a riding stable of gross negligence. c. An exculpatory clause that relieves a riding stable from intentional torts. d. A riding stable's exculpatory clause that is hidden in an eight-page document that all riders are required to sign.
A
13. An insurance contract is not considered to be a legalized form of gambling because: a. one must have an insurable interest in the person being insured. b. insurance contracts are underwritten by reputable companies. c. insurance activities are regulated by the state department of insurance. d. All of the above.
A PTS: 1 MSC: AACSB Analytic
7. In the case of Worldwide Insurance v. Klopp, the Supreme Court of Delaware found that: a. a contract provision requiring arbitration and then permitting appeal by either party was void as unconscionable. b. the contract provision requiring arbitration was clear, unambiguous, and fair to both parties. c. the arbitration clause in Klopp's auto insurance contract was valid because it furthered the state policy favoring the use of arbitration to resolve disputes. d. the automobile insurance policy was governed by UCC, Article 3.
A PTS: 1 MSC: AACSB Analytic
Which of the following exculpatory clauses will most likely be enforceable? a. An exculpatory clause that relieves a riding stable of negligence. b. An exculpatory clause that relieves a riding stable of gross negligence. c. An exculpatory clause that relieves a riding stable from intentional torts. d. A riding stable's exculpatory clause that is hidden in an eight-page document that all riders are required to sign.
A PTS: 1 MSC: AACSB Analytic
20. Judith is a CPA with an excellent reputation and client base. She sells her tax preparation business to Shawn, and the sales contract includes a noncompete clause restricting Judith from opening a similar business for two years within a 10-mile radius of her former office. If she opens a tax preparation office five miles away after one year, a court would probably: a. grant an injunction barring her from operating the new office. b. order confiscation of all of her new client files and turn them over to Shawn. c. refuse to become involved, as the noncompete clause was illegal. d. refuse to enforce the noncompete clause, as it is unreasonable regarding time and geographic area.
A PTS: 1 MSC: AACSB Reflective Thinking
24. The Tavern's secret recipe for its pizza sauce would be considered: a. a trade secret, and an employment noncompete clause would be enforceable to protect it. b. a trade secret, and an employment noncompete clause would NOT be enforceable to protect it. c. just a secret recipe and not something the Tavern could protect in a noncompete clause. d. an exculpatory clause and not enforceable.
A PTS: 1 MSC: AACSB Reflective Thinking
6. Barb has been a children's day care provider for several years in the small town of Sallton. She has decided to give it all up and move to the big city for excitement and adventure. She sells her business to Ken, agreeing not to open a competing business within five miles of Sallton for a period of nine months. After five months of the big city life, Barb is broke and moves back to Sallton. She opens a small day care business. Ken sues on the noncompete clause. What is the most likely result? a. Ken wins. The agreement is enforceable. b. Barb wins. The agreement is denying her the right to do the only thing she knows how to do. c. Barb wins. The agreement is not enforceable because it is not ancillary to a legitimate bargain. d. Barb wins. The agreement is not reasonable as to time.
A PTS: 1 MSC: AACSB Reflective Thinking
PTS: 1 MSC: AACSB Communication | AACSB Reflective Thinking 6. Cherise contacted her insurance agent and said she was interested in purchasing several life insurance policies: (a) a policy on her own life for $100,000, naming her son and daughter as beneficiaries; (b) a policy on her neighbor's life for $100,000, since she had observed him engaging in reckless behavior, naming herself as beneficiary; (c) a $5,000 policy on another neighbor to cover a loan Cherise made to him, naming herself as beneficiary; and (d) a $250,000 policy on her business partner, naming herself as beneficiary. Discuss the legality of each of these potential contracts.
A person may insure her own life for any amount and may name any beneficiary. Anyone who takes out a life insurance policy on the life of another must have an insurable interest in that person. The policy in (a) would be legal, as Cherise is insuring her own life. The potential policy in (b) is lacking in insurable interest; therefore there could be no enforceable contract. The policy in (c) would be legal because the debtor-creditor relationship creates an insurable interest. The potential policy in (d) would be legal, as the business relationship creates an insurable interest; Cherise would need compensation if her business partner dies. PTS: 1 MSC: AACSB Communication | AACSB Reflective Thinking
In the case of Worldwide Insurance v. Klopp, the Supreme Court of Delaware found that:
A. A contract provision requiring arbitration and then permitting appeal by either party was void as unconscionable
The Tavern's secret recipe for its pizza sauce would be considered:
A. A trade secret, and an employment noncompete clause would be enforceable to protect it
Which of the following exculpatory clauses will most likely be enforceable?
A. An exculpatory clause that relieves a riding stable of negligence
Judith is a CPA with an excellent reputation and client base. She sells her tax preparation business to Shawn, and the sales contract includes a noncompete clause restricting Judith from opening a similar business for two years within a 10-mile radius of her former office. If she opens a tax preparation office five miles away after one year, a court would probably:
A. Grant an injunction barring her from operating the new office
Barb has been a children's day care provider for several years in the small town of Sallton. She has decided to give it all up and move to the big city for excitement and adventure. She sells her business to Ken, agreeing not to open a competing business within five miles of Sallton for a period of nine months. After five months of the big city life, Barb is broke and moves back to Sallton. She opens a small day care business. Ken sues on the noncompete clause. What is the most likely result?
A. Ken wins. The agreement is enforceable
An insurance contract is not considered to be a legalized form of gambling because:
A. One must have an insurable interest in the person being insured
AAA and XXX companies are both major international conglomerates. They are negotiating a contract whereby AAA will install a computer system for XXX. One clause in the contract states that AAA will not be liable for damages caused by the negligent installation of the computer system, except that AAA warrants the system and will fix any problem for a period of two years following installation. AAA completes the installation of the computer system. XXX loads extensive amounts of information but it's destroyed because AAA negligently installed the memory chips. AAA fixes the memory, but XXX incurred significant expenses in recreating the lost information. XXX sues for these expenses. AAA defends with the noted clause in contract
AAA wins, the exculpatory clause is enforceable
AAA and XXX companies are both major international conglomerates. They are negotiating a contract whereby AAA will install a computer system for XXX. One clause in the contract states that AAA will not be liable for damages caused by the negligent installation of the computer system, except that AAA warrants the system and will fix any problem for a period of two years following installation. AAA completes the installation of the computer system. XXX loads extensive amounts of information on the system, but all of it is destroyed because AAA negligently installed the memory chips. AAA fixes the memory, but XXX incurred significant expenses in recreating the lost information. XXX sues for these expenses. AAA defends with the noted clause in the contract.
AAA wins; this exculpatory clause is enforceable.
Virginia borrowed money from G & L Lending at 35% interest per year. The state maximum interest rate is 20% per year. Virginia defaulted on the loan. What amount can G& L collect from Virginia?
All of the below may be correct. The answer depends on the particular state law. G & L will be able to collect the principal plus 20% interest per year. G & L will be able to collect the principal but not any interest. G & L will not be able to collect either the principal or interest.
To be valid, a noncompete clause must be:
All of the below: ancillary to a legitimate bargain. reasonable in time, geographical area, and scope of activity when ancillary to the sale of a business. necessary to protect trade secrets, confidential information, or customer lists developed over an extended time when ancillary to an employment contract.
The UCC deals with unconscionability in a contract by providing that a court may:
All of the below: refuse to enforce the contract. enforce the remainder of the contract without the unconscionable clause. limit the application of any unconscionable clause as to avoid any unconscionable result.
PTS: 1 MSC: AACSB Communication | AACSB Reflective Thinking 3. Discuss the pros and cons of gambling and whether there might be any reason for a court or legislature to treat gambling on credit any differently from gambling itself.
Almost all states permit some form of wagering. Supporters of gambling say that casinos create jobs and steady income, provide money for the state, and take business away from organized crime. Opponents of gambling argue that it appeals to human weakness because those who cannot afford to lose money will spend on the unlikely chance of gaining more, that addicted gamblers destroy families, that gambling weakens the fabric of communities by appealing to the idea that people can get something for nothing rather than encouraging citizens to earn income from honest labor, and that crime increases when gambling is permitted in a community. Many states do not allow gambling on credit. The California Court of Appeals in Metropolitan Creditors Service of Sacramento v. Sadri, set forth a special reason for treating gambling on credit differently from gambling in general. The court stated that having lost cash, a pathological gambler will continue to play on credit, if extended. The court stated that "the law should not invite them to play themselves into debt."
Alpha and Xenon companies are both major international conglomerates. They are negotiating a contract whereby Alpha will install a computer system for Xenon. One clause in the contract states that Alpha will not be liable for damages caused by the negligent installation of the computer system, except that Alpha warrants the system and will fix any problem for a period of two years following installation. Alpha completes the installation of the computer system. Xenon loads extensive amounts of information on the system, but all of it is destroyed because Alpha negligently installed the memory chips. Alpha fixes the memory, but Xenon incurred significant expenses in recreating the lost information. Xenon sues for these expenses. Alpha defends with the noted clause in the contract. Xenon wins; these types of clauses are never enforceable. Xenon wins; exculpatory clauses are sometimes valid, but this one would not be valid. Xenon wins; this exculpatory clause is not valid because it is unconscionable. Alpha wins; this exculpatory clause is enforceable
Alpha wins; this exculpatory clause is enforceable.
PTS: 1 MSC: AACSB Communication | AACSB Reflective Thinking 4. Mabel, an 85-year-old widow who is in poor health, signs a contract with the only nursing home in Anytown (the nearest alternative facility is 75 miles away). The contract obligates Mabel to pay $4,000 per month for the rest of her life and for her estate to pay the same amount for the period of time that the unit sits empty upon her death. Mabel's daughter believes this agreement amounts to an adhesion contract. What is an adhesion contract? What factors will a court look at in determining whether an adhesion contract exists?
An adhesion contract is a standard form contract prepared by one party and given to the other on a "take it or leave it" basis. Some of the factors the court will consider include the ages of the parties, their respective degrees of expertise, and their mental conditions at the time of the signing of the contract. Here, Mabel was an elderly widow in poor health. The nursing home was the only one in the area, so it probably presented the terms to Mabel as a "take it or leave it" proposition. The nursing home had relatively no risk and there is a gross disparity of interests in the contract. PTS: 1 MSC: AACSB Communication | AACSB Reflective Thinking
5. In 1970, Continental Airlines agreed to buy a number of DC-10 airplanes from McDonnell Douglas Corporation (MDC). Their contract included a limited warranty in which MDC undertook certain servicing obligations and an exculpatory clause in which Continental waived "all other remedies" against MDC. On March 1, 1978, one of these DC-10s was nearing takeoff at Los Angeles International Airport when the two front tires of its left-side landing gear blew out. The pilot aborted the takeoff, but the uncushioned landing gear tore through the tarmac and broke away from the plane. This ruptured the left wing fuel tank, which burst into flames. The emergency escape slides failed, apparently due to the heat of the fire. Some passengers evacuated through the copilot's window, others jumped from the exits. Four passengers died, and over 70 suffered injuries. The plane was destroyed. It should be noted that the exculpatory clause did not prevent the passengers from suing Continental and/or MDC. Continental sued MDC and MDC defended based on the exculpatory clause. Is this type of clause enforceable? Discuss exculpatory clauses, particularly the one involved here.
An exculpatory clause is one that attempts to release one of the parties from liability in the event of injury. A clause is generally unenforceable when it attempts to exclude an intentional tort or gross negligence, affects activity that is in the public interest, when the parties have greatly unequal bargaining power, and unless the clause is clearly written and readily visible. Here, however, the parties are both sophisticated companies and laboriously negotiated the terms of the agreement. The clause should be enforced.
Which of the following exculpatory clauses will most likely be enforceable?
An exculpatory clause that relieves a riding stable of negligence.
Which of the following exculpatory clauses will most likely be enforceable? An exculpatory clause that relieves a riding stable of negligence. An exculpatory clause that relieves a riding stable of gross negligence. An exculpatory clause that relieves a riding stable from intentional torts. A riding stable's exculpatory clause that is hidden in an eight-page document that all riders are required to sign.
An exculpatory clause that relieves a riding stable of negligence.
Which of the following exculpatory clauses will most likely be enforceable?
An exculpatory clause that relieves a white water rafting outfitter from ordinary negligence.
