Business Law 16

B,C

A(n) ______ contract may have both legal and illegal portions. (Choose TWO best answers) A. voidable B. divisible C. severable D. exculpatory

B

A(n) ______ contract is an agreement presented on a take-it-or-leave-it basis. A. dilution B. adhesion C. annulment D. deferment

d

A(n) ______ contract must be enforced or rejected in its entirety. a. severable b. restraint of trade c. unconscionable d. indivisible

b,a

A(n) ______ contract requires ________ performance by the parties, even if it appears to contain multiple parts. a. indivisible b. complete c. severable d. no

express

A(n) ______ ratification occurs when, after reaching the age of majority, the person states she intends to be bound by the contract entered into as a minor.

c,a

A _______ covenant made in conjunction with the ______ of an ongoing business is enforceable. a. sale b. implied c. restrictive d. rental

divisible

A severable contract is also known as a(n) ______ contract.

c

According to the legal principle of ______ both contracting parties are equally responsible for an illegal agreement. a. severability b. exculpatory remedies c. in pari delicto d. lack of capacity

C,D

Heavily _______ contracts are known as ______ agreements. (Choose TWO best answers) A. exculpatory B. antitrust C. unconscionable D. one-sided

a,d

_______ refers to agreements in which parties pay ______ (money placed during bets) for the chance, or opportunity, to obtain an amount of money or property. a. chips or credits b. Gambling c. Usury d. consideration

license; contract

in terms of the effect of entering into an agreement with a person who is unlawfully unlicensed, in some states the rule is "no ______, no ______." These states will not enforce any agreement with an unlawfully licensed professional.

d,a

When a court determines a restraint on trade is ______ and the restraint is part of a(n) ______, or ancillary, clause in a contract, the restraint is typically allowed. a. subordinate b. foreseeable c. dominant d. reasonable

d,c

When a court determines a restraint on trade is reasonable and the restraint is part of a subordinate, or ancillary, clause in a contract, the restraint is typically allowed. Such restraints are known as covenants not to ______ or _______ covenants. a. legal b. forceful c. restrictive d. compete

B

Which of the following is not typically considered a necessary? A. Clothing B. A vacation C. Shelter D. Basic medical services

B,D

A contract cannot be for an illegal ______ or require an ______ for performance. A. illegal agreement B. purpose C. consideration D. illegal act

D,C

A contract need not be in violation of a statute to be illegal; agreements against generally accepted ______ policy are also illegal and ________. A. private B. severable C. public D. unenforceable

B

A contract overturned for illegal subject matter or for being illegal to perform is generally declared: _______. A. voidable B. void C. voidable ab initio D. void esse quam videri

b,c

A minor can ______ a contract for a necessary, but upon doing so, the minor is still liable for the ______ of the necessary. a. ratify b. disaffirm c. reasonable value d. actual value

A

A minor would be most likely able to disaffirm which of the following contracts? A. A contract for stereo equipment B. A contract for life insurance C. A contract for health insurance D. A contract for psychological counseling

C

A minor would be most likely able to disaffirm which of the following contracts? A. A contract for a student loan B. A contract for psychological counseling C. A contract for a vacation D. A contract for enlistment in the armed services

a,b,c,d

A recognized purpose of licensing statutes is government protection of the public's ______, ______, and ______. (Check ALL that apply) health security safety welfare free speech

illegal;legal

A severable contract may have both ______ and ______ portions.

exculpatory

A(n) ______ clause releases one of the contracting parties from all liability, regardless of who is at fault or what injury is suffered.

A

According to Section 2-302 of the Uniform Commercial Code, if a court -- as a matter of law -- finds a contract or any clause of the contract to have been unconscionable at the time it was made, the court may do all of the following except: _______. A. award the affected party treble damages B. enforce the remainder of the contract without the unconscionable clause C. limit application of any unconscionable clause in order to avoid an unconscionable result D. refuse to enforce the contract

b

Adhesion contracts are : _______. a. per se inequitable b. legal c. equitable d. per se illegal

a

Agreements that restrain trade, called ______ agreements, are viewed as being harmful to consumers and against public policy. a. anticompetitive b. competitive c. privation d. deprivation

a,d

Although most people do not consider them to be such, state-run _______ are a form of ______. a. gambling b. check-cashing services c. liquor d. lotteries

b

An agreement in violation of a statute or legal code is illegal: ______. a. per diem. b. per se. c. pro bono. d. pro hac vice.

