BLAW Chapter 13 and 14 12:20 Study Guide

Disaffirmance

- * Avoidance of the contract; may be done upon reaching majority * - Releases the minor from any liability on the contract - In some jurisdictions he/she may through words or conduct manifest an intention not to abide by the contract, exercise the power to disaffirm - Must come either during minority OR within a reasonable time after he reaches majority

Ratification (giving formal consent)

- *Affirmation of the entire contract; may be done upon reaching majority * - Makes the contract binding from the beginning; the result is the same if the contract has been valid; final and cannot be withdrawn - Minor can ratify the contract only as a whole, he CANNOT ratify to retain consideration he received and escape payment nor can he retain part of the contract and disaffirm the rest

Example of disaffirmance

- A minor agrees to sell property to Alice and then sells that property to Brian - Sale to Brian would constitute a disaffirmance in the contract with Alice

Liability on Contracts

- A minor's contract is not entirely void and of no legal effect - It is voidable at the minor's option - exercise of this power of avoidance is called disaffirmance

Licensing Statutes

- Apply to lawyers, doctors, dentists, accountants, brokers, plumbers, and contractors - Pertains to the rights of the unlicensed party to enforce obligations of the other party - Provide that an unlicensed person engaged in a business or profession for which a license is required shall not recover for services rendered

Exculpatory (evidence favorable to the defendant in a criminal trial that exonerates the defendant of guilt) Clauses

- Excuses one party from liability for her own tortious conduct - Courts generally agree that exculpatory clauses relieving a person from tort liability for harm caused intentionally are unenforceable as violating public policy * The courts generally disapprove of contractual provisions excusing a party from liability for her own tortious conduct

Disaffirmance may be either...

- Express OR - Implied * As long as they show an intention not to be bound, may be manifested by acts or conduct *

Ratification may be...

- Express OR - Implied from conduct OR - Result from the failure to make a timely disaffirmance

Sale of land by a minor cannot be disaffirmed until after....

- He reaches his majority - Minor may wait until the period of the statute of limitations has expired, if the sale involves no questions of fairness and equity

Gambling Statutes

- In a wager the parties stipulate that one shall win and the other lose depending upon the outcome of an event in which their sole "interest" arises from the possibility of such gain or loss - US courts refuse to recognize the enforceability of a gambling agreement

Express Example

- Minor make a contract to buy property from an adult - Contract is voidable by the minor and she can escape liability - Suppose that after reaching her majority she promises to go through with the purchase - Since she expressly ratified the contract she entered when she was a minor, her promise is binding and the adult can recover for breach upon her failure to perform

Minor's duty upon disaffirmance

- Minor must return any property he has received from the other party, provided he has it in his possession at the time of disaffirmance

Example

- Minor sells his car to an individual who resells it to a used car dealership, a good faith purchaser for value - The used car dealer would acquire legal title even though he bought the car from a seller who had only voidable title

Exceptions of the rule:

- Party withdrawing before performance - Party protected by statute - Party not equally at fault - Excusable Ignorance - Partial Illegality

Sale of a business (when restraints typically arise)

- To sell a business the seller frequently promises not to compete in that particular type of business in a defined area for a state time - To protect the business's goodwill, the buyer must be allowed to enforce such a promise by the seller not to compete with the purchaser within reasonably limitations * The promise by the seller of a business not to compete in that particular business in a reasonable geographic area for a reasonable period of time is enforceable

Exculpatory clauses excusing negligent conduct are unenforceable on grounds of public policy if they exempt:

1. An employer from liability to an employee 2. A public service business from liability to a customer 3. A person from liability to a party who is a member of a protected class

The illegal bargain is made unenforceable to...

1. Discourage such undesirable conduct 2. To preclude (prevent) the inappropriate use of the judicial process in carrying out such socially undesirable bargains

Contracts that raise questions of public policy

1. Restrain trade 2. Exempt or exculpate a party from liability for his own tortious conduct 3. Unconscionable 4. Involve tortious conduct 5. Tends to corrupt public officials or impair the legislative process 6. Tends to obstruct the administration of justice 7. Impair family relationships

An agreement to refrain from a particular trade, profession, or business is enforceable if...

1. The purpose of the restraint is to protect a property interest of the promisee 2. The restraint is no more extensive than is reasonably necessary to protect the interest

A buyer of a business may negotiate a __________ contract clause to keep the seller from running a competing business. A. covenant not to compete B. good faith C. contract in restraint of trade D. None of these are correct.

