CL Ch. 16 Review

In which of the following situations are covenants not to compete enforceable?

When it is in conjunction with the sale of a business

Which of the following statements is most accurate regarding a restrictive covenant made in conjunction with the sale of an ongoing business?

A restrictive covenant made in conjunction with the sale of an ongoing business is enforceable.

Which of the following statements is correct regarding the legality and enforceability of contracts?

Both a contract that requires an illegal act for performance and a contract for an illegal purpose are unenforceable.

which of the following statements is incorrect concerning contracts made by intoxicated persons?

Courts tend to allow the intoxicated person to disaffirm the contract if disaffirmance occurs within one month after the person becomes sober.

Julie, a 16-year-old student, enters a three-year modeling contract with a local ad agency. After two months, she realizes that the modeling schedule is too hectic and interferes with her school and other activities. She does not want to continue modeling. Which of the following statements is true in the given scenario?

Julie can void the contract immediately

Which of the following states allows casino gambling?

Louisiana, Nevada, New Jersey

Covenants not to compete in conjunction with the sale of a business are generally enforceable if which of the following conditions are met?

Provided the covenant not to compete is reasonable with regard time and location, the covenant will be enforceable.

Which of the following is true of severable contracts?

They can be partially voided by the court. Their legal portion can be enforced by the court.

Which of the following is true of states where the purpose of licensing is to provide government control over the profession or generate revenue?

They enforce contracts with unlicensed professionals.

Which of the following is true of anticompetitive agreements?

They restrain trade. They are against public policy

A(n) ______ contract is an agreement presented on a take-it-or-leave-it basis.

adhesion

An agreement in which a party is given an offer without the right to negotiate its terms is called a(n) _______ contract.

adhesion

An agreement presented as the only chance the presented party will have to enter into it is known as a(n) ______ contract.

adhesion

Agreements that restrain trade, called ______ agreements, are viewed as being harmful to consumers and against public policy.

anticompetitive

What happens if a legal contract is formed and its subject later becomes illegal under a new statute?

both parties are discharged from their obligations

Public policy involves:

both the government's concern for its citizens and the beliefs people hold regarding the proper subject of business transaction

A person who has legal _______ has the mental ability to understand his or her rights and obligations under a contract.

capacity

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

divisible

Which of the following occurs when a minor's parents or legal guardians give up their right to exercise legal control over the minor?

emancipation

Usury occurs when a party gives a loan at an interest rate ______ the legal ______.

exceeding; maximum

Which of the following terms refers to a clause that releases one of the contracting parties from all liability, regardless of who is at fault or what injury is suffered?

exculpatory

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.

express

The public policy argument in favor of supporting the enforceability of a restrictive covenant regarding the sale of a business involves the ______.

fairness of the sale

______ refers to agreements in which parties pay consideration for the chance, or opportunity, to obtain an amount of money or property.

gambling

Which of the following is not a recognized purpose of licensing statutes?

government retribution

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) _______.

implied ratification

when a party attempts to ratify an agreement right after reaching the age of majority, there is a(n)

implied ratification

According to the legal principle of ______ both contracting parties are equally responsible for an illegal agreement.

in pari delicto

A(n) ______ contract must be enforced or rejected in its entirety.

indivisible

Which of the following contracts requires complete performance by both parties, even if it appears to contain multiple parts?

indivisible

Adhesion contracts are

legal

the mental ability of a person to understand his or her rights and obligations under a contract and comply with the terms.

legal capacity

Identify the types of contracts that minors do not have the right to disaffirm in most states, as determined by courts or state legislatures in the interest of public policy

marriage contracts, enlistment in the armed services, child support contracts

individuals who have limited capacity to contract (voidable contracts)

minors, those suffering from mental deficiency, those who are intoxicated

Sabbath laws typically do not apply to contracts for obtaining ______, including prescription medication, food, and anything else related to health or survival.

necessities

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

not

If no exception allows a usurious loan, a few states declare all usurious loans void, which means that the lender is ______.

not entitled to recover either principal or interest

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 a ______.

not to compete covenant

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

not voidable

As a general rule, covenants not to compete in employment contracts are:

permissible

A party seeking enforcement of an exculpatory clause must be a(n) ______ business or individual not important to the ______ interest.

private; public

______ unconscionability describes conditions that impair one party's understanding of a contract, as well as the integration of terms into a contract.

procedural

3 exceptions to illegal contracts

protected class, justifiable ignorance, withdrawal

Which of the following aspects are guaranteed government protection under licensing statutes?

public health and public safety

When a court can void the illegal part of an agreement and enforce the rest if the terms represent the main purpose of the original agreement, it is a(n) _______ contract

severable (divisible)

Identify the activities that are forms of gambling?

state-run lotteries, horse tracks

In the context of general rules for illegal agreements, a party is allowed to sue for performance if ______.

the violated statute is intended to protect the specific class to which the party belongs

individuals having no capacity to contract (void)

those adjudicated insane, those adjudicated habitually intoxicated, those with appointed legal guardians

Under common law, a(n) ______ contract is unenforceable

unconscionable

the term ____ refers to the fact that the agreement in question is so unfair that it is void of conscience

unconscionable

Heavily one-sided agreements are known as

unconscionable contracts

A contract overturned for illegal subject matter or for being illegal to perform is generally declared: _______.

void

When an agreement is deemed illegal, courts will usually label it ______.

void

As a general rule, any contract entered into by a minor is _______ by the minor until he or she _______.

voidable; reaches the age of majority or a reasonable time thereafter

Identify the legal exception whereby loans may exceed the predetermined maximum in a state despite usury statute.

Corporate loans for facilitating business transactions

when is a contract voidable?

when entered into by a minor