a

An exculpatory clause releases one of the contracting parties from all liability: _______. a. regardless of who is at fault b. assuming both contracting parties were equally at fault c. assuming the other party was at fault d. assuming neither of the parties was at fault

B

An indivisible contract requires ______ performance by both parties, even if it appears to contain multiple parts. A. conditional B. complete C. limited D. partial

d,b

Anticompetitive agreements are viewed as being harmful to ______ and against public ______. a. corporations b. consumers c. regulation d. policy

not

As a general rule, parents are ______ liable for contracts entered into by their minor children.

a,c

As a general rule, when an agreement is deemed illegal, courts will usually label it _______, meaning neither party can enforce the agreement, and neither is entitled to recovery. One exception to this rule is when justifiable ______ of facts leaves one party unaware of a provision of the agreement that would make it illegal. a. void b. severability c. ignorance d. voidable

A,B

Covenants not to ______ are ______ for the sale of businesses. A. enforceable B. compete C. voidable D. sell

a,b

Covenants not to compete in _______ contracts are legal in most states, but they mostly protect a(n) ______ business interest. (Choose TWO best answers) a. employment b. legitimate c. foreseeable d. railroad construction

defect; voidable

Depending on the nature and extent of the mental or physical _______, a person may have either no capacity, the complete inability to enter into contracts, or limited capacity, the ability to form only ______ contracts. (

interest;void

If no exception allows a usurious loan, a few states declare all usurious loans _______, which means the lender is not entitled to recover either principal or ______ from the borrower.

A,C

If the purpose of a(n) _______ statute is to provide government control over the profession or generate revenue, most states _______ enforcement of the contract. (Check TWO correct answers) A. allow B. decline C. licensing D. gambling

capacity; emancipated

In most states, a person is given full legal ______ to enter into contracts when she becomes ______ before reaching the age of majority.

d

Once a person reaches the age of majority, she may ratify, or ______ contracts made as a minor. a. legally void b. legally disaffirm c. legally concede d. legally affirm

d,c,a

Persons suffering from a mental illness or deficiency may have ______, ______, or ______ legal capacity to enter into a binding contract, depending on the nature and extent of their deficiency. (Check ALL that apply) a. full b. enforceable c. no d. limited

B

Public policy involves: _______. A. the beliefs people hold regarding the proper subject of business transactions B. both the government's concern for its citizens and the beliefs people hold regarding the proper subject of business transaction C. the government's concern for its citizens D. neither the government's concern for its citizens nor the beliefs people hold regarding the proper subject of business transactions

b,d

The public policy argument in favor of supporting the enforceability of a(n) _______ covenant regarding the sale of a business involves the ______ of the sale. a. express b. restrictive c. legality d. fairness

d

Under common law, a(n) ______ contract is unenforceable. a. equitable b. equanimous c. conscionable d. unconscionable

A

Which of the following terms refers to an agreement that is overly harsh or lopsided? A. Substantive unconscionability B. Procedural responsibility C. Procedural divisibility D. Substantive accountability

B,C

_____ occurs when a party gives a loan at an interest rate exceeding the legal _______. A. Gambling B. Usury C. Maximum D. Minimum

B

Generally, contracts made by intoxicated persons are ______. A. enforceable unless they violate the Statute of Frauds B. voidable C. void D. valid

indivisible

If declaring parts of a contract void would substantially alter it, such a contract is ______ ; in such a situation, a court must either enforce or reject the contract in its entirety.

b,c

Under ______ law, unconscionable contracts are ________. (Choose TWO best answers) a. statutory b. common c. unenforceable d. void

c,b

A party seeking enforcement of an exculpatory clause must be a(n) ______ business or individual not important to the ______ interest. (Choose TWO best answers) a. compelling b. private c. public d. substantial

b,c

A person who has legal ______ has the ______ ability to understand his or her rights and obligations under a contract. (Choose TWO correct answers) a. liability b. capacity c. mental d. disaffirmance

Capacity; rights; obligations

A person who has legal _______ has the mental ability to understand his or her ______ and ______ under a contract, and therefore, presumably to comply with the terms of the contract. (Choose THREE correct answers)