Virginia borrowed money from G & L Lending at 35% interest per year. The state maximum interest rate is 20% per year. Virginia defaulted on the loan. What amount can G& L collect from Virginia? G & L will be able to collect the principal plus 20% interest per year. G & L will be able to collect the principal but not any interest. G & L will not be able to collect either the principal or interest. Any one of the above may be correct. The answer depends on the particular state law
Any one of the above may be correct. The answer depends on the particular state law
An exculpatory clause is generally unenforceable when: a. it attempts to release a party from liability for ordinarily negligent behavior. b. it involves public transportation. c. it is written clearly and in bold, large print. d. the affected activity is a recreational activity.
B
In bailment cases, exculpatory clauses: a. are very rarely used. b. are somewhat more likely to be enforced than in other types of cases. c. ordinarily involve an attempt to limit liability for damage to persons rather than property. d. None of the above.
B
Mike owns a house in a poor area of a large city. Mike is on disability and his total monthly income is $700. A sales representative visits his home, selling a water purification system. Mike buys and signs a contract that calls for monthly payments of $500 for the next 10 years. The water system is worth no more than $1000. Mike did not understand what he was signing and thought it was a permission slip allowing the salesman to conduct a free water test to determine the number of toxins in the water. How would a court most likely describe this contract? a. The contract is fully enforceable as written. b. The contract is unenforceable because it is unconscionable. c. The contract is unenforceable because it is illusory. d. The contract is unenforceable because it is exculpatory.
B
Wendell, new to the area, selects a doctor from the telephone book and visits that doctor to have a splinter extracted. Unbeknownst to Wendell, the doctor has never passed the state licensing exams. Later, when Wendell discovers the truth, he refuses to pay his bill. If the doctor sues for recovery of the fee, will the court support the doctor's claim? a. Yes, it was up to Wendell to verify the doctor's qualifications prior to having the splinter extracted. b. No, the court is likely to take the position that it is not in the public's best interests to enforce contracts with unlicensed doctors. c. It depends on whether Wendell's injury healed properly. d. No, but the doctor could probably recover under quasi-contract.
B
Which of the following is an example of an exculpatory clause? a. Seller reserves the right to cancel the contract at any time. b. Seller is not responsible for property damage regardless of the cause of the injury. c. Buyer agrees to pay any costs of litigation. d. Buyer agrees to notify seller of any change in address.
B
Which of the following relationships will ordinarily not create an insurable interest? a. Husband and wife. b. Doctor and patient. c. Debtor and creditor. d. Chief executive officer and corporation
B
12. Which of the following relationships will ordinarily not create an insurable interest? a. Husband and wife. b. Doctor and patient. c. Debtor and creditor. d. Chief executive officer and corporation.
B PTS: 1 MSC: AACSB Analytic
19. In bailment cases, exculpatory clauses: a. are very rarely used. b. are somewhat more likely to be enforced than in other types of cases. c. ordinarily involve an attempt to limit liability for damage to persons rather than property. d. None of the above.
B PTS: 1 MSC: AACSB Analytic
21. An exculpatory clause is generally unenforceable when: a. it attempts to release a party from liability for ordinarily negligent behavior. b. it involves public transportation. c. it is written clearly and in bold, large print. d. the affected activity is a recreational activity.
B PTS: 1 MSC: AACSB Analytic
8. Which of the following is an example of an exculpatory clause? a. Seller reserves the right to cancel the contract at any time. b. Seller is not responsible for property damage regardless of the cause of the injury. c. Buyer agrees to pay any costs of litigation. d. Buyer agrees to notify seller of any change in address.
B PTS: 1 MSC: AACSB Analytic
17. Mike owns a house in a poor area of a large city. Mike is on disability and his total monthly income is $700. A sales representative visits his home, selling a water purification system. Mike buys and signs a contract that calls for monthly payments of $500 for the next 10 years. The water system is worth no more than $1000. Mike did not understand what he was signing and thought it was a permission slip allowing the salesman to conduct a free water test to determine the number of toxins in the water. How would a court most likely describe this contract? a. The contract is fully enforceable as written. b. The contract is unenforceable because it is unconscionable. c. The contract is unenforceable because it is illusory. d. The contract is unenforceable because it is exculpatory.
B PTS: 1 MSC: AACSB Reflective Thinking
25. Wendell, new to the area, selects a doctor from the telephone book and visits that doctor to have a splinter extracted. Unbeknownst to Wendell, the doctor has never passed the state licensing exams. Later, when Wendell discovers the truth, he refuses to pay his bill. If the doctor sues for recovery of the fee, will the court support the doctor's claim? a. Yes, it was up to Wendell to verify the doctor's qualifications prior to having the splinter extracted. b. No, the court is likely to take the position that it is not in the public's best interests to enforce contracts with unlicensed doctors. c. It depends on whether Wendell's injury healed properly. d. No, but the doctor could probably recover under quasi-contract.
B PTS: 1 MSC: AACSB Reflective Thinking
In bailment cases, exculpatory clauses:
B. Are somewhat more likely to be enforced than in other types of cases
Which of the following relationships will ordinarily not create an insurable interest?
B. Doctor and patient
An exculpatory clause is generally unenforceable when:
B. It involves public transportation
Wendell, new to the area, selects a doctor from the telephone book and visits that doctor to have a splinter extracted. Unbeknownst to Wendell, the doctor has never passed the state licensing exams. Later, when Wendell discovers the truth, he refuses to pay his bill. If the doctor sues for recovery of the fee, will the court support the doctor's claim?
B. No, the court is likely to take the position that it is not in the public's best interests to enforce contracts with unlicensed doctors
Which of the following is an example of an exculpatory clause?
B. Seller is not responsible for property damage regardless of the cause of the injury
Mike owns a house in a poor area of a large city. Mike is on disability and his total monthly income is $700. A sales representative visits his home, selling a water purification system. Mike buys and signs a contract that calls for monthly payments of $500 for the next 10 years. The water system is worth no more than $1000. Mike did not understand what he was signing and thought it was a permission slip allowing the salesman to conduct a free water test to determine the number of toxins in the water. How would a court most likely describe this contract?
B. The contract is unenforceable because it is unconscionable
Gerald was a subcontractor, bidding on a contract for XYZ Corp., the general contractor. When adding up the total of materials and labor, Gerald's secretary made a clerical error with a total of $45,000 instead of $450,000. Gerald then submitted his bid for $45,000. XYZ accepted Gerald's bid of $45,000, mostly because all the other bids were over $400,000. When Gerald learns of his mistake, he tells XYZ that he cannot perform the contract. If XYZ sues to enforce this contract, what is the most likely result?
Because XYZ should have known that this was an error, Gerald will be allowed to rescind the contract.
Bill sells some old books to Marion for a small sum of money. A few weeks later, Marion discovers that the books are quite valuable, worth as much as $50,000. Bill seeks to rescind the contract. What is the most likely result?
Bill may not rescind the contract because it is a mutual mistake of value.
Francis signs an agreement with Sam on July 21, but 4 days later decides he made a bad deal. Which of the following, if true, will be a legal basis for Francis to get out of the contract?
Both Sam and Francis are mistaken as to the subject matter of the contract.
A contract most likely will be declared unconscionable if: a. it is unfair to one party. b. it contains a cancellation clause. c. it is oppressive and the weaker party did not fully understand the consequences of the agreement. d. it is signed by a minor.
C
Mark works as a bartender at The Little Nipper, a local bar. Under state law, bartenders are required to be licensed. The licensing requires filling out an application and submitting a $50 application fee. The application does not require any special education or experience, just the $50 fee. Craig enters Mark's bar, orders a round of drinks for the house, then notices that Mark's license is not on display behind the bar. Craig learns that Mark is not licensed and refuses to pay for the round of drinks. The Little Nipper sues. What result? a. Since this is an illegal contract, the courts will not enforce it. b. Since Mark violated a regulatory statute, the contract is unenforceable. c. Since this is a revenue-raising statute, The Little Nipper wins. d. Since this is a revenue-raising statute, the licensing law is unconstitutional. Craig wins.
C
Public policy means the law that comes from the: a. state legislature. b. executive branch of the government. c. courts that decide what would have a negative impact on society. d. Constitution.
C
Suppose that Lenny Lawyer enters into an agreement with Cindy Client that his fees will be a percentage of the recovery Lenny obtains for Cindy in her pending divorce. State law makes such a contingency fee arrangement illegal in divorce actions. What will be the probable outcome if Lenny attempts to enforce the agreement? a. The contract will be valid. Cindy would not have been able to afford an attorney otherwise and therefore Lenny was doing a public service. b. The contract will be voidable at Cindy's option. c. The contract will be void as violating a statute. Lenny will not be able to recover anything. d. The contract will be unenforceable if Lenny did not get the agreement in writing
C
arry has the largest pizza business in the city. He learns that Henry is thinking of opening a competing pizza and pasta delivery business. Larry gives Henry $25,000 to not open his proposed business in the same city. Which statement is correct? a. The contract is voidable at Larry's option. b. The contract is void for lack of consideration. c. The contract is illegal and void. d. The contract is enforceable.
C
11. A contract most likely will be declared unconscionable if: a. it is unfair to one party. b. it contains a cancellation clause. c. it is oppressive and the weaker party did not fully understand the consequences of the agreement. d. it is signed by a minor.
C PTS: 1 MSC: AACSB Analytic
22. Public policy means the law that comes from the: a. state legislature. b. executive branch of the government. c. courts that decide what would have a negative impact on society. d. Constitution.
C PTS: 1 MSC: AACSB Analytic
14. Suppose that Lenny Lawyer enters into an agreement with Cindy Client that his fees will be a percentage of the recovery Lenny obtains for Cindy in her pending divorce. State law makes such a contingency fee arrangement illegal in divorce actions. What will be the probable outcome if Lenny attempts to enforce the agreement? a. The contract will be valid. Cindy would not have been able to afford an attorney otherwise and therefore Lenny was doing a public service. b. The contract will be voidable at Cindy's option. c. The contract will be void as violating a statute. Lenny will not be able to recover anything. d. The contract will be unenforceable if Lenny did not get the agreement in writing.
C PTS: 1 MSC: AACSB Reflective Thinking
5. Mark works as a bartender at The Little Nipper, a local bar. Under state law, bartenders are required to be licensed. The licensing requires filling out an application and submitting a $50 application fee. The application does not require any special education or experience, just the $50 fee. Craig enters Mark's bar, orders a round of drinks for the house, then notices that Mark's license is not on display behind the bar. Craig learns that Mark is not licensed and refuses to pay for the round of drinks. The Little Nipper sues. What result? a. Since this is an illegal contract, the courts will not enforce it. b. Since Mark violated a regulatory statute, the contract is unenforceable. c. Since this is a revenue-raising statute, The Little Nipper wins. d. Since this is a revenue-raising statute, the licensing law is unconstitutional. Craig wins.
C PTS: 1 MSC: AACSB Reflective Thinking
9. Larry has the largest pizza business in the city. He learns that Henry is thinking of opening a competing pizza and pasta delivery business. Larry gives Henry $25,000 to not open his proposed business in the same city. Which statement is correct? a. The contract is voidable at Larry's option. b. The contract is void for lack of consideration. c. The contract is illegal and void. d. The contract is enforceable.
C PTS: 1 MSC: AACSB Reflective Thinking
Public policy means the law that comes from the:
C. Courts that decide what would have a negative impact on society
A contract most likely will be declared unconscionable if:
C. It is oppressive and the weaker party did not fully understand the consequences of the agreement
Mark works as a bartender at The Little Nipper, a local bar. Under state law, bartenders are required to be licensed. The licensing requires filling out an application and submitting a $50 application fee. The application does not require any special education or experience, just the $50 fee. Craig enters Mark's bar, orders a round of drinks for the house, then notices that Mark's license is not on display behind the bar. Craig learns that Mark is not licensed and refuses to pay for the round of drinks. The Little Nipper sues. What result?
C. Since this is a revenue-raising statute, The Little Nipper wins
Larry has the largest pizza business in the city. He learns that Henry is thinking of opening a competing pizza and pasta delivery business. Larry gives Henry $25,000 to not open his proposed business in the same city. Which statement is correct?
C. The contract is illegal and void
Suppose that Lenny Lawyer enters into an agreement with Cindy Client that his fees will be a percentage of the recovery Lenny obtains for Cindy in her pending divorce. State law makes such a contingency fee arrangement illegal in divorce actions. What will be the probable outcome if Lenny attempts to enforce the agreement?