A

A noncompete agreement may be held invalid, the courts insist that the employer demonstrate that the restriction is __________ to protect the employer's legitimate interest without overly restricting the employee's ability to find another job. A. reasonable and necessary B. unconscionable C. exculpatory D. usurious

A

Courts allow a minor a certain amount of time to disaffirm a contract when he turns 18 years of age. That time period is: A. a reasonable period of time after reaching the age of majority. B. 30 days from learning of his or her right to disaffirm. C. Ten days from his 18th birthday. D. one year from the date of the agreement.

A

George and Laura make mutual promises to marry, but unknown to Laura, George is already married to Barbara. In the state where George and Laura live, bigamy (marriage to more than one person) is illegal and makes a bigamous marriage void. If Laura sues George for damages and wins, what principle may she use? A. Excusable ignorance. B. Duress. C. Unconscionability. D. None of these answers are correct.

A

Jacqueline entered into an employment contract with The Umbrella Corporation that contained a covenant not to compete, as well as other provisions involving salary, a severance package, holiday compensation, and other employment-related benefits. If the court finds only the covenant not to compete illegal, what effect will such a ruling have on the remainder of the contract? A. Because this is a partially illegal contract, the remainder of the contract may be enforced. B. Because the covenant not to compete is illegal, the entire contract is illegal. C. Because this is a partially illegal contract, Jacqueline is entitled to liquidated damages on the remainder of the contract. D. None of these answers are correct.

A

Mabel is 88 years old and under the court ordered legal guardianship of her daughter. One day Mabel receives a telephone call from a health insurance salesman and purchases a $400-a-month Medigap insurance policy. The contract is: A. void. B. voidable. C. valid. D. unconscionable.

A

Madeline, age 17, ordered a pair of diamond earrings on the installment plan. She paid $50 every month until she turned 18, the age of majority. The next day, she sold them to Samantha and disaffirmed the contract. What is the result? A. Samantha is still liable because selling the earrings amounted to a ratification. B. Samantha is not liable because earrings are not necessaries. C. Samantha is still liable because she used the earrings. D. Samantha is still liable since she had to disaffirm before her 18th birthday.

A

One issue before the court in Payroll Advance, Inc. v. Yates case was: A. whether the covenant not to compete between a check cashing company and its former employee was reasonable in scope and duration. B. whether Yates was trying to recruit clients away from Payroll. C. whether there was any consideration to Yates for signing the noncompetition provision. D. whether Yates's new employer was in competition with Payroll.

A

One issue before the court in the First State Bank of Sinai v. Hyland case was: A. whether the contract between Hyland's father and the Bank was void due to alcohol-related incapacity. B. whether the bank knew that Mervin Hyland was incapacitated by liquor. C. whether a person committed to alcoholism treatment is automatically incompetent. D. whether the note was discharged in Randy Hyland's bankruptcy.

A

Sean and John are business associates. At dinner, Sean has only one beer over the course of three hours. Sean is a light drinker and normally feels severely intoxicated after three beers. At the end of dinner, Sean and John enter into a multi-year agreement worth potentially millions of dollars. Later, if Sean attempts to void the contract on the basis of intoxication and loses, what would be the reason for it? A. Sean's slight intoxication did not destroy his capacity to contract. B. Sean's intoxication was unable to understand the nature and consequences of his actions. C. Sean was without reason or understand when entering into the contract. D. Intoxication is insufficient to void a contract.

A

Veronica has not been declared incompetent by a court, but she suffers from delusions that a Martian visits her every evening at 6 p.m. to tell her that the future of the human race depended on her buying a tract of land in Lackawanna County. Today, Veronica entered a contract to purchase a large tract of land in Lackawanna County on the Martian's advice. Which of the following statements is true about the contract? A. The contract to purchase the land is voidable, because Veronica has not been adjudicated insane, and possible could still have understood the contract. B. The contract to purchase the land is valid, because the seller had no knowledge that the Martian suggested the purchase. C. The contract to purchase is void, because it was made on a Martian's advice. D. None of these answers are correct.

A

When it is said that a contract made by a minor is voidable, which of the following is true? A. While still a minor, he can disaffirm the contract and return the property. B. At any time before he turns 21, he can disaffirm the contract and return the property. C. Within 72 hours of the contract a minor can disaffirm the contract. D. None of these are correct.

A

Which of the following would generally be considered to be a regulatory licensing law? A. A statute requiring that doctors be licensed after finishing medical school. B. A statute requiring that salespeople be licensed, but not establishing any educational or training requirements. C. A statute requiring plumbers to be licensed, but not establishing any standards of competence. D. A statute that requires flag makers to register with the state before selling flags.