D

According to the Restatement (Second) of Contracts, if a court -- as a matter of law -- finds a contract or any clause of the contract to have been unconscionable at the time it was made, the court may do all of the following except: _______. A. enforce the remainder of the contract without the unconscionable clause B. limit application of any unconscionable clause in order to avoid an unconscionable result C. refuse to enforce the contract D. impose statutory sanctions on the party who drafted the contract

B

Another term for incapacity is: _______. A. duress B. incompetence C. impracticability D. coercion

D

As a general rule, when an agreement is deemed illegal, courts will usually label it void, meaning neither party can enforce the agreement, and neither is entitled to recovery. Which of the following is not a recognized exception to this rule? A. Justifiable ignorance of facts leaves one party unaware of a provision of an agreement that would make it illegal. B. A member of a protected class is a party to an agreement that contradicts a statute intended to protect the specific class. C. One of the parties withdraws from an illegal agreement before an illegality occurs. D. One of the parties withdraws from an illegal agreement after an illegality occurs.

c

Covenants not to compete in connection with the sale of a business are generally: _______. a. only enforceable overseas b. only enforceable with a foreign court's order c. enforceable d. not enforceable

c,d

Despite the existence of _______ laws, most states allow the performance of ______ work on Sundays. (Choose TWO best answers) a. Usury b. some c. Sabbath d. charity

B

If intoxication causes a person to exercise poor judgment in making a contract, the contract is ______ unless the other party unfairly capitalized on the impaired judgment. A. voidable B. not voidable C. void D. null

b

If no exception allows a usurious loan, a few states declare all usurious loans ______, which means the lender is not entitled to recover either interest or principal from the borrower. a. enforceable b. void c. valid d. voidable

D

In many states, parents may be liable when a child causes harm if it can be proved that the parents: _____. A. are the legal guardians of the child B. failed to complete their college education C. are part-time workers D. failed to properly supervise the child

b

In most states, ______ are liable for a minor's personal torts. a. both minors and their parents b. minors, not their parents, c. parents, but not their minor children, d. neither minors nor their parents

C,B,D

Incapacity is the possession of a(n) ______ or ______ defect that prevents a natural person from being able to enter into a(n) _______ contract. A. voidable or void B. mental C. legally binding D. physical

d

Industry officials prefer to use the term ______, rather than gambling, to refer to agreements in which parties pay consideration for the chance, or opportunity, to obtain an amount of money or property. a. wagering b. usury c. profiteering d. gaming

a

Most courts find that continuing to act in accordance with a contract, such as continuing to make regular payments after reaching the age of majority, constitutes a(n) _______. a. implied ratification b. restraint of trade c. disaffirmance d. covenant

B

Multiple Choice Question Which of the following statements is correct regarding the legality and enforceability of contracts? A. A contract that requires an illegal act for performance is enforceable, while a contract for an illegal purpose is unenforceable. B. Both a contract that requires an illegal act for performance and a contract for an illegal purpose are unenforceable. C. Both a contract that requires an illegal act for performance and a contract for an illegal purpose are enforceable. D. A contract for an illegal purpose is enforceable, while a contract that requires an illegal act for performance is unenforceable.

C,B,D

No ______ are required to _______ a contract involving a minor; the minor need only show an intention to ______ it, either by words or actions. (Choose THREE correct answers) A. ratify B. cancel C. formalities D. rescind

A

Ratification may be either ______ or ______. A. express; implied B. licensed; non-licensed C. active; passive D. proactive; reactive

unconscionability

Substantive _________ occurs when an agreement is overly harsh or lopsided.

c

The enforceability of covenants not to compete in employment contracts: _______. a. is a matter of federal statutory law b. is a matter of federal constitutional law c. varies from state to state d. is governed by the Uniform Employment Code (UEC), a uniform law adopted by 48 of the 50 states

a,c

There are two main types of unconscionable agreements: ______ and ______. a. substantive b. illegal c. procedural d. legal

A,B

Today, in all but _______ states, a minor is someone under the age of ______. (Choose TWO correct answers) A. three B. 18 C. 21 D. five