C. The contract will be void as violating a statute. Lenny will not be able to recover anything
AAA and XXX companies are both major international conglomerates. They are negotiating a contract whereby AAA will install a computer system for XXX. One clause in the contract states that AAA will not be liable for damages caused by the negligent installation of the computer system, except that AAA warrants the system and will fix any problem for a period of two years following installation. AAA completes the installation of the computer system. XXX loads extensive amounts of information on the system, but all of it is destroyed because AAA negligently installed the memory chips. AAA fixes the memory, but XXX incurred significant expenses in recreating the lost information. XXX sues for these expenses. AAA defends with the noted clause in the contract. a. XXX wins; these types of clauses are never enforceable. b. XXX wins; exculpatory clauses are sometimes valid, but this one would not be valid. c. XXX wins; this exculpatory clause is not valid because it is unconscionable. d. AAA wins; this exculpatory clause is enforceable.
D
E-mation entered into a contract with a consumer, Ezra. Ezra was a recent immigrant to the United States, spoke very little English, and had no formal education. The contract provided for Ezra to pay $2500 for a computer system. The system was worth $400. If E-mation sued Ezra under the contract, what is the most likely result? a. The contract is enforceable because of the Statute of Frauds. b. The contract is enforceable because of the parol evidence rule. c. The contract is enforceable because of the underlying reference rule. d. The contract is unenforceable because it is unconscionable.
D
E-mation, Inc hires Marvin to steal trade secrets from one of its competitors for $10,000. Marvin demands half of the money up front. E-mation pays Marvin $5000 but Marvin decides not to pursue theft of the trade secrets. E-mation sues Marvin for the return of the $5000. What will the court do with this contract? a. The court will order Marvin to return the $5000. b. The court will order Marvin to return the $5000 with interest. c. The court will order Marvin to obtain the trade secrets. d. The court will not do anything to help E-mation get its money back.
D
Eintz Corp. hired Jose to bribe a foreign government official. Eintz gave Jose $10,000 in cash to make the bribe payment and $2000 for Jose's efforts. Instead of paying the bribe, Jose pocketed all of the money. If Eintz sues Jose, Eintz will: a. be able to recover the $12,000. b. be able to recover the $10,000, but not the $2,000. c. be able to recover the $2,000 but not the $10,000. d. not be able to recover the $12,000.
D
The UCC deals with unconscionability in a contract by providing that a court may: a. refuse to enforce the contract. b. enforce the remainder of the contract without the unconscionable clause. c. limit the application of any unconscionable clause as to avoid any unconscionable result. d. All of the above.
D
To be valid, a noncompete clause must be: a. ancillary to a legitimate bargain. b. reasonable in time, geographical area, and scope of activity when ancillary to the sale of a business. c. necessary to protect trade secrets, confidential information, or customer lists developed over an extended time when ancillary to an employment contract. d. All of the above.
D
Virginia borrowed money from G & L Lending at 35% interest per year. The state maximum interest rate is 20% per year. Virginia defaulted on the loan. What amount can G& L collect from Virginia? a. G & L will be able to collect the principal plus 20% interest per year. b. G & L will be able to collect the principal but not any interest. c. G & L will not be able to collect either the principal or interest. d. All of the above may be correct. The answer depends on the particular state law.
D
When Mohammed was hired by Pomico, Inc., he signed the following agreement, "Upon termination of my employment with Pomico, I agree not to work for a competing company within 30 miles of Pomico's headquarters for one year." This agreement, important to protecting secret information developed in the employer's business, is: a. an unenforceable exculpatory agreement. b. an unenforceable usurious agreement. c. an enforceable bailment agreement. d. an enforceable agreement not to compete.
D
10. The UCC deals with unconscionability in a contract by providing that a court may: a. refuse to enforce the contract. b. enforce the remainder of the contract without the unconscionable clause. c. limit the application of any unconscionable clause as to avoid any unconscionable result. d. All of the above.
D PTS: 1 MSC: AACSB Analytic
23. To be valid, a noncompete clause must be: a. ancillary to a legitimate bargain. b. reasonable in time, geographical area, and scope of activity when ancillary to the sale of a business. c. necessary to protect trade secrets, confidential information, or customer lists developed over an extended time when ancillary to an employment contract. d. All of the above.
D PTS: 1 MSC: AACSB Analytic
16. AAA and XXX companies are both major international conglomerates. They are negotiating a contract whereby AAA will install a computer system for XXX. One clause in the contract states that AAA will not be liable for damages caused by the negligent installation of the computer system, except that AAA warrants the system and will fix any problem for a period of two years following installation. AAA completes the installation of the computer system. XXX loads extensive amounts of information on the system, but all of it is destroyed because AAA negligently installed the memory chips. AAA fixes the memory, but XXX incurred significant expenses in recreating the lost information. XXX sues for these expenses. AAA defends with the noted clause in the contract. a. XXX wins; these types of clauses are never enforceable. b. XXX wins; exculpatory clauses are sometimes valid, but this one would not be valid. c. XXX wins; this exculpatory clause is not valid because it is unconscionable. d. AAA wins; this exculpatory clause is enforceable.
D PTS: 1 MSC: AACSB Reflective Thinking
E-mation, Inc hires Marvin to steal trade secrets from one of its competitors for $10,000. Marvin demands half of the money up front. E-mation pays Marvin $5000 but Marvin decides not to pursue theft of the trade secrets. E-mation sues Marvin for the return of the $5000. What will the court do with this contract? a. The court will order Marvin to return the $5000. b. The court will order Marvin to return the $5000 with interest. c. The court will order Marvin to obtain the trade secrets. d. The court will not do anything to help E-mation get its money back.
D PTS: 1 MSC: AACSB Reflective Thinking
MULTIPLE CHOICE 1. Virginia borrowed money from G & L Lending at 35% interest per year. The state maximum interest rate is 20% per year. Virginia defaulted on the loan. What amount can G& L collect from Virginia? a. G & L will be able to collect the principal plus 20% interest per year. b. G & L will be able to collect the principal but not any interest. c. G & L will not be able to collect either the principal or interest. d. All of the above may be correct. The answer depends on the particular state law.
D PTS: 1 MSC: AACSB Reflective Thinking
15. When Mohammed was hired by Pomico, Inc., he signed the following agreement, "Upon termination of my employment with Pomico, I agree not to work for a competing company within 30 miles of Pomico's headquarters for one year." This agreement, important to protecting secret information developed in the employer's business, is: a. an unenforceable exculpatory agreement. b. an unenforceable usurious agreement. c. an enforceable bailment agreement. d. an enforceable agreement not to compete.
D PTS: 1 MSC: AACSB Reflective Thinking | AACSB Diversity
18. Eintz Corp. hired Jose to bribe a foreign government official. Eintz gave Jose $10,000 in cash to make the bribe payment and $2000 for Jose's efforts. Instead of paying the bribe, Jose pocketed all of the money. If Eintz sues Jose, Eintz will: a. be able to recover the $12,000. b. be able to recover the $10,000, but not the $2,000. c. be able to recover the $2,000 but not the $10,000. d. not be able to recover the $12,000.
D PTS: 1 MSC: AACSB Reflective Thinking | AACSB Diversity
4. E-mation entered into a contract with a consumer, Ezra. Ezra was a recent immigrant to the United States, spoke very little English, and had no formal education. The contract provided for Ezra to pay $2500 for a computer system. The system was worth $400. If E-mation sued Ezra under the contract, what is the most likely result? a. The contract is enforceable because of the Statute of Frauds. b. The contract is enforceable because of the parol evidence rule. c. The contract is enforceable because of the underlying reference rule. d. The contract is unenforceable because it is unconscionable.
D PTS: 1 MSC: AACSB Reflective Thinking | AACSB Diversity
AAA and XXX companies are both major international conglomerates. They are negotiating a contract whereby AAA will install a computer system for XXX. One clause in the contract states that AAA will not be liable for damages caused by the negligent installation of the computer system, except that AAA warrants the system and will fix any problem for a period of two years following installation. AAA completes the installation of the computer system. XXX loads extensive amounts of information on the system, but all of it is destroyed because AAA negligently installed the memory chips. AAA fixes the memory, but XXX incurred significant expenses in recreating the lost information. XXX sues for these expenses. AAA defends with the noted clause in the contract.
D. AAA wins; this exculpatory clause is enforceable
To be valid, a noncompete clause must be:
D. All of the above A. Ancillary to a legitimate bargain B. Reasonable in time, geographical area, and scope of activity when ancillary to the sale of a business C. Necessary to protect trade secrets, confidential information, or customer lists developed over an extended time when ancillary to an employment contract
The UCC deals with unconscionability in a contract by providing that a court may:
D. All of the above A. Refuse to enforce the contract B. Enforce the remainder of the contract without the unconscionable clause C. Limit the application of any unconscionable clause as to avoid any unconscionable result
Virginia borrowed money from G & L Lending at 35% interest per year. The state maximum interest rate is 20% per year. Virginia defaulted on the loan. What amount can G& L collect from Virginia?
D. All of the above may be correct. The answer depends on the particular state law A. G & L will be able to collect the principal plus 20% interest per year B. G & L will be able to collect the principal but not any interest C. G & L will not be able to collect either the principal or interest
When Mohammed was hired by Pomico, Inc., he signed the following agreement, "Upon termination of my employment with Pomico, I agree not to work for a competing company within 30 miles of Pomico's headquarters for one year." This agreement, important to protecting secret information developed in the employer's business, is:
D. An enforceable agreement not to compete
Eintz Corp. hired Jose to bribe a foreign government official. Eintz gave Jose $10,000 in cash to make the bribe payment and $2000 for Jose's efforts. Instead of paying the bribe, Jose pocketed all of the money. If Eintz sues Jose, Eintz will:
D. Not be able to recover the $12,000
E-mation entered into a contract with a consumer, Ezra. Ezra was a recent immigrant to the United States, spoke very little English, and had no formal education. The contract provided for Ezra to pay $2500 for a computer system. The system was worth $400. If E-mation sued Ezra under the contract, what is the most likely result?
D. The contract is unenforceable because it is unconscionable
E-mation, Inc hires Marvin to steal trade secrets from one of its competitors for $10,000. Marvin demands half of the money up front. E-mation pays Marvin $5000 but Marvin decides not to pursue theft of the trade secrets. E-mation sues Marvin for the return of the $5000. What will the court do with this contract?
D. The court will not do anything to help E-mation get its money back
Which of the following relationships will ordinarily not create an insurable interest?
Doctor and patient
When both parties are mistaken as to the subject matter of a contract, which of the following is true?
Either party can rescind the contract.
At the entrance of a hockey arena, there is a big yellow sign that states, "This arena is not responsible for pucks that might fly into the crowd." This is an example of a(n):
Exculpatory clause.
A gambling contract is legal unless it is specifically prohibited by state statute.
F
Barbara, a skilled welder, was hired at Mainco Enterprises for a welding position. Steve, a recent graduate with few job skills, was also hired and was expected to develop general skills on the job. Both were asked to sign noncompete clauses limiting future employment if they left Mainco. A court would be very likely to enforce the noncompete clauses unless the time or geographic restriction is unreasonable.
F
Cynthia and Brian were friends. Brian was a dare devil. Because of his antics, Cynthia thought that Brian wasn't long for this life. Cynthia purchased a life insurance policy on Brian's life. Subsequently, Brian was killed in a car accident. Since Cynthia and Brian were friends, Cynthia had an insurable interest in his life and will be entitled to the insurance proceeds.
F
If a court finds as a matter of law that a clause of Superior Siding's contract was unconscionable at the time the contract was made, the court must refuse to enforce the contract.
F
Morality plays no part of gambling contract legality.
F
Rudolph overhears Macy's plans to go skydiving over spring break. Not really knowing Macy, but figuring it's worth a chance, Rudolph rushes out and buys an insurance policy for $100,000 on Macy's life. Macy does in fact meet her demise jumping out of the airplane. Rudolph can collect the $100,000.
F
To raise revenues, the City of St. Cloud required restaurants to purchase a special permit if they wanted to serve food in an open-air patio. While at Hola Taco, a restaurant in St. Cloud, a customer notices that Hola Taco's permit expired. Because Hola's Taco's permit expired, the customer is not legally required to pay for her food
F
When Randy accepted a job with Buren Construction, Randy signed the following agreement, "Upon termination of my employment with Buren Construction, I agree never to work for another employer as an electrician." If Randy resigns from Buren Construction, this agreement would be upheld under the theory of freedom of contract.
F
11. A gambling contract is legal unless it is specifically prohibited by state statute.
F PTS: 1 MSC: AACSB Analytic
If a court finds as a matter of law that a clause of Superior Siding's contract was unconscionable at the time the contract was made, the court must refuse to enforce the contract.
