Business Law Chapters 11 and 12 study guide

Courts may enforce all or part of an illegal agreement and may grant relief to one of the parties when - the contract is divisible into legal parts - the parties are not equally blame-worthy - the law was designed to protect one of the parties - all of these

all of these

When the court finds a contract illegal for unconscionability, it can - enforce the legal part and refuse to enforce the illegal part - refuse to enforce the contract - modify the terms of the contract to make it fair - all of these

all of these

Which of the following forms of written contracts will the statute of frauds accept? - exchanged letters - faxed messages - telegrams - all of these

all of these

courts will enforce an oral contract involving real property if the buyer has: - occupied or possessed the land - made substantial improvements to the land - made partial or full payment - all of these

all of these

(Vocabulary) Competitors' agreement to split market areas between themselves.

allocation of markets

(t/f) Small loan rates of interest typically exceed the usurious rates, yet they are legal.

true

(t/f) Trade secrets are the most commonly recognized employer interests.

true

(t/f) Unlicensed persons can make valid contracts even when business licenses are required as a means of raising public revenue.

true

(t/f) Valid contracts may be oral, written, implied from conduct, or some combination of these unless otherwise required by law

true

Webster is working as a licensed attorney. However, he failed to get a required revenue-raising license in the city of Belleville. Stafford, his client, finds this out and refuses to pay for the legal services that have been provided. Can Stafford be required to pay? Why or why not? - Yes. However, he would need a competency hearing. - No. He does not have a competency license. - No. He does not have a revenue license. - Yes. He has his competency license.

Yes. He has his competency license.

Davis signed an agreement stating that he would not work for anyone else in the field of architecture for 2 years within the tri-country area. After getting mad at his employer, he left his employ and began working for a competitor in a neighboring city. Can the agreement be enforced? Why or why not? - Yes. Not to compete agreements are enforceable if for a reasonable time and area. - No. It is for a competitor in another city. - Yes. He should know not to mess with the man. - No. Not to compete agreements are unenforceable if for a reasonable time and area.

Yes. Not to compete agreements are enforceable if for a reasonable time and area.

George was doing some extensive landscaping on his property and wanted about 3 acres of Pete's property to completely finish the project. Pete agreed to sell George that portion of ground and George gave Pete $500 towards the price of the land. After George had finished the project, which included a paved driveway and a drainage system on the portion of land from Pete, Pete insisted that since there was nothing in writing, the property was still his. Can George get title to the land in question? - No. Anything over $500 must be in writing. - Yes. There was work already done on the property. - Yes. Partial payment, substantial improvements, and occupied property. - No. Pete has legal title.

Yes. Partial payment, substantial improvements, and occupied property

The minimum wage in the state of Illinois is $6.20 per hour. Lograsso was desperate for a job and agreed to take $4.00 per hour. She worked for over a year and then someone told her she could sue to collect the difference in the wage since it is illegal to pay less than minimum wage. Can she successfully sue for the difference in wage or is the fact that it was an illegal contract mean she cannot collect? Explain. - Yes. You can't waive your rights to a minimum wage. - Yes. Primary estoppel. - No. She agreed and has passed the age of majority. - No. You can waive your rights to a minimum wage.

Yes. You can't waive your rights to a minimum wage.

You have a preprinted contract that you purchased at an office supply store. You complete the contract and later make some changes using an ink pen and some using a typewriter. There is a conflict between the interest rates on the contract. The preprinted form stated interest at 5%, also typed in was 12%. The handwritten amount listed interest at 10%. Both parties initialed all changes, but there is a dispute about which is most recent. (12%, 8%, 10%, 5%)

10%

Professionals such as physicians, teachers, lawyers, and pharmacists must have - a federal license - a competency license - a revenue license - none of these

a competency license

Owen could not stand the man his daughter was engaged to marry. He promised his daughter $20,000 if she would never marry him. She agreed. Is either party bound by their promise? Why or why not? - Yes. Marriage is a legal contract that can be rescinded. - No. Affects marriage negatively - illegal. - No. He doesn't have the money anyway. - Yes. She can collect the money, marry, and elope.

No. Affects marriage negatively - illegal.

The witness to a robbery promises not to give testimony at the trial. This promise is in return for a promise to pay the witness $40,000 to leave the country for the week of the trial. If the witness leaves the country and the robber refuses to pay, can he sue in court and successfully collect the money? Why or why not? - Yes. Primary estoppel. - No. Bribing a witness and a nice vacation too. - Yes. A promise is a promise. - No. Bribing a witness and compounding of crime.

No. Bribing a witness and compounding of crime.