A,C

Upon _______ most states simply require a minor to notify the other party and return any ______ received, regardless of its condition. (Choose TWO correct answers) A. disaffirmance B. gifts C. consideration D. ratification

A,D

Usually, when a(n) _______ marries, she or he is considered ______. (Choose TWO correct answers) A. minor B. female C. ratified D. emancipated

d

Usury occurs when a party gives a loan at an interest rate ______ the legal ______. a. below; maximum b. below; minimum c. exceeding; minimum d. exceeding; maximum

a,d

When an agreement is deemed ___or ___, courts will usually label it void. a. illegal b. exculpatory c. severable d. in pari delicto

b,c,d

When an agreement is deemed illegal, courts will usually label it ______. (Check ALL that apply) a. severable b. voided c. unenforceable d. void

c

Which of the following businesses would most likely be able to enforce an exculpatory clause? a. A bank b. An airline c. A nightclub d. A utility

D

Which of the following is a correct statement regarding a minor's obligations on disaffirmance? A. A minor's obligations on disaffirmance are a matter of federal law B. A minor has no obligations on disaffirmance C. A minor's obligations on disaffirmance are the same from state to state D. A minor's obligations on disaffirmance vary from state to state

A

Which of the following is a correct statement regarding a minor's power to disaffirm or void a contract? A. If a minor chooses to disaffirm a contract, he or she must void the entire contract. B. A minor only has the right to disaffirm any portion of a contract pertaining to the sale of goods. C. A minor has the right to disaffirm a portion of a contract. D. A minor only has the right to disaffirm any portion of a contract pertaining to the provision of services.

D

Which of the following is a correct statement regarding minors and contracts? A. Minors may enter into only void contracts. B. Minors may enter into fully enforceable, valid contracts. C. Minors may not enter into contracts. D. Minors may enter into only voidable contracts.

D

Which of the following is a legally-recognized way to expressly ratify a contract? A. After reaching majority, a person indicates by actions or conduct that he or she intends to be bound by the contract entered into as a minor. B. Before reaching majority, a person states orally or in writing that he or she intends to be bound by the contract entered into as a minor. C. After reaching majority, a person states orally or in writing that he or she intends to be bound by the contract entered into as a minor. D. Before reaching majority, a person indicates by actions or conduct that he or she intends to be bound by the contract entered into as a minor.

D

Which of the following is a type of legal capacity a person suffering from a mental illness may have, depending on the nature and extent of their deficiency? A. Resolute B. Secular C. Draconian D. Limited

A

Which of the following is not a recognized purpose of licensing statutes? A. Government retribution B. Government control over which people can perform certain jobs C. Government control over how many people can perform certain jobs D. Government revenue

b

Which of the following legal principles holds both contracting parties equally responsible for an illegal agreement? a. Esse quam videri b. In pari delicto c. Veni vidi vici d. Lux libertas

c

Which of the following occurs when a former minor takes some action after reaching the age of majority consistent with the intent to ratify a contract? a. Implied reaction b. Express renunciation c. Implied ratification d. Express reaction

D

Which of the following statements is correct regarding the legal exceptions to usury statutes? A. To facilitate business, a minority of states with usury statutes allow corporations to borrow at rates exceeding the maximum. B. There are no legal exceptions to usury statutes. C. The legal exceptions to usury statutes apply to personal loans, but not business loans. D. To facilitate business, most states with usury statutes allow corporations to borrow at rates exceeding the maximum.

b

Which of the following states allows casino gambling? a. Utah b. Louisiana c. Hawaii d. South Carolina

d

Which of the following terms refers to an agreement so unfair that it is void of conscience? a. Exculpatory b. Conscionable c. Devoid d. Unconscionable

B,D

_____ or _______ contracts contain multiple parts that can each be performed separately and for which separate consideration is offered. A. Illegal B. Severable C. Exculpatory D. Divisible

blue; sunday (sabbath)

______ laws limit the types of business activities in which parties can legally engage on _______.

a,b,d

______ statutes act as a _______ on rates, but there are a few legal exceptions whereby loans may exceed the predetermined _______. (Choose ALL that apply) a. Usury b. maximum c. minimum d. ceiling

A

______ unconscionability describes conditions that impair one party's understanding of a contract, as well as the integration of terms into a contract. A. Procedural B. Procurement C. Substantive D. Subversive