F PTS: 1 MSC: AACSB Analytic
8. Morality plays no part of gambling contract legality.
F PTS: 1 MSC: AACSB Analytic | AACSB Ethics
10. When Randy accepted a job with Buren Construction, Randy signed the following agreement, "Upon termination of my employment with Buren Construction, I agree never to work for another employer as an electrician." If Randy resigns from Buren Construction, this agreement would be upheld under the theory of freedom of contract.
F PTS: 1 MSC: AACSB Reflective Thinking
13. Cynthia and Brian were friends. Brian was a dare devil. Because of his antics, Cynthia thought that Brian wasn't long for this life. Cynthia purchased a life insurance policy on Brian's life. Subsequently, Brian was killed in a car accident. Since Cynthia and Brian were friends, Cynthia had an insurable interest in his life and will be entitled to the insurance proceeds.
F PTS: 1 MSC: AACSB Reflective Thinking
5. To raise revenues, the City of St. Cloud required restaurants to purchase a special permit if they wanted to serve food in an open-air patio. While at Hola Taco, a restaurant in St. Cloud, a customer notices that Hola Taco's permit expired. Because Hola's Taco's permit expired, the customer is not legally required to pay for her food.
F PTS: 1 MSC: AACSB Reflective Thinking
6. Rudolph overhears Macy's plans to go skydiving over spring break. Not really knowing Macy, but figuring it's worth a chance, Rudolph rushes out and buys an insurance policy for $100,000 on Macy's life. Macy does in fact meet her demise jumping out of the airplane. Rudolph can collect the $100,000.
F PTS: 1 MSC: AACSB Reflective Thinking
12. Barbara, a skilled welder, was hired at Mainco Enterprises for a welding position. Steve, a recent graduate with few job skills, was also hired and was expected to develop general skills on the job. Both were asked to sign noncompete clauses limiting future employment if they left Mainco. A court would be very likely to enforce the noncompete clauses unless the time or geographic restriction is unreasonable.
F PTS: 1 MSC: AACSB Reflective Thinking | AACSB Diversity
A gambling contract is legal unless it is specifically prohibited by state statute.
False
A gambling contract is legal unless it is specifically prohibited by the state statute.
False
Barbara, a skilled welder, was hired at Mainco Enterprises for a welding position. She was asked to sign noncompete clauses limiting future employment if she left Mainco. A court would be very likely to enforce the noncompete clause unless the time or geographic restriction is unreasonable.
False
Barbara, a skilled welder, was hired at Mainco Enterprises for a welding position. Steve, a recent graduate with few job skills, was also hired and was expected to develop general skills on the job. Both were asked to sign noncompete clauses limiting future employment if they left Mainco. A court would be very likely to enforce the noncompete clauses unless the time or geographic restriction is unreasonable.
False
Cynthia and Brian were friends. Brian was a dare devil. Because of his antics, Cynthia thought that Brian wasn't long for this life. Cynthia purchased a life insurance policy on Brian's life. Subsequently, Brian was killed in a car accident. Since Cynthia and Brian were friends, Cynthia had an insurable interest in his life and will be entitled to the insurance proceeds
False
Cynthia and Brian were friends. Brian was a dare devil. Because of his antics, Cynthia thought that Brian wasn't long for this life. Cynthia purchased a life insurance policy on Brian's life. Subsequently, Brian was killed in a car accident. Since Cynthia and Brian were friends, Cynthia had an insurable interest in his life and will be entitled to the insurance proceeds.
False
If a court finds as a matter of law that a clause of Superior Siding's contract was unconscionable at the time the contract was made, the court must refuse to enforce the contract.
False
If a court finds as a matter of law that a clause of Superior Sidings contract was unconscionable at the time the contract was made, the court must refuse to enforce the contract.
False
If a court finds as a matter of law that a clause of a contract was unconscionable at the time the contract was made, the court must refuse to enforce the contract.
False
Morality plays no part of gambling contract legality
False
Morality plays no part of gambling contract legality.
False
Rudolph overhears Macy's plans to go skydiving over spring break. Not really knowing Macy, but figuring it's worth a chance, Rudolph rushes out and buys an insurance policy for $100,000 on Macy's life. Macy does in fact meet her demise jumping out of the airplane. Rudolph can collect the $100,000.
False
To raise revenues, the City of St. Cloud required restaurants to purchase a special permit if they wanted to serve food in an open-air patio. While at Hola Taco, a restaurant in St. Cloud, a customer notices that Hola Taco's permit expired. Because Hola's Taco's permit expired, the customer is not legally required to pay for her food.
False
When Randy accepted a job with Buren Construction, Randy signed the following agreement, "Upon termination of my employment with Buren Construction, I agree never to work for another employer as an electrician." If Randy resigns from Buren Construction, this agreement would be upheld under the theory of freedom of contract.
False
Jay offers to buy a car from Leslie. He requests that she provide receipts and invoices from all repairs made to the vehicle during the past year. She agrees, but does not give him all of the receipts. He later purchases that car and determines that the auto has significant mechanical problems. He should be able to prove a claim of:
Fraud by Concealment
Betsy told David about some wonderful development property that she owned in Florida. She offered to let him have a significant profit if he would invest in her development. After providing her with several thousands of dollars, David later discovered that there was no investment property in Florida. He should be able to state a claim of:
Fraud in the Inducement
barb has been a children's daycare provider for several years in the small town of saltine. She has decided to give it all up and move to the big city for excitement and adventure. She sells her business to Ken, agreeing to not open a competing business within five miles to Sallton. After the big city life, she opens another daycare business in Sallton. Ken sues. What is the result
Ken wins. The agreement is enforceable
Barb has been a children's day care provider for several years in the small town of Sallton. She has decided to give it all up and move to the big city for excitement and adventure. She sells her business to Ken, agreeing not to open a competing business within five miles of Sallton for a period of nine months. After five months of the big city life, Barb is broke and moves back to Sallton. She opens a small day care business. Ken sues on the noncompete clause. What is the most likely result?
Ken wins. The agreement is enforceable.
Barb has been a children's day care provider for several years in the small town of Sallton. She has decided to give it all up and move to the big city for excitement and adventure. She sells her business to Ken, agreeing not to open a competing business within five miles of Sallton for a period of nine months. After five months of the big city life, Barb is broke and moves back to Sallton. She opens a small day care business. Ken sues on the noncompete clause. What is the most likely result? Ken wins. The agreement is enforceable. Barb wins. The agreement is denying her the right to do the only thing she knows how to do. Barb wins. The agreement is not enforceable because it is not ancillary to a legitimate bargain. Barb wins. The agreement is not reasonable as to time
Ken wins. The agreement is enforceable.
Brockwell left his boat to be repaired at Lake Gaston Sales (LGS). The boat contained electronic equipment and other personal items. Brockwell signed a form stating that LGS had no responsibility for any loss to any property in or on the boat. Brockwell's electronic equipment was stolen and other personal items were damaged, and he sued. Who wins?
LGS wins because of the exculpatory clause, unless it was grossly negligent.
Margie, a 'tattooist,' lives in a state that requires two licenses: one is a business license to open her store, and the other is a license to actually do tattoos. Margie secured a license to open her store but thought that was enough to 'do business' as a tattooist. She subsequently enters into a contract to do tattoos. What is the status of the contract?
Margie may keep her store but the contract is unenforceable.
Mark was shopping for a used car in February. He went to AutoMegaWorld and test drove a used 2000 Tiger XL. While driving the car, he looked at the climate control center and noticed that the temperature lever was marked "cold" at one end in blue and "hot" in red at the other end. Mark assumed that the "cold" marking meant that the car had air conditioning. Mark wanted to finally have an air-conditioned car. The salesperson did not mention anything about whether this car was air conditioned, but while test-driving the car, Mark commented, "It will be great to have an air-conditioned car." The salesperson heard Mark and knew that the car did not have air conditioning, but said nothing. Mark bought the car. When Mark was showing his new car off to friends, one of them showed him that the car was not air conditioned. In this circumstance, which of the following is true?
Mark can avoid the contract on the basis of unilateral mistake because the salesperson knew that Mark was mistaken.
Mark was shopping for a used car in February. He went to AutoMegaWorld and test drove a used 2000 Tiger XL. While driving the car, he looked at the climate control center and noticed that the temperature lever was marked "cold" at one end in blue and "hot" in red at the other end. Mark assumed that the "cold" marking meant that the car had air conditioning. Mark wanted to finally have an air-conditioned car. Before test driving any cars, Mark had discussed with the salesperson what he wanted in a car, and mentioned air conditioning as a top priority. Mark and the salesperson had no other discussions about air conditioning generally or in connection with this particular car. When Mark was showing his new car off to friends, one of them showed him that the car was not air conditioned. In this circumstance, most likely, which of the following is true?
Mark can avoid the contract on the basis of unilateral mistake because the salesperson should have known that Mark was mistaken.
Mark was shopping for a used car in February. He went to AutoMegaWorld and test drove a used 2000 Tiger XL. While driving the car, he looked at the climate control center and noticed that the temperature lever was marked "cold" at one end in blue and "hot" in red at the other end. Mark assumed that the "cold" marking meant that the car had air conditioning. Mark wanted to finally have an air-conditioned car. He did not discuss air conditioning in any way with the salesperson. Mark bought the car. Later, when Mark was showing his new car to friends, one of them pointed out to him that the car was not air conditioned. In this circumstance, which of the following is true?
Mark cannot avoid the contract on the basis of his unilateral mistake.
Martha was selling some land she owned in Florida to Mary. Martha told Mary that there was a golf course and swimming pool in the subdivision as part of the development, and that other improvements would be made soon. Martha knew that none of these improvements existed and none were planned. Mary believed Martha and bought the land for $100,000 when it was really only worth $20,000. Mary learns of the error and sues Martha for fraud. Which of the following statements best describes this situation?
Mary can rescind or recover damages because this is clearly fraud.
What is the effect of one party being mistaken about the subject matter of a contract?
Neither party can rescind the contract or recover damages.
Guyan Machinery, a West Virginia manufacturing corporation, hired Albert Voorhees as a salesman and required him to sign a contract stating that if he left Guyan he would not work for a competing corporation anywhere within 250 miles of West Virginia for a two-year period. Later, Voorhees left Guyan and began working at Polydeck Corp., another West Virginia manufacturer. The only product Polydeck made was urethane screens, which comprised half of 1 percent of Guyan's business. Is Guyan entitled to enforce its noncompete clause?
No, because it is not essential to the employer.
Wendell, new to the area, selects a doctor from the telephone book and visits that doctor to have a splinter extracted. Unbeknownst to Wendell, the doctor has never passed the state licensing exams. Later, when Wendell discovers the truth, he refuses to pay his bill. If the doctor sues for recovery of the fee, will the court support the doctor's claim?
No, the court is likely to take the position that it is not in the public's best interests to enforce contracts with unlicensed doctors.
Wendell, new to the area, selects a doctor from the telephone book and visits that doctor to have a splinter extracted. Unbeknownst to Wendell, the doctor has never passed the state licensing exams. Later, when Wendell discovers the truth, he refuses to pay his bill. If the doctor sues for recovery of the fee, will the court support the doctor's claim? Yes, it was up to Wendell to verify the doctor's qualifications prior to having the splinter extracted. No, the court is likely to take the position that it is not in the public's best interests to enforce contracts with unlicensed doctors. It depends on whether Wendell's injury healed properly.
No, the court is likely to take the position that it is not in the public's best interests to enforce contracts with unlicensed doctors.
If the seller of a product makes a misrepresentation of law that the buyer relies upon, can the buyer rescind the contract?
No; each party to the contract is assumed to know the law that applies.
Zach sold a restaurant to Shane for $295,000. As part of the agreement, Zach promised not to open another restaurant business for three years within a 50-mile radius of the one sold. Is this agreement enforceable against Zach?
Noncompete clauses are often upheld when the clause is ancillary to the sale of a business provided it is reasonable in time, geographic area, and scope of activity. Here the clause is ancillary to the sale of a business. Thus, the issue is whether the clause is reasonable.The clause prevents Zach from opening another restaurant so the scope of activity is reasonable. But, is three years a reasonable amount of time and is the 50-mile radius too broad? Some factors that may be considered are the strength of Zach's reputation and where his customers were from in terms of distance from the restaurant.