Bonnie's parents promised to pay for her flight home to attend the funeral of her grandmother. Bonnie (an adult) immediately purchased the round-trip ticket on her credit card and came home for the funeral. While home, she and her parents had an argument and her parents ordered her out the house and refused to pay for her ticket. Was there a valid agreement that could be enforced? - No. Collateral promises must be in writing to be enforceable - Yes. Collateral promises are unforceable - Yes. A promise from parents to children are enforceable - No. Primary Estoppel

No. Collateral promises must be in writing to be enforceable

Joe made an agreement with Fred to steal Joe's truck and set it afire in order to collect the insurance. The agreement was that Joe would pay Fred $500 up front and the balance of $1,500 after Joe collected his insurance. However, when the truck was taken, Joe called the police and has Fred arrested for auto theft and claimed that the $500 was in the truck when it was stolen. Can Fred countersue? - No. Illegal acts are unenforceable. - Yes. Illegal acts are enforceable. - No. He can claim insurance. - Yes. It was a legal contract

No. Illegal acts are unenforceable.

All car dealers in the city of St. Louis met together annually to discuss problems of the trade. During one meeting, a group of Chevy dealers agreed that they would charge no less than an agreed upon price for various models in their showrooms. If one of the dealers broke this agreement, would the others have cause for legal action? Why or why not? - Yes. Suggested retail price. - No. Price fixing. - Yes. Christmas bonuses are needed. - No. Allocation of market.

No. Price fixing

Steinkoenig opened up a beauty shop in her own home. She is quite talented although the has never been to business school. She has built up quite a business for herself. Can she legally require her customers to pay her for the services she provides? Why or why not? - No. She does not have a competency license. - No. She does not have a revenue license. - Yes. She is competent and needs the revenue. - Yes. However, she would need a competency hearing.

No. She does not have a competency license.

The local grocery store decided to have a promotional contest where customers fill out a card with their name and address on it that is placed in a huge drum. The customer also is given a card with numbers on it that they must have stamped each week in the store. They do not have to buy any groceries to get the card stamped. Once a week a card is drawn from the huge drum and if the person whose name is drawn has had their card stamped that week, they win the jackpot. Is this game of chance an illegal gambling promotion? Why or why not? - Yes. There is one prize won by luck. - No. The 3 requirements for gambling are not met. - No. They have been doing this for years in various states. - Yes. The 3 requirements for gambling are met.

No. The 3 requirements for gambling are not met.

Cook contracted to buy a pool hall for $100,000. Included in the sale price were 2 illegal pinball machines valued at $2,000 each. Would the courts refuse to enforce this contract because of the pinball machines? Why or why not? - No. The contract is divisible, the legal part is enforceable. - No. The contract is indivisible, unenforceable. - Yes. The contract is illegal and unenforceable. - Yes. Ignorance of the law is no excuse.

No. The contract is divisible, the legal part is enforceable.

Melton was desperately in need of money for an emergency surgery. He could not qualify for a bank loan. A friend told him he would loan him the needed $2,500. He would be required to pay back the principal plus 12 monthly installments. Each installment payment equaled $500. Was this a valid contract? Why or why not - Yes. However it would ruin their friendship. - Yes. As long as there is a written agreement. - No. Contracts between friends are illegal. - No. Usury is illegal.

No. Usury is illegal.

(vocabulary) Certain agreements that must be evidenced by a signed writing to be enforceable

statute of frauds

the statute of frauds is satisfied when the agreement is signed by: - stamping - engraving - writing - any of these

any of these

(Vocabulary) Element of unconscionability shown in the terms of a contract.

substantive unconscionability

(Vocabulary) Competitors who bid on jobs agree one bidder will have the lowest bid.

bid rigging

A contract made illegal by specific statute might involve - discrimination - usurious interest - both a and b - none of these

both a and b

Some agreements that delay or prevent justice might include - compounding a crime - bribing jurors - both a and b - none of these

both a and b

Under common law, the writing must contain: - all essential terms - evidence of a contract - both a and b - none of these

both a and b

(t/f) It is legal for manufacturers to identify a "suggested retail price".

true

(vocabulary) Promise to pay a debt or default of another

collateral promise

(Vocabulary) State requirement for people and business to pass exams for license.

competency license

(Vocabulary) Accepting something of value for a promise not to inform or prosecute a suspected criminal.

compounding a crime

(vocabulary) Contract in which the more powerful party dictates all the important terms

contract of adhesion

Which of the following statements is not true? - contracts that are unenforceable are illegal - certain contracts are enforceable only if they are written and signed - most contracts are enforceable even if there is no writing - some contracts may be implied from conduct

contracts that are unenforceable are illegal

List the 5 types of contracts subjects to the Statute of Frauds. - contracts to pay debt or answer for legal obligation of another - contracts for the sale of goods for $500 or more - contracts for which the consideration is marriage - contracts that require more that one year to complete - contracts to see an interest in real property - contracts that are sent through the UPS

contracts to pay debt or answer for legal obligation of another, contracts for the sale of goods for $500 or more, contracts for which the consideration is marriage, contracts that require more than one year to complete, contracts to see an interest in real property

(Vocabulary) Price fixing, market allocations, and terminated employees for the purpose of protecting company's interest.

covenants not to compete

(Vocabulary) Contracts for which separate consideration is given for the legal and illegal parts.

