acct 324 chap 16

which of the following is the third element of a legally binding contract?

Capacity

An indivisible contract requires ______ performance by both parties, even if it appears to contain multiple parts.

complete

The requirement of legal capacity presumes the ability of a party to

comply with the contract terms

Capacity is an element of a legally binding: Blank

contract

In which of the following situations is a contract enforceable?

A contract with a legal subject matter A contract that can perform legally

How many states currently consider a minor as someone under the age of 18?

47

What is another term for incapacity?

Incompetence

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

void

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

void

As a general rule, any contract entered into by a minor is ________by ________until the minor reaches the age of majority or for ________ thereafter.

voidable; the minor; a reasonable time

Ratification may be either ______ or ______.

express; implied

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

illegal

Another term for contractual incapacity is:

incompetence

In most cases, when a minor ______, that minor is considered emancipated.

marries

Courts will usually consider an illegal agreement:

void

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?

Implied ratification

A minor would be most likely able to disaffirm which of the following contracts?

A contract for a vacation

A minor would be most likely able to disaffirm which of the following contracts?

A contract for stereo equipment (not life or health insurance, psychological counseling)

When Giuseppe hired Ines to work in his beauty shop as a hair stylist, she entered into an agreement with Giuseppe whereby if she left his employment she would not work for another beauty shop within 50 miles for 2 years. Giuseppe trained Ines in several new techniques. After nine months, Ines was offered a great job down the street at a new beauty shop. She quit Giuseppe's shop and many customers followed her down the street to her new job. Giuseppe claimed that she had signed a contract and had no right to go to work at the new shop. Ines disagreed and told Giuseppe that no judge in the country would enforce such an agreement. Ines then told Giuseppe that she was more worried about a customer who was threatening to sue her because her hair turned green after Ines worked on it. Ines said that she knew that the customer's hair was damaged; but that she told the customer that odd results could result from a dye attempt and had the customer sign a contract that released Ines from all liability and that she would not sue. The customer, however, sued anyway. which of the following is the agreement between Giuseppe and Ines?

A covenant not to compete

Some states hold that when a minor who appears to be of the age of majority misrepresents his or her age and a competent party relies on that misrepresentation in good faith, the minor gives up the right to disaffirm the agreement and can be treated as an adult. Which of the following is a recognized justification for this rule?

A minor who misrepresents his or her age does not need the protection that disaffirmance is designed to provide

Which of the following is a correct statement regarding a minor's obligations on disaffirmance?

A minor's obligations on disaffirmance vary from state to state.

Which of the following businesses would most likely be able to enforce an exculpatory clause?

A nightclub

Identify the examples of procedural unconscionability.

A person's inability to fully read a contract Hard-to-read print on the back of an agreement Excessive use of legalese

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 is not typically considered a necessary?

A vacation

Quinton is in desperate need of a new refrigerator but does not have good credit. Julio indicates that he will sell Quinton a refrigerator, but Quinton will have to make weekly payments at 18% interest and if he misses one payment, Julio has the right to repossess the refrigerator. Julio tells Quinton that those are the final terms and Quinton has 10 minutes to decide whether he wants to accept the deal. This is an example of which of the following?

An adhesion contract

Which of the following is incorrect regarding usury laws in Saudi Arabia?

Banks in Saudi Arabia have not been able to circumvent the prohibition on interest-bearing loans.

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.

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

Corporate loans for facilitating business transactions

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

In Great Britain, a legally binding contract cannot be entered into by a young person until the age of 21.

False

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?

Full

Which of the following 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 protection of the public's constitutional right

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

Government retribution

Which of the following are forms of gambling?

Horse tracks State-run lotteries

Which of the following is a correct statement regarding a minor's power to disaffirm or void a contract?

If a minor chooses to disaffirm a contract, he or she must void the entire contract.

Which of the following is true once a guardian has been appointed for a person who has been adjudicated insane?

If a person has been adjudicated insane and has a guardian appointed, that person has no capacity to enter into contracts and any contract he does attempt to enter into is void.

Which of the following legal principles holds both contracting parties equally responsible for an illegal agreement?

In pari delicto

_______- or incompetence, is the possession of a mental or physical defect that prevents a natural person from being able to enter into a legally binding contract.

Incapacity

Which of the following is correct regarding express ratification?

It can occur either orally or in writing.

Which of the following states allows casino gambling?

Louisiana

Why are contracts that are made for an illegal purpose void?

Making them void clearly indicates that such agreements are not socially acceptable. Making them void prevents the legal system's being used to promote agreements that are harmful to society.

Regarding contracts for necessaries, which of the following statements is true of the liability of minors

Minors can be held liable for the reasonable value of necessaries. Minors can disaffirm contracts for necessaries.

Which of the following is a correct statement regarding minors and contracts?

Minors may enter into only voidable contracts.

Which of the following activities are entirely allowed on Sundays in most states under the Sabbath law?

Obtaining necessities Executing contracts Charity work

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?

One of the parties withdraws from an illegal agreement after an illegality occurs.

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

Procedural

Antoine and Terrell are roommates. Antoine has Terrell sign a contract promising to wash Antoine's car once a week for $80 per month in payment. The contract incorporated by reference terms on the back. The terms on the back were in very small print and required Terrell to cook dinner for Antoine, do his laundry, and clean their apartment. Antoine is also very angry with his former girlfriend, Laura, and decides to start rumors that would constitute the tort of defamation. He spreads via Snapchat that Laura cheated on tests and stole from friends. Antoine wants to enlist the help of Terrell in smearing Laura but knows that Terrell would be hesitant to assist in his efforts. One evening, however, Terrell comes home clearly intoxicated—a fact apparent to Antoine. Antoine has him sign a contract agreeing to defame Laura for $100. When he sobers up, Terrell tells Antoine that he was drunk and that he has no intention of defaming Laura, who also happens to be the best friend of Terrell's new girlfriend. He also finally takes a look at the contract involving work for Antoine and tells Antoine that the contract is outrageous. Depending on the size of the print on the back of the contract, which of the following could Terrell potentially use as a defense to contract enforcement?