A

Partial Illegality

A contract may be partly unlawful and partly lawful. The courts view such a contract in one of two ways 1. the partial illegality may be held to taint the entire contract with illegality, so that it is wholly unenforceable. 2. the court may determine it possible to separate the illegal from the legal part, in which case the illegal part only will be held unenforceable, whereas the legal part will be enforced. For example, if a contract contains an illegal covenant not to compete, the covenant will not be enforced, though the rest of the contract may be.

Usury Statutes

A law establishing a maximum rate of permissible interest for which a lender and borrower of money may contract; regulations governing the amount of interest that can be charged on a loan For a transaction to be usurious, courts require evidence of... 1. A loan or forbearance 2. of money 3. which is repayable absolutely and in all events 4. for which an interest charge is exacted (demanded) in excess of the interest rate allowed by law

Party withdrawing before performance

A party to an illegal agreement may withdraw from the transaction prior performance and recover whatever has been contributed if it is not serious misconduct

Tortious Conduct

A promise to commit a tort or to induce the commission of a tort is unenforceable on grounds of public policy

After the minor becomes of age she/he may chose to...

Adopt or ratify the contract - surrenders her power of avoidance and become bound

Excusable Ignorance

Agreement that appears on its face to be entirely permissible, nevertheless, may be illegal by reason of facts and circumstances of which one of the parties is completely unaware A party also may be excused for ignorance of legislation of a minor character. For instance, Jones and Old South Building Co. enter into a contract to build a factory that contains specifications in violation of the town's building ordinance. Jones did not know of the violation and had no reason to know. Old South's promise to build would not be rendered unenforceable on grounds of public policy, and Jones consequently would have a claim against Old South for damages for breach of contract.

Corrupting Public Officials

Agreements that may affect the public interest through the corruption of public officials or the impairment of the legislative process are unenforceable EX: - Using improper means to influence legislation; secure official action, or procure a government contract

Covenant not to compete

An agreement to refrain from entering into a competing trade, profession, or business

A given agreement may not violate any statute but may still be so offensive to society that courts feel that enforcing the contract would be: A. fraudulent. B. contrary to public policy. C. illegal lobbying. D. unfair to merchants.

B

A minor may avoid or __________ a contract by any expression of an intention to repudiate the contract. A. ratify B. disaffirm C. incapacitate D. restitute

B

A(n) __________ is a measure designed to raise money by requiring the purchase of a license. A. exculpatory clause B. revenue license C. regulatory license D. usury statute

B

Assume Jack was drunk during the contract negotiations and signing, and that the contract was voidable due to Jack's intoxication. Two years later after the signing, Jack sues to undo the contract. Which of the following would be Hal's and Sophie's best defense against this action? A. That the contract is void. B. That Jack, by waiting two years, ratified the contract. C. That Jack was voluntarily intoxicated at the time of the negotiations and signing of the contract. D. That Jack was intoxicated very often.

B

Buyer and Seller have entered into a contract for the sale of several goods worth hundreds of thousands of dollars. In the contract, seller includes an "as is" warranty clause that is in extremely small print and inconspicuous. If the court finds this clause procedural unconscionable, what would be the reason? A. Such a clause is oppressive. B. Seller obscured this warranty clause. C. Such a clause is grossly unfair because it takes away any legal defenses that Buyer has. D. None of these answers are correct.

B

Every adult is presumed to have capacity unless: A. they cannot read and write. B. it is proven that capacity is lacking or there is status incapacity. C. they understand the full legal meaning of the contract being made. D. there was a clause of the contract they did not understand.

B

Fred operates a fledgling remodeling business and is in desperate need of a certain type of drywall. He obtains the material from Megaworks, but is charged a grossly unreasonable price and is forced to buy other material he does not need. In view of the buyer's unequal bargaining power and unreasonable terms of the contract, this may be a case of: A. discrimination. B. substantive unconscionability. C. supervening illegality. D. restraint of trade.

B

Marilyn sells her highly successful travel agency to Adelle. In the sales contract, Marilyn agrees never to open a travel agency in the state. Which of the following best describes this contract clause? A. Binding as fair protection. B. Unenforceable as a violation of public policy. C. Valid as a reasonable restraint on trade. D. Void as an illegal violation of a statute.

B

Mary is a person who experiences hallucinations and other psychotic episodes. She has been adjudicated incompetent and a guardian has been appointed to care for her. Any contracts from this point forward are: A. voidable. B. void. C. valid. D. enforceable.

B

On his 17th birthday, David makes a contract to purchase a moped. In a state in which the age of majority is 18, which of the following actions would be a ratification of the contract? A. One week before his 18th birthday, David telephones the seller and says, "I intend to keep my promise to you in our contract." B. Three days after