Cherise contacted her insurance agent and said she was interested in purchasing several life insurance policies: (a) a policy on her own life for $100,000, naming her son and daughter as beneficiaries; (b) a policy on her neighbor's life for $100,000, since she had observed him engaging in reckless behavior, naming herself as beneficiary; (c) a $5,000 policy on another neighbor to cover a loan Cherise made to him, naming herself as beneficiary; and (d) a $250,000 policy on her business partner, naming herself as beneficiary. What insurance policies are legal?
Polices (a), (c) and (d) are legal.
Marcy and Elliot are both sophisticated merchants who deal in diamonds. Marcy contracted to purchase a diamond for $20,000. The day after the purchase, Marcy took the diamond to a jeweler's show but the highest offer for the diamond was only $10,000. Is Marcy's contract for purchase of the diamond for $20,000 unconscionable? Best Answer:
Probably not. Both are merchants.
Zach sold a restaurant to Shane for $295,000. As part of the agreement, Zach promised not to open another restaurant business for three years within a 50-mile radius of the one sold. Is this agreement enforceable against Zach? Best answer:
Probably not. The court will look to the reasonableness of the terms
Marcy and Elliot are both sophisticated merchants who deal in diamonds. Marcy contracted to purchase a diamond for $20,000. The day after the purchase, Marcy took the diamond to a jeweler's show but the highest offer for the diamond was only $10,000. Is Marcy's contract for purchase of the diamond for $20,000 unconscionable?
Probably not. The parties had equal bargaining power in that they were both experts in this field. Elliot did not use a superior position to force the contract on Marcy. Furthermore, Marcy is going to have a tough argument to say she did not fully understand the consequences of the agreement.
Mabel, an 85-year-old widow who is in poor health, signs a contract with the only nursing home in Anytown (the nearest alternative facility is 75 miles away). The contract obligates Mabel to pay $4,000 per month for the rest of her life and for her estate to pay the same amount for the period of time that the unit sits empty upon her death. Mabel's daughter believes this agreement amounts to an adhesion contract. Is she correct? Best answer:
Probably. The courts will look to such factors as age and the number of nursing homes in the area to determine if there is an adhesion contract.
The case that involved two ships, both of which were named "Peerless," is:
Raffles v. Wichelhaus
Richard and Michelle Kommit from California where gambling on credit is illegal, traveled to New Jersey to have fun in the casinos. While in Atlantic City, they used their MasterCard to withdraw cash from an ATM conveniently located in the "pit"—the gambling area of a casino. They ran up debts of $5,500 on the credit card and did not pay. The California National Bank sued for the money in a California court. Who wins?
Richard and Michelle Kommit
In a state that requires electricians to be licensed, Hope hires Rigoberto to rewire her kitchen and he completes the work within the time agreed. When Hope finds out that Rigoberto is not a licensed electrician, she refuses to pay him for the work. If Rigoberto sues Hope, the most likely result will be:
Rigoberto will lose, because being licensed is a condition required to perform the work.
Which of the following is an example of an exculpatory clause?
Seller is not responsible for property damage regardless of the cause of the injury.
Sally is thinking about buying Linda's car. Linda knows that there is a leak in the brake line, and that after driving the car for a few minutes, the brake fluid will leak out and the car will have no brakes. Sally does not ask about it and Linda does not tell her. Sally buys the car, and while driving home, the brakes fail. Sally has an accident and the car is destroyed. Sally sues Linda for fraud to get her money back. Which is true?
Silence in this situation is a misrepresentation.
Mark works as a bartender at The Little Nipper, a local bar. Under state law, bartenders are required to be licensed. The licensing requires filling out an application and submitting a $50 application fee. The application does not require any special education or experience, just the $50 fee. Craig enters Mark's bar, orders a round of drinks for the house, then notices that Mark's license is not on display behind the bar. Craig learns that Mark is not licensed and refuses to pay for the round of drinks. The Little Nipper sues. What result?
Since this is a revenue-raising statute, The Little Nipper wins.
An agreement may violate public policy even if the agreement does not require a party to commit a crime, tort, or violate a statute.
T
If a contract is made with a person required by law to hold a license, and the purpose of the license is protection of the public, the contract made by an unlicensed person will generally be unenforceable.
T
In many states it is illegal to lend money to help someone gamble
T
John did not have a license to practice medicine in Florida. Nevertheless, when he retired to Florida, he started providing medical services to the people in his condo. Isaac, John's next-door neighbor, owed John $2000 for medical services. John will not be able to enforce the contract he made with Isaac.
T
L & M loaned Joan $400 so that she could buy her textbooks for the current semester. L & M's terms for repayment of the loan are, $200 in two months, $200 in four months, and another $100 at the end of the fifth month. The legal rate of interest on this type of loan is six percent per annum. L & M's loan is usurious
T
Roger parked his car at a garage that has a large sign at the entrance saying, "This garage is not liable for items stolen from a car." This type of notice is referred to as an exculpatory clause
T
To be valid, an agreement not to compete must be ancillary to a legitimate bargain.
T
15. To be valid, an agreement not to compete must be ancillary to a legitimate bargain.
T PTS: 1 MSC: AACSB Analytic
4. If a contract is made with a person required by law to hold a license, and the purpose of the license is protection of the public, the contract made by an unlicensed person will generally be unenforceable.
T PTS: 1 MSC: AACSB Analytic
7. Roger parked his car at a garage that has a large sign at the entrance saying, "This garage is not liable for items stolen from a car." This type of notice is referred to as an exculpatory clause.
T PTS: 1 MSC: AACSB Analytic
CHAPTER 13 - LEGALITY TRUE/FALSE 1. An agreement may violate public policy even if the agreement does not require a party to commit a crime, tort, or violate a statute.
T PTS: 1 MSC: AACSB Analytic
In many states it is illegal to lend money to help someone gamble.
T PTS: 1 MSC: AACSB Analytic
14. John did not have a license to practice medicine in Florida. Nevertheless, when he retired to Florida, he started providing medical services to the people in his condo. Isaac, John's next-door neighbor, owed John $2000 for medical services. John will not be able to enforce the contract he made with Isaac.
T PTS: 1 MSC: AACSB Reflective Thinking
9. L & M loaned Joan $400 so that she could buy her textbooks for the current semester. L & M's terms for repayment of the loan are, $200 in two months, $200 in four months, and another $100 at the end of the fifth month. The legal rate of interest on this type of loan is six percent per annum. L & M's loan is usurious.
T PTS: 1 MSC: AACSB Reflective Thinking
For 20 years, Art's Flower Shop relied almost exclusively on advertising in the yellow pages to bring business to its shop in a small West Virginia town. One year, the yellow pages printer accidentally did not print Art's ad, and Art's suffered an enormous drop in business. Art's sued for negligence and won a judgment of $50,000 from the jury, but the printing company appealed, claiming that under an exculpatory clause in the contract, the company could not be liable to Art's for more than the cost of the ad, about $910. Art's claimed that the exculpatory clause was unconscionable. Please rule.
The clause is unenforceable because it is unconscionable
Larry has the largest pizza business in the city. He learns that Henry is thinking of opening a competing pizza and pasta delivery business. Larry gives Henry $25,000 to not open his proposed business in the same city. Which statement is correct? The contract is voidable at Larry's option. The contract is void for lack of consideration. The contract is illegal and void. The contract is enforceable.
The contract is illegal and void.
Seller is not responsible for property damage regardless of the cause of the injury.
The contract is illegal and void.
E-mation entered into a contract with a consumer, Ezra. Ezra was a recent immigrant to the United States, spoke very little English, and had no formal education. The contract provided for Ezra to pay $2500 for a computer system. The system was worth $400. If E-mation sued Ezra under the contract, what is the most likely result?
The contract is unenforceable because it is unconscionable
E-mation entered into a contract with a consumer, Ezra, a recent immigrant to the United States, who spoke very little English, and had no formal education. The contract provided for Ezra to pay $2500 for a computer system. The system was worth $400. If E-mation sued Ezra for enforcement the contract, what is the most likely result? The contract is enforceable because of the Statute of Frauds. The contract is enforceable because of the parol evidence rule. The contract is enforceable because of the underlying reference rule. The contract is unenforceable because it is unconscionable.
The contract is unenforceable because it is unconscionable.
Mike owns a house in a poor area of a large city. Mike is on disability and his total monthly income is $700. A sales representative visits his home, selling a water purification system. Mike buys and signs a contract that calls for monthly payments of $500 for the next 10 years. The water system is worth no more than $1000. Mike did not understand what he was signing and thought it was a permission slip allowing the salesman to conduct a free water test to determine the number of toxins in the water. How would a court most likely describe this contract?
The contract is unenforceable because it is unconscionable.
Mike owns a house in a poor area of a large city. Mike is on disability and his total monthly income is $700. A sales representative visits his home, selling a water purification system. Mike signs a contract that calls for monthly payments of $500 for the next 10 years. The water system is worth no more than $1000. Mike thought he was signing a permission slip allowing the salesman to conduct a free water test to determine the toxins in the water. How would a court most likely describe this contract? The contract is fully enforceable as written. The contract is unenforceable because it is unconscionable. The contract is enforceable, but only up to the value of the water system. The contract is unenforceable because it is exculpatory
The contract is unenforceable because it is unconscionable.
Suppose that Lenny Lawyer enters into an agreement with Cindy Client that his fee will be a percentage of the recovery Lenny obtains for Cindy in her pending divorce. State law makes such a contingency fee arrangement illegal in divorce actions. What will be the probable outcome if Lenny attempts to enforce the agreement? The contract will be valid. Cindy would not have been able to afford an attorney otherwise and therefore Lenny was doing a public service. The contract will be voidable at Cindy's option. The contract will be void as violating a statute. Lenny will not be able to recover anything.
The contract will be void as violating a statute. Lenny will not be able to recover anything.
Suppose that Lenny Lawyer enters into an agreement with Cindy Client that his fees will be a percentage of the recovery Lenny obtains for Cindy in her pending divorce. State law makes such a contingency fee arrangement illegal in divorce actions. What will be the probable outcome if Lenny attempts to enforce the agreement?
The contract will be void as violating a statute. Lenny will not be able to recover anything.
E-mation, Inc hires Marvin to steal trade secrets from one of its competitors for $10,000. Marvin demands half of the money up front. E-mation pays Marvin $5000 but Marvin decides not to pursue theft of the trade secrets. E-mation sues Marvin for the return of the $5000. What will the court do with this contract?
The court will not do anything to help E-mation get its money back.
Joanne goes to a garage sale where she finds jewelry for sale. She buys a handful of what appears to be costume jewelry for her daughter to play with. She pays $5 for it. Later, a friend of Joanne happens to see the jewelry and discovers that one piece consists of diamonds and is worth about $2,000. If the seller of the jewelry seeks to rescind this contract, which of the following is true?
This is a case of mutual mistake in value; the contract is fully enforceable.
An agreement may violate public policy even if the agreement does not require a party to commit a crime, tort, or violate a statute.
True
If a contract is made with a person required by law to hold a license, and the purpose of the license is protection of the public, the contract made by an unlicensed person will generally be unenforceable.
True
If a contract is made with a person required by law to hold a liscense, and the purpose of the license is protection of the public, the contract made by an unlicensed person will generally be unenforceable.
True
In many states it is illegal to lend money to help someone gamble
True
In many states it is illegal to lend money to help someone gamble.
True
John did not have a license to practice medicine in Florida. Nevertheless, when he retired to Florida, he started providing medical services to the people in his condo. Isaac, John's next-door neighbor, owed John $2000 for medical services. John will not be able to enforce the contract he made with Isaac.
True
L & M loaned Joan $400 so that she could buy her textbooks for the current semester. L & M's terms for repayment of the loan are, $200 in two months, $200 in four months, and another $100 at the end of the fifth month. The legal rate of interest on this type of loan is six percent per annum. L & M's loan is usurious.
True
Roger parked his car at a garage that has a large sign at the entrance saying, "This garage is not liable for items stolen from a car." This type of notice is referred to as an exculpatory clause.
True
To be valid, an agreement not to compete must be ancillary to a legitimate bargain.
True
Robert is a pastor at United Church. One of the members of his congregation, Mrs. Smith, is a very devout believer. Robert convinces Mrs. Smith to sell him her farm for $5,000. The actual value of the farm is $500,000. Mrs. Smith dies and her estate sues to get her farm back. Which of the following best describes this situation?
Unless Robert can prove that there was no undue influence, the contract can be rescinded.