Procedural unconscionability

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

Public health Public safety

______ unconscionability occurs when an agreement is overly harsh or lopsided.

Substantive

The harsh and lopsided terms of Antoine's contract could constitute which of the following?

Substantive unconscionability

Which of the following involves overly harsh or lopsided substance in an agreement?

Substantive unconscionability

Which of the following terms refers to an agreement that is overly harsh or lopsided?

Substantive unconscionability

Which of the following is a correct statement regarding a competent party's recourse against a minor who disaffirms when the consideration the minor received is damaged or destroyed?

The competent party has no recourse against the minor.

Which of the following is correct regarding a minor's misrepresentation of his or her age and the right to disaffirm a contract?

The majority rule is that a minor's misrepresentation of age does not affect the minor's right to disaffirm a contract.

A person who has legal capacity to contract is one who has which of the following?

The mental ability to understand his or her contractual rights and obligations

Which of the following are true of anticompetitive agreements?

They are against public policy. They restrain trade.

Which of the following are 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. They require unlicensed professionals to pay fines.

Which of the following statements is correct regarding the legal exceptions to usury statutes?

To facilitate business, most states with usury statutes allow corporations to borrow at rates exceeding the maximum.

California does not allow any covenants not to compete in employment contracts

True

If a contract contains an illegal clause or section in the contract, courts will generally sever the illegal clause or section and enforce only the legal portions of the contract.

True

Which of the following terms refers to an agreement so unfair that it is void of conscience?

Unconscionable

What occurs when a party gives a loan at an interest rate exceeding the legal maximum?

Usury

Because their contracts are ________blank, minors have the right, until a reasonable time after reaching the age of majority, to ________blank or void their contracts.

Voidable; disaffirm

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

When it is in conjunction with the sale of a business

When can a minor be given full legal capacity to enter into contracts?

When the minor's parents or legal guardians give up their right to exercise legal control over the minor When the minor moves out of the parents' house and begins supporting himself or herself When the minor marries

Within what period of time must a former minor disaffirm a contract after reaching the age of majority?

Within a reasonable time after reaching the age of majority.

trina offers her convertible Mustang for sale on Facebook for its fair market value of $19,750. Dion e-mails Trina and agrees to buy the car for the advertised price. Trina is unaware that Dion had been drinking beer for the past few hours and was intoxicated when he e-mailed his acceptance. Is the contract between Trina and Dion valid and therefore enforceable?

Yes, since Trina did not know Dion was intoxicated and the agreement is fair.

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

adhesion

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

anticompetitive

According to Section 2-302 of the Uniform Commercial Code (UCC), if a court finds that a contract or any clause of the contract was unconscionable at the time it was made, the court may do all of the following except:

award the affected party treble damages

Public policy involves

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

A contract for necessaries by a person suffering from a mental deficiency: Blank

can be enforced for the reasonable value of the necessaries

Once sober, a previously intoxicated person Blank______ a contract entered into when he or she was intoxicated

can either ratify or disaffirm

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

discharged from obligations

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

divisible

Covenants not to compete in connection with the sale of a business are generally:

enforceable

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

exceeding; maximum

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

In many states, parents may be liable when a child causes harm if it can be proved that the parents:

failed to properly supervise the child

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

If a minor enters into a contract with an adult, both parties may disaffirm the contract based upon the minor's lack of majority.

false both parties can't, only the minor

Industry officials prefer to use the term Blank______, 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.

gaming

Which of the following terms refers to a contract that must be enforced or rejected in its entirety?

indivisible

What is the maximum interest rate in the United States?

it varies depending on the state involved

Adhesion contracts are :

legal

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.

license; contract

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

necessities

Generally, 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

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

private; public

An implied Blank______ occurs when a former minor takes some action after reaching the age of majority consistent with intent to ratify a contract.

ratification

An exculpatory clause releases one of the contracting parties from all liability:

regardless of who is at fault

A covenant not to compete is also known as a(n) Blank______ covenant.

restrictive

A covenant not to compete is also known as a:

restrictive covenant

Once a former minor ratifies a contract

the contract is no longer voidable

A basic test to determine whether an exculpatory clause is enforceable is to see whether the enforcing party engages in a business directly related to:

the public interest

Regarding 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

Currently, in all but ______ states, a minor is someone under the age of

three; 18

Some types of agreements that are not illegal per se, are nevertheless unenforceable because courts deemed them to be against public policy.

true

Heavily one-sided agreements are known as _____ contracts.

unconscionable

The common law would not enforce contracts the courts deemed

unconscionable

Primarily for which of the following reasons have most state courts or state legislatures determined that a minor should not have the right to disaffirm contracts for life insurance, health insurance, counseling, education loans and marriage?

Public policy

Which of the following terms refers to a contract that may have both illegal and legal portions, allowing a court to void the illegal portions and enforce the rest?

Severable

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.

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

severable

A minor has the right to disaffirm his or her contracts:

until a reasonable time after reaching the age of majority

The maximum legal limit for a loan in Walter's state is 5.8%. Keeli charges Walter 23% because she does not believe it is likely that he will pay back the loan. What is the term for giving a loan at an interest rate that exceeds the legal maximum?

usury

The enforceability of covenants not to compete in employment contracts: Blank

varies from state to state