divisible contracts

(vocabulary) Contract that has been fully performed

executed contract

(vocabulary) Contract that has not been fully performed

executory contract

(t/f) A quasi-contract exists when some element of an enforceable contract has unjustly enriched one of the parties in excess of four times its worth

false

(t/f) Agreements to commit felonies are not illegal.

false

(t/f) All states have the same set rate of interest; this is considered usurious and illegal.

false

(t/f) An executory contract in violation of the statute of frauds is an illegal contract

false

(t/f) An oral agreement to sell a house is bound by the down payment of the buyer

false

(t/f) Compounding a crime means committing 2 or more distinct crimes against the victim, such as robbery, battery, and kidnapping.

false

(t/f) Our economic system is based on the concept of free and open competition; therefore, it is perfectly legal for competing firms to agree to fix prices.

false

(t/f) To comply with the statute of frauds, written contracts must be very specific, explaining every aspect of the contract in great detail

false

Which of the following would not be an agreement that would restrain trade unreasonably? - allocation of markets - bid rigging - franchising - price fixing

franchising

(Vocabulary) A chance to win on luck rather than skill with a prize for a winner(s).

gambling

What is the order of interpretation for interpreting the validity of a contract? Place in order - typed - typeset or preprinted - handwritten

handwritten, typed, typeset or preprinted

(Vocabulary) Contract clause stating both parties agree written contract terms constitute entire, final agreement

integration clause

(t/f) Rules for the parole of prisoners and the parole evidence rule are not related

true

A typewritten agreement that includes a conflicting handwritten statement will be: - interpreted based on the handwritten portion - interpreted based on the typewritten portion - considered illegal and unenforceable - voided and a new contract written

interpreted based on the handwritten portion

(Vocabulary) A contract interest rate when called for but not stated.

legal rate of interest

(vocabulary) Third party liable for oral promise to pay another's debt of main purpose serves promisor's own interest

main purpose rule

(vocabulary) Oral testimony cannot be used to contradict a complete, final written contract

parol evidence rule

(vocabulary) Interpreting a contract based on main goals of parties

parties' principal objective

Gambling involves - paying to play, luck, and a prize - entree fee, skill, and a prize, - down payment, risk, and a guaranteed award - none of these

paying to play, luck, and a prize

(vocabulary) Crime of lying under oath

perjury

(Vocabulary) Competitors agree to charge the same amount for a product or service.

price fixing

(vocabulary) Promise to pay another's debt that is not conditioned upon the other person's failure to pay

primary promise

(Vocabulary) A contract created with gross unfairness.

procedural unconscionability

When contracts contain very fine print, light typesetting or elements of fraud, duress, undue influence, or misrepresentation, they are said to be - procedural unconscionablity - substantive unconscionability - rare unconscionabilty - none of these

procedural unconscionability

contracts withing the statute of frauds might include: - contracts to buy and sell goods for a price of $300 or less - promises to pay the debt of another person - contracts requiring less than a year to complete - all of these

promises to pay the debt of another person

Under the UCC, the writing must indicate that a contract has been created and the - quantity of goods - quality of goods - price of goods - all of these

quantity of goods

(vocabulary) Obligation enforced as a contract to prevent unjust enrichment of one party

quasi-contract

(Vocabulary) Manufacturer attempts to influence retail price of its product or service.

resale price maintenance

(Vocabulary) Restoring or making good a loss.

restitution

(Vocabulary) Mechanism used by governments only to raise money.

revenue license

(Vocabulary) Higher interest rates for loans under $2,000 loan companies and pawnbrokers may charge.

small loan interest rate

Some legalized forms of gambling might include - sports wagering - state lotteries - office pools - none of these

state lotteries

In an incentive to stop illegal acts, restitution is available - to a party if they rescind before the illegal act occurs - for the legal part of every contract - for unperformed illegal acts - all of these

to a party if they rescind before the illegal act occurs

when interpreting a written contract, the courts generally seek: - to guarantee that each party gets equal monetary value from the contract - every possible interpretation of the contract to ensure equality - to interpret the contract in terms of the parties' principal objective - to side with the weaker party to the contract

to interpret the contract in terms of the parties' principal objective

(t/f) A writing between merchants that is signed and sent by one party and not objected to within 10 days after receipt is treated as the writing of the other party

true

(t/f) An executed contract cannot be reversed if within the statute of frauds and there is neither writing nor signature

true

(t/f) An integration clause shows that a written agreement is complete and final

true

(t/f) Important transactions should include all the essential terms in writing

true

(t/f) In contracts for the sale of services or realty, courts generally will help neither party to the illegal agreement.

true

(t/f) In most states, lenders of money may not charge more than a specified maximum rate of interest.

true

(Vocabulary) Grossly unfair contract for the sale of goods.

unconscionable contract

(Vocabulary) Charging interest on a loan beyond the legally permitted maximum rate.

usury

(Vocabulary) A bet on a certain outcome of an event.

wager

In contracts referring to amounts of money in which both the numerical and the written expressions of the amount are unambiguous the: - numerical prevails - written prevails - contract is void - highest value prevails

written prevails