Van hires Terri to add an electrical outlet to his living room for his new HDTV. Terri does an excellent job, and the new outlet works perfectly. Terri presents Van with a bill for $200. But Terri is not a licensed electrician. Her state sets licensing standards in the profession to protect the public. Can Van can refuse to pay Terri for his services.
Yes. Terri was working without a license in violation of a state statute
In 1970, Continental Airlines agreed to buy a number of DC-10 airplanes from McDonnell Douglas Corporation (MDC). Their contract included a limited warranty in which MDC undertook certain servicing obligations and an exculpatory clause in which Continental waived "all other remedies" against MDC. On March 1, 1978, one of these DC-10s was nearing takeoff at Los Angeles International Airport when the two front tires of its left-side landing gear blew out. The pilot aborted the takeoff, but the uncushioned landing gear tore through the tarmac and broke away from the plane. This ruptured the left wing fuel tank, which burst into flames. The emergency escape slides failed, apparently due to the heat of the fire. Some passengers evacuated through the copilot's window, others jumped from the exits. Four passengers died, and over 70 suffered injuries. The plane was destroyed. It should be noted that the exculpatory clause did not prevent the passengers from suing Continental and/or MDC. Continental sued MDC and MDC defended based on the exculpatory clause. Is this type of clause enforceable? Best answer:
Yes. The parties are both sophisticated companies and laboriously negotiated the terms of the agreement.
Beta Construction Company, a subcontractor, understates its bid due to a clerical error. If Acme Construction is the general contractor, can Acme enforce the contract as bid?
Yes; if there is no reason to doubt its accuracy. OR No; not if the mistake is so serious that enforcing it would be unconscionable.
You go to the Cosmic Runners Supply Store in Asheville. The salesperson shows you some shoes and says, "In a race, these shoes pick up the cosmic energy from the runners around you and channel it into your own legs. This causes everyone with these shoes to run twice as fast as in normal shoes." In your next race, you do only slightly better than usual and sue for fraud. Which of the following is true?
You would lose because your reliance was not justified.
in the case of worldwide insurance v. clop, the supreme court of delaware found that:
a contract provision requiring abortion and then permitting appeal by either party void as unconscionable
In the case of Worldwide Insurance v. Klopp, the Supreme Court of Delaware found that:
a contract provision requiring arbitration and then permitting appeal by either party was void as unconscionable.
In the case of Worldwide Insurance v. Klopp, the Supreme Court of Delaware found that: a contract provision requiring arbitration and then permitting appeal by either party was void as unconscionable. the contract provision requiring arbitration was clear, unambiguous, and fair to both parties. the arbitration clause in Klopp's auto insurance contract was valid because it furthered the state policy favoring the use of arbitration to resolve disputes. the automobile insurance policy was governed by UCC, Article 3
a contract provision requiring arbitration and then permitting appeal by either party was void as unconscionable.
which of the following exculpatory clauses will most likely be enforceable?
a exculpatory clause that relieves a riding style of negligence
To be actionable for fraud, a misrepresentation must relate to:
a material existing fact
To be grounds for fraud, a misrepresentation must relate to:
a material existing fact
Kevin disconnects the odometer on his car and then drives it for another 15,000 miles after which he decides to sell it. When Linda inquires about the vehicle, Kevin says "the odometer indicates the car has only 20,000 miles on it." Kevin's statement is:
a material misstatement of fact
Where two parties contract for the purchase and sale of an ordinary item, such as a desk, that unknown to both parties is a rare and valuable example of that item, this is:
a mistake of value, but not a mistake of fact
When Samuel was hired to manage Microswift, a computer software firm in Dallas, he signed an employment agreement which contained the following provision: "I, Samuel, will not solicit business from the customers that I worked with at Microswift for a period of one year following my termination of employment with Microswift." This is an example of a:
a noncompete clause.
Undue influence is characterized by one party being put at a disadvantage in a contract due to:
a party taking advantage of a fiduciary relationship
duress
a situation in which one party threatens to do a wrongful act unless the other party entered into a contract
undue influence
a situation in which one person takes advantage of another person's mental, emotional, or physical weakness and unduly persuades that person to enter into a contract, the persuasion by the wrongdoer must overcome the free will of the innocent party 1) fiduciary relationship must have existed btwn the parties 2) dominant party must have unduly used his or her influence to persuade the servient party to enter into a contract ex- 70 yr old guy stroke and paralyzed, required to sue wheelchair, before he made a will, giving his property equally to his four grandkids. edward, a nurse, is hired to care for this guy everyday, and this guy is dependent on edwards. he works for him for 2 years before he dies. later we find out that the guy created a written contract with nurse edward 3 months before he died, giving him a huge piece of real estate, if they can show that edward used his dominant and fiduciary position to unduly influence the guy to enter into the contract, then it's invalid, if no undue influence then its valid
undue influence
a situation in which one person takes advantage of another's person's mental, emotional, or physical weakness and unduly persuades that person to enter into a contract; the persuasion by the wrongdoer must overcome the free will of the innocent party
Heidi persuades Iris to buy her used Ford Escort by telling Iris that the car "handles better than any car I have ever owned." Heidi's statement is:
a statement of opinion
the tavern's secret recipe for its pizza sauce would be considered
a trade secret, and an employment noncompete clause would be enforceable to protect it
The Tavern's secret recipe for its pizza sauce would be considered:
a trade secret, and an employment noncompete clause would be enforceable to protect it.
Which of the following exculpatory clauses will most likely be enforceable? a. An exculpatory clause that relieves a riding stable of negligence. b. An exculpatory clause that relieves a riding stable of gross negligence. c. An exculpatory clause that relieves a riding stable from intentional torts. d. A riding stable's exculpatory clause that is hidden in an eight-page document that all riders are required to sign.
a. An exculpatory clause that relieves a riding stable of negligence.
Barb has been a children's day care provider for several years in the small town of Sallton. She has decided to give it all up and move to the big city for excitement and adventure. She sells her business to Ken, agreeing not to open a competing business within five miles of Sallton for a period of nine months. After five months of the big city life, Barb is broke and moves back to Sallton. She opens a small day care business. Ken sues on the noncompete clause. What is the most likely result? a. Ken wins. The agreement is enforceable. b. Barb wins. The agreement is denying her the right to do the only thing she knows how to do. c. Barb wins. The agreement is not enforceable because it is not ancillary to a legitimate bargain. d. Barb wins. The agreement is not reasonable as to time.
a. Ken wins. The agreement is enforceable.
In the case of Worldwide Insurance v. Klopp, the Supreme Court of Delaware found that: a. a contract provision requiring arbitration and then permitting appeal by either party was void as unconscionable. b. the contract provision requiring arbitration was clear, unambiguous, and fair to both parties. c. the arbitration clause in Klopp's auto insurance contract was valid because it furthered the state policy favoring the use of arbitration to resolve disputes. d. the automobile insurance policy was governed by UCC, Article 3.
a. a contract provision requiring arbitration and then permitting appeal by either party was void as unconscionable.
The Tavern's secret recipe for its pizza sauce would be considered: a. a trade secret, and an employment noncompete clause would be enforceable to protect it. b. a trade secret, and an employment noncompete clause would NOT be enforceable to protect it. c. just a secret recipe and not something the Tavern could protect in a noncompete clause. d. an exculpatory clause and not enforceable.
a. a trade secret, and an employment noncompete clause would be enforceable to protect it.
Judith is a CPA with an excellent reputation and client base. She sells her tax preparation business to Shawn, and the sales contract includes a noncompete clause restricting Judith from opening a similar business for two years within a 10-mile radius of her former office. If she opens a tax preparation office five miles away after one year, a court would probably: a. grant an injunction barring her from operating the new office. b. order confiscation of all of her new client files and turn them over to Shawn. c. refuse to become involved, as the noncompete clause was illegal. d. refuse to enforce the noncompete clause, as it is unreasonable regarding time and geographic area.
a. grant an injunction barring her from operating the new office.
An insurance contract is not considered to be a legalized form of gambling because: a. one must have an insurable interest in the person being insured. b. insurance contracts are underwritten by reputable companies. c. insurance activities are regulated by the state department of insurance. d. All of the above.
a. one must have an insurable interest in the person being insured.
rescission
action to undo a contract
To be valid, a noncompete clause must be: ancillary to a legitimate bargain. reasonable in time, geographical area, and scope of activity when ancillary to the sale of a business. necessary to protect trade secrets, confidential information, or customer lists developed over an extended time when ancillary to an employment contract. all of the above
all of the above
the UCC deals with junconsciounability in a contract by providing that a court may
all of the above
to be valid, a noncompete clause must be
all of the above
virginia borrowed money from GL lending at 35% interest per year. the state maximum interest rate is 20% per year. virginia defaulted on the loan. what amount can GL collect from Virginia?
all of the above answers are correct
rescission
an action to undo a contract
when Mohammed was hired by Pomico Inc, the signed the following agreement, "upon termination of my employment with Pomico, I agree not to work for a competing company within 30 miles of Pumice's headquarters for one year. This agreement, important to protecting secret information developed in the employers business, is
an enforceable agreement not to compete
When Mohammed was hired by Pomico, Inc., he signed the following agreement, "Upon termination of my employment with Pomico, I agree not to work for a competing company within 30 miles of Pomico's headquarters for one year." This agreement, important to protecting secret information developed in the employer's business, is:
an enforceable agreement not to compete.
When Mohammed was hired by Pomico, Inc., he signed the following agreement, "Upon termination of my employment with Pomico, I agree not to work for a competing company within 30 miles of Pomico's headquarters for one year." This agreement, important to protecting secret information developed in the employer's business, is: an unenforceable exculpatory agreement. an unenforceable usurious agreement. an enforceable bailment agreement. an enforceable agreement not to compete.
an enforceable agreement not to compete.
fraudulent misrepresentation
an event that occurs when one person consciously decides to induce another person to rely and act on a misrepresentation
in bailment cases, exculpatory clauses
are somewhat more likely to be enforced than in other types of cases
In bailment cases, exculpatory clauses:
are somewhat more likely to be enforced than in other types of cases.
In bailment cases, exculpatory clauses: are very rarely used. are somewhat more likely to be enforced than in other types of cases. ordinarily involve an attempt to limit liability for damage to persons rather than property. None of the above.
are somewhat more likely to be enforced than in other types of cases.
Which of the following relationships will ordinarily not create an insurable interest? a. Husband and wife. b. Doctor and patient. c. Debtor and creditor. d. Chief executive officer and corporation.
b. Doctor and patient.
Wendell, new to the area, selects a doctor from the telephone book and visits that doctor to have a splinter extracted. Unbeknownst to Wendell, the doctor has never passed the state licensing exams. Later, when Wendell discovers the truth, he refuses to pay his bill. If the doctor sues for recovery of the fee, will the court support the doctor's claim? a. Yes, it was up to Wendell to verify the doctor's qualifications prior to having the splinter extracted. b. No, the court is likely to take the position that it is not in the public's best interests to enforce contracts with unlicensed doctors. c. It depends on whether Wendell's injury healed properly. d. No, but the doctor could probably recover under quasi-contract.
b. No, the court is likely to take the position that it is not in the public's best interests to enforce contracts with unlicensed doctors.
Which of the following is an example of an exculpatory clause? a. Creditor charges 38% interest on a loan. b. Seller is not responsible for property damage regardless of the cause of the injury. c. Buyer agrees to pay any costs of litigation. d. Employee agrees to never work for a competing company.
b. Seller is not responsible for property damage regardless of the cause of the injury.
Mike owns a house in a poor area of a large city. Mike is on disability and his total monthly income is $700. A sales representative visits his home, selling a water purification system. Mike signs a contract that calls for monthly payments of $500 for the next 10 years. The water system is worth no more than $1000. Mike thought he was signing a permission slip allowing the salesman to conduct a free water test to determine the toxins in the water. How would a court most likely describe this contract? a. The contract is fully enforceable as written. b. The contract is unenforceable because it is unconscionable. c. The contract is enforceable, but only up to the value of the water system. d. The contract is unenforceable because it is exculpatory.
b. The contract is unenforceable because it is unconscionable.
In bailment cases, exculpatory clauses: a. are very rarely used. b. are somewhat more likely to be enforced than in other types of cases. c. ordinarily involve an attempt to limit liability for damage to persons rather than property. d. None of the above.
b. are somewhat more likely to be enforced than in other types of cases.
An exculpatory clause is generally unenforceable when: a. it attempts to release a party from liability for ordinarily negligent behavior. b. it involves public transportation. c. it is written clearly and in bold, large print. d. the affected activity is a recreational activity.
b. it involves public transportation.
What is another term for economic duress?
business compulsion business duress economic coercion
Mark works as a bartender at The Little Nipper, a local bar. Under state law, bartenders are required to be licensed. The licensing requires filling out an application and submitting a $50 application fee. The application does not require any special education or experience, just the $50 fee. Craig enters Mark's bar, orders a round of drinks for the house, then notices that Mark's license is not on display behind the bar. Craig learns that Mark is not licensed and refuses to pay for the round of drinks. The Little Nipper sues. What result? a. Since this is an illegal contract, the courts will not enforce it. b. Since Mark violated a regulatory statute, the contract is unenforceable. c. Since this is a revenue-raising statute, The Little Nipper wins. d. Since this is a revenue-raising statute, the licensing law is unconstitutional. Craig wins.
c. Since this is a revenue-raising statute, The Little Nipper wins.
Larry has the largest pizza business in the city. He learns that Henry is thinking of opening a competing pizza and pasta delivery business. Larry gives Henry $25,000 to not open his proposed business in the same city. Which statement is correct? a. The contract is voidable at Larry's option. b. The contract is void for lack of consideration. c. The contract is illegal and void. d. The contract is enforceable.
c. The contract is illegal and void.
Suppose that Lenny Lawyer enters into an agreement with Cindy Client that his fee will be a percentage of the recovery Lenny obtains for Cindy in her pending divorce. State law makes such a contingency fee arrangement illegal in divorce actions. What will be the probable outcome if Lenny attempts to enforce the agreement? a. The contract will be valid. Cindy would not have been able to afford an attorney otherwise and therefore Lenny was doing a public service. b. The contract will be voidable at Cindy's option. c. The contract will be void as violating a statute. Lenny will not be able to recover anything. d. The contract will be unenforceable if Lenny did not get the agreement in writing.
c. The contract will be void as violating a statute. Lenny will not be able to recover anything.
Public policy means the law that comes from the: a. state legislature. b. executive branch of the government. c. courts that decide what would have a negative impact on society. d. Constitution.
c. courts that decide what would have a negative impact on society.
A contract most likely will be declared unconscionable if: a. it is unbalanced, making it unfair to one party. b. it contains a cancellation clause. c. it is oppressive and the weaker party did not fully understand the consequences of the agreement. d. it is signed by a minor for an item of luxury.
c. it is oppressive and the weaker party did not fully understand the consequences of the agreement.
Bob sees a used car advertised as having 65,000 miles on it, the same as the odometer shows. Bob has the car inspected by a mechanic who says, "I think this car actually has about 100,000 miles on it, but it is in excellent condition." Frank buys the car and the engine fails a month later. Based on this, Frank:
cannot avoid the contract on the basis of fraud
public policy means the law that comes from the
courts that decide what would have a negative impact on society
Public policy means the law that comes from the:
courts that decide what would have a negative impact on society.
The UCC deals with unconscionability in a contract by providing that a court may: a. refuse to enforce the contract. b. enforce the remainder of the contract without the unconscionable clause. c. limit the application of any unconscionable clause as to avoid any unconscionable result. d. All of the above.
d. All of the above.
To be valid, a noncompete clause must be: a. ancillary to a legitimate bargain. b. reasonable in time, geographical area, and scope of activity when ancillary to the sale of a business. c. necessary to protect trade secrets, confidential information, or customer lists developed over an extended time when ancillary to an employment contract. d. All of the above.
d. All of the above.
Alpha and Xenon companies are both major international conglomerates. They are negotiating a contract whereby Alpha will install a computer system for Xenon. One clause in the contract states that Alpha will not be liable for damages caused by the negligent installation of the computer system, except that Alpha warrants the system and will fix any problem for a period of two years following installation. Alpha completes the installation of the computer system. Xenon loads extensive amounts of information on the system, but all of it is destroyed because Alpha negligently installed the memory chips. Alpha fixes the memory, but Xenon incurred significant expenses in recreating the lost information. Xenon sues for these expenses. Alpha defends with the noted clause in the contract. a. Xenon wins; these types of clauses are never enforceable. b. Xenon wins; exculpatory clauses are sometimes valid, but this one would not be valid. c. Xenon wins; this exculpatory clause is not valid because it is unconscionable. d. Alpha wins; this exculpatory clause is enforceable.
d. Alpha wins; this exculpatory clause is enforceable.
Virginia borrowed money from G & L Lending at 35% interest per year. The state maximum interest rate is 20% per year. Virginia defaulted on the loan. What amount can G& L collect from Virginia? a. G & L will be able to collect the principal plus 20% interest per year. b. G & L will be able to collect the principal but not any interest. c. G & L will not be able to collect either the principal or interest. d. Any one of the above may be correct. The answer depends on the particular state law.
d. Any one of the above may be correct. The answer depends on the particular state law.
E-mation entered into a contract with a consumer, Ezra, a recent immigrant to the United States, who spoke very little English, and had no formal education. The contract provided for Ezra to pay $2500 for a computer system. The system was worth $400. If E-mation sued Ezra for enforcement the contract, what is the most likely result? a. The contract is enforceable because of the Statute of Frauds. b. The contract is enforceable because of the parol evidence rule. c. The contract is enforceable because of the underlying reference rule. d. The contract is unenforceable because it is unconscionable.
d. The contract is unenforceable because it is unconscionable.
E-mation, Inc hires Marvin to steal trade secrets from one of its competitors for $10,000. Marvin demands half of the money up front. E-mation pays Marvin $5000 but Marvin decides not to pursue theft of the trade secrets. E-mation sues Marvin for the return of the $5000. What will the court do with this contract? a. The court will order Marvin to return the $5000. b. The court will order Marvin to return the $5000 with interest. c. The court will order Marvin to obtain the trade secrets. d. The court will not do anything to help E-mation get its money back.
d. The court will not do anything to help E-mation get its money back.
When Mohammed was hired by Pomico, Inc., he signed the following agreement, "Upon termination of my employment with Pomico, I agree not to work for a competing company within 30 miles of Pomico's headquarters for one year." This agreement, important to protecting secret information developed in the employer's business, is: a. an unenforceable exculpatory agreement. b. an unenforceable usurious agreement. c. an enforceable bailment agreement. d. an enforceable agreement not to compete.
d. an enforceable agreement not to compete.
Eintz Corp. hired Jose to bribe a foreign government official into awarding a $3 million contract to Eintz. Eintz gave Jose $10,000 in cash to make the bribe payment and $2000 for Jose's efforts. Instead of paying the bribe, Jose pocketed all of the money. If Eintz sues Jose, Eintz will: a. be able to recover the $12,000. b. be able to recover the $3 million lost on the contract. c. be able to recover the $2,000 but not the $10,000. d. not be able to recover the $12,000.
d. not be able to recover the $12,000.
which of the following relationships will ordinarily not create an insurable interest
doctor and patient
If Brent, a contractor refuses to complete a room addition unless the homeowner pays him an additional $20,000, this may be construed as:
economic duress
What is the underlying concern of the economic duress doctrine?
enforcing certain minimal standards of business ethics
fraudulent misrepresentation
event that occurs when one person consciously decides to induce another person to rely and act on a misrepresentation, the contract is not genuine and the contract is voidable by the innocent party
mutual mistake of value
exists if both parties know the object of the contract but are mistaken as to its value, contract remains enforceable ex - andy warhol painting selling at $100, cannot recover painting
A prediction, if proven to be incorrect, can form the basis of a fraud case.
false
A preexisting relationship is a required element of a duress claim.
false
A statement of opinion may form the basis for fraud.
false
An ambiguity in a contract will not constitute a mutual mistake of material fact.
false
Assent may only be demonstrated by words.
false
Assent may still be present even if a party entered into a contract based on mistake.
false
Courts do not recognize economic duress as a contract defense.
false
Cynthia and Brian were friends. Brian was a dare devil. Because of his antics, Cynthia thought that Brian wasn't long for this life. Cynthia purchased a life insurance policy on Brian's life. Subsequently, Brian was killed in a car accident. Since Cynthia and Brian were friends, Cynthia had an insurable interest in his life and will be entitled to the insurance proceeds.
false
Fraud in the inception exists when the misrepresentation occurs at the beginning of negotiations.
false
Generally, a mutual mistake does not allow either party to rescind the contract.
false
Generally, mistake in value allows for rescission.
false
If a court finds as a matter of law that a clause of a contract was unconscionable at the time the contract was made, the court must refuse to enforce the contract.
false
No special relationship between the parties is necessary to find undue influence.
false
Silence is actionable misrepresentation anytime it relates to a material fact.
false
So long as the plaintiff in a fraud in the inducement case actually relied on the defendant's false statement, the reliance element is met.
false
The threat to bring a criminal charge (lawsuit) or civil lawsuit is duress.
false
When Randy accepted a job with Buren Construction, Randy signed the following agreement, "Upon termination of my employment with Buren Construction, I agree never to work for another employer as an electrician." If Randy resigns from Buren Construction, this agreement would be upheld under the theory of freedom of contract.
false
Where two parties contract for the sale of an old violin, but neither party realizes that it is a rare and extremely valuable violin, this is a mutual mistake of fact allowing rescission.
false
a gambling contract is legal unless it is specific prohibited by state statute
false
barbara, a skilled welder, was hired at Mainco enterprises for a welding position. Steve, a recent graduate with few job skills, was also hired and expected to develop general skills on the job.Both were asked to sign noncompete clauses limiting future employment if they left Manico. A court would be very likely to enforce the noncompete clauses unless the time or geographic restriction is unreasonable.
false
cynthia and brian were friends. brian was a dare devil. because of his antics, cynthia thought that brian wasn't long for this life. Cynthia purchased an insurance policy on Brian's life. Subsequently, Brian was killed in a car accident. Since Cynthia and Brian were friends, Cynthia had an insurable interest in his life and will be entitled to the insurance proceeds
false
if a court finds a matter of law that a clause of superior siding's contract was unconscionable at the time the contract was made, the court must refuse to enforce the contract
false
morality plays no part of gambling contract legality
false
rudolph overhears mace's plans to go skydiving over spring break. not really knowing macy, but figuring it's worth a chance, Rudolph rushes out and buys an insurance policy for 100,000 on Macy's life. Macy does in fact meet her demise jumping out of the airplane. Rudolph can collect the 100,000
false
to raise revenues, city of saint cloud required restaurants to purchase a special permit if they wanted to serve food in an open air patio. While at Holla Taco, a restaurant in st. cloud, a customer notices that Hola Taco's permit expired. Because Hola Taco's permit expired, the customer is not legally required to pay for her food
false
when randy accepted a job with burn construction, randy signed the following agreement, "upon termination of my unemployment with Buren construction, I agree never to work for another employer as an electrician." If Randy resigns from Buren construction, this agreement would be upheld under the theory of freedom of contract
false
proving fraud
following elements must be shown: - wrongdoer made false representation of material fact - wrongdoer intended to deceive the innocent party - innocent party justifiably relied on the misrepresentation - innocent party was injured
Where a party was given a document to sign and told that it was one type of document, but in reality was a different legal document, that party would have a claim based on:
fraud in the inception
In a situation where one party to a contract has lied about the subject matter in order to entice the other party to enter into a contract, the type of fraud that would most likely be present is:
fraud in the inducement
fraud in the inception
fraud that occurs if a person is deceived as to the nature of his or her act and does not know what he or she is signing
innocent misrepresentation
fraud that occurs when a person makes a statement of fact that he or she honestly believes to be true even though it is not
fraud by concealment
fraud that occurs when one party takes specific action to conceal a material fact from another party
fraud in the inducement
fraud that occurs when the party knows what he or she is signing but has been fraudulently induced to enter into the contract
judith is a CPA with an excellent reputation and client base. She sells her tax preparation business to Shawn, and the sales contract include a noncompete clause restricting Judith from opening a similar business for two years within a 10 mile radius of her former office. If she opens a tax preparation office five miles away after one year, a court will probably
grant an injunction barring her from operating the new office
Judith is a CPA with an excellent reputation and client base. She sells her tax preparation business to Shawn, and the sales contract includes a noncompete clause restricting Judith from opening a similar business for two years within a 10-mile radius of her former office. If she opens a tax preparation office five miles away after one year, a court would probably:
grant an injunction barring her from operating the new office.
fraud in the inducement
innocent party knows what he or she is signing or doing but has been fraudulently induced to enter into the contract, voidable by the innocent party ex- lyle tells candice that he is forming a partnership to invest in drilling for oil in and oil field and invites her to invest, in reality there is no oil field, lyle intends to use the money for his personal expenses, candice believes lyle and gives him 30k, lyle takes off with her investment, candice can rescind the contract and recover the money if she can find him
injury to the innocent party
innocent party must prove that the fraud caused him or her economic injury, measure of damages is the difference between the value of the property as represented and the actual value of the property
an exculpatory clause is generally enforceable when
it involves public transportation
An exculpatory clause is generally unenforceable when:
it involves public transportation.
a contract will most likely be declared unconscionable if
it is oppressive an the weaker party did not fully understand the consequences of the agreement
A contract most likely will be declared unconscionable if:
it is oppressive and the weaker party did not fully understand the consequences of the agreement.
A contract most likely will be declared unconscionable if: it is unbalanced, making it unfair to one party. it contains a cancellation clause. it is oppressive and the weaker party did not fully understand the consequences of the agreement.
it is oppressive and the weaker party did not fully understand the consequences of the agreement.
scienter
knowledge that a representation is false of that it was made without sufficient knowledge of the truth
material representation of fact
may occur by words or by conduct of party, must have been a significant factor in inducing the innocent party to enter into the contract but does not have to be the sole factor
A plaintiff in a fraud case must prove what?
misrepresentation of a material fact intent to deceive knowledge of the statement's falsity justifiable reliance on the false statement
Under which of the following types of misrepresentation is the innocent party usually not able to rescind a contract?
misrepresentation of law
unilateral mistake
mistake in which one part is mistaken about a material fact regarding the subject matter of a contract
unilateral mistake
mistake in which only one party is mistaken about a material fact regarding the supplier matter of a contract, mistaken party will not be permitted to rescind the contract unless.. 1. other party knew it was a mistake 2. clerical or mathematical error that is not the result of gross negligence 3. so serious that enforcing the contract would be unconscionable ex - guy buys car and assumes it has sunroof, but doesnt tell salesperson, his unilateral mistake will not relieve him of his contractual obligation to purchase the car
mutual mistake of material fact
mistake made by both parties concerning a material fact that is important to the subject matter of a contract
mutual mistake of fact
mistake made by both parties concerning a material fact that is important to the subject matter of a contract, if there has been a mutual mistake the contract may be rescinded on the grounds that no contract has been formed because there has been no "meeting of the minds" between the parties ex - two different ships named peerless, no binding contract was formed
mutual mistake of value
mistake that occurs if both parties know the object of the contract but are mistaken as to its value
A ________ exists if both parties know the object of the contract but are mistaken as to its value.
mutual mistake of a value
assent
necessary to create an enforceable contract, determined by relevant facts surrounding the negotiation and formation of a contract
genuineness of assent
needs to be real and not a mistake, fraud, or duress
Wendell, new to the area, selects a doctor from the telephone book and visits that doctor to have a splinter extracted. Unbeknownst the Wendell, the doctor never passed the licensing exams. Later, when Wendell discovers the truth , he refuses to pay his bill. If the doctor sues for recovery of the fee, will the court support the doctor's claim?
no, the court is likely to take the position that it is not in the public's best interests to enforce contracts with unlicensed doctors
reliance on the misrepresentation
not actionable unless the innocent party to whom the misrepresentation was directed acted on it, innocent must justify his or her reliance
Eintz Corp. hired Jose to bribe a foreign government official. Eintz gave Jose $10,000 in cash to make the bribe payment and $2000 for Jose's efforts. Instead of paying the bribe, Jose pocketed all of the money. If Eintz sues Jose, Eintz will:
not be able to recover the $12,000.
eintz corp hired jose to bribe a foreign govenrment official. Eintz gave jose 10,000 in cash to make the bribe payment and 2000 for jose's efforts. instead of paying the bribe, jose pocketed all of the money. if eintz sues Jose, eintz will
not be able to recover the the 12,000
innocent misrepresentation
occurs when a person makes a statement of fact that he or she honestly and reasonably believes to be true even though it is not, it is not fraud, aggrieved party may rescind but may not sue, usually mutual mistake
mistake
occurs when one or both parties to a contract have an erroneous belief about the subject matter, value, or some other aspect of the contract, may be unilateral or mutual, law permits rescission
fraud by concealment
occurs when one party takes specific action to conceal a material fact from another party ex - steel inc. contracts to buy used equipment from united inc. united does not show steel the repair invoices for repairs to the equipment even though steel asked to see all of the repair invoices, relying on the knowledge that equipment is in good condition and has never been repaired, steel purchases equip from united. if steel discovers that a significant repair record has been concealed by united, steel can sue united for fraud by concealment
duress
occurs when one party threatens to do some wrongful act unless other party enters into a contract, not enforceable against innocent party, if physically harm then physical duress, if victim of duress signs contract, it cannot be enforced against the victim
An insurance contract is not considered to be a legalized form of gambling because:
one must have an insurable interest in the person being insured.
An insurance contract is not considered to be a legalized form of gambling because: one must have an insurable interest in the person being insured. insurance contracts are underwritten by reputable companies. insurance activities are regulated by the state department of insurance. All of the above
one must have an insurable interest in the person being insured.
an insurance contract is not considered to be a legalized form of gambling because
one must have an insurance interest in the person being insured
An exculpatory clause is
one that attempts to release you from liability in the event of injury to another party.
fraud in the inception
or fraud in the factum, occurs if a person is deceived as to the nature of his or her act and does not know what he or she is signing ex - heather brings her professor a grade card to sign, prof signs card in front without reading card, on front however are contract terms and transfer all of the prof's property to heather, here there is fraud in the inception, contract is void
silence as misrepresentation
ordinarily, silence is not a misrepresentation unless 1) nondisclosure would cause bodily injury or death, 2) there's a fiduciary relationship btwn contracting parties, 3) fed and state statutes require disclosure.. restatement (second) of contracts specifies a broader duty of disclosure: nondisclosure is a misrepresentation if it would constitute a failure to act in "good faith"
intent to deceive
person making the misrepresentation must have either had knowledge that representation was false or made it without sufficient knowledge of the truth, scienter "guilty mind"
Usury laws:
prohibit charging excess interest on loans.
genuineness of assent
requirement that a party's assent to a contract be genuine
A party who has been a victim of fraud in the inducement can:
rescind the contract or collect damages
The knowledge that a misrespresentation is false is known as:
scienter
which of the following is an example of an exculpatory clause?
seller is not responsible for property damage regardless of the cause of injury
mark works as a bartender at the little nipper,a local bar. under state law, bartenders are required to be licensed. the licensing requires filling out an application and submitting 50 application fee. The application does not require any special education or experience, just the 50 fee. craig enters mark's bar, orders a round of drinks for free, then notices mark's license is not on display behind the bar. craig learns that mark is not licensed and refuses to pay for the round of drinks. the little nipper sues. what is the result
since this is a revenue raising statute, little nipper wins
The owner of a dance studio tells Rupert if he takes just one dance lesson for $50, his life will change forever. Rupert takes the lesson and his life remains the same. The dance instructor's statements could be described as:
statements of opinion or sales talk
larry has the largest pizza business in the city. he learns that henry is thinking of opening a competing pizza and pasta delivery business. larry gives henry 25,000 to not open his proposed business in the same city, which statement is correct
the contract is illegal and void
Emation entered a contract with a customer Ezra. Ezra was a recent immigrant to the US, barely spoke English and had no formal education. The contract provided for Ezra to pay 2500 for a computer system. The system was worth 400. If Emation sued Ezra under the contract, what is the likely resort
the contract is unenforceable because it is unconscionable
mike owns a house in a poor area of a large city. mike is on disability and his total monthly income is 700. A sales representative visits his home, selling a water purification system. Mike buys and signs a contract that calls for monthly payment of 500 for the next 10 years. the water system is worth no more than 1000. mike did not understand what he was signing and thought it was a permission slip allowing the salesman to conduct a free water test. how would a court describe this contract
the contract is unenforceable because its unconscionable
suppose that lenny lawyer enters into an agreement with cindy client that his fees will be a percentage of the recovery lenny obtains for cindy in her pending divorce. state law makes a such a contingency fee arrangement illegal in divorce actions. what will be the probable outcome if lenny attempts to enforce the agreement
the contract will be void as violating a statute. lenny will not be able to recover anything
Emation Inc hires Marvin to steal trade secrets from one of its competitors for 10,000. Marvin demands half of the money up front. Emotion pays Marvin 5000 but Marvin decides not to pursue theft of the trade secrets. Emotion sues Marvin for the return of the 5000. What will the court do with this contract?
the court will not do anything to help emotion get its money back
Jill asks Jack to give her an estimate in the price of building a fence around her orchard. Jack inspects and measures Jill's apple orchard and gives Jill an estimate of $1,000. Jill agrees to the price and they sign a contract. Jill, however, had in mind a fence around her peach orchard that is much larger than the apple orchard on which Jack based his estimate. Jack says he cannot build a fence around the peach orchard for $1,000, but Jill wants to hold Jack to the $1,000 for a fence around the peach orchard. Which of the following statements best describes this situation?
this is a case of mutual mistake
A contract between two parties in a fiduciary relationship, which unduly benefits the dominant party, is presumed to have been made under undue influence.
true
A fraudulent misrepresentation may be used to show that genuine assent was lacking in a parties' contract.
true
A misrepresentation of law is actionable if one party to the contract is a professional and should know what the law is and intentionally misrepresents the law to a less sophisticated contracting party.
true
An agreement may violate public policy even if the agreement does not require a party to commit a crime, tort, or violate a statute.
true
Generally, a unilateral mistake allows either party to rescind the contract if the other party knew or should have known that a mistake was made.
true
If a contract is made with a person required by law to hold a license, and the purpose of the license is protection of the public, the contract made by an unlicensed person will generally be unenforceable.
true
In order to recover damages for fraud, the innocent party must prove that the fraud caused economic injury.
true
In undue influence, the persuasion by the dominant party must have overcome the free will of the innocent party.
true
Intentional misrepresentation is commonly referred to as "fraud."
true
John didn't have a license to practice medicine in Florida. Nevertheless, when he retired to Florida, he started providing medical services. Isaac, John's neighbor, owed John 2,000 for medical services. John will not be able to enforce the contract he made with Isaac
true
L & M loaned Joan $400 so that she could buy her textbooks for the current semester. L & M's terms for repayment of the loan (including interest) are, $200 in two months, $200 in four months, and another $100 at the end of the fifth month. The legal maximum rate of interest on this type of loan is six percent per annum. L & M's loan is usurious.
true
L & M loaned Joan 400 so that she could buy her textbooks for the current semester. LMs terms for repayment of the loan are, 200 in two months, 200 in four months, and another 100 at the end of the fifth month. The legal rate of interest on this type of loan is 6% per annum. Kms loan is usurious
true
Ordinarily, silence is not a misrepresentation.
true
The assent of parties to a contract must be voluntary.
true
The threat to bring a legitimate criminal lawsuit can support a duress claim.
true
When only one party to a contract is mistaken about a material fact that is the subject matter of the contract, that party will not be permitted to rescind the contract.
true
an agreement may violate public policy even if the agreement does not require a party to commit a crime, a tort, or violate a statute
true
if a contract is made with a person required by law to hold a license, and the purpose of the license is protection of the public, the contract made by an unlicensed person will generally be unforceable
true
in many states it is illegal to lend money to help someone gamble
true
roger parked his car at a garage that has a large sign at the entrance saying, "This garage is not liable for items stolen from a car." This type of notice is referred to as a exculpatory clause
true
to be valid, an agreement not to compete must be ancillary to a legitimate bargain
true
Where one party takes advantage of a confidential relationship when entering into a contract, the remedy would be based on:
undue influence
misrepresentation of law
usually not actionable as fraud, innocent party cannot generally rescind the contract because each party to a contract is assumed to know the law that applies to the transaction, major exception: misrepresentation will be allowed as grounds for rescission of the contract if one party to the contract is a professional who should know what the law is and intentionally misrepresents the law to a less sophisticated party
Contracts involving fraud and misrepresentation are:
voidable
TSC, Inc. hired Joan to bribe a foreign government official. The bribe violates the Foreign Corrupt Practices Act. TSC gave Joan $100,000 in cash to make the bribe payment. Instead of paying the bribe, Joan kept all of the money. If TSC sued Joan to recover the $100,000, TSC:
will not be able to recover the $100,000 because the agreement was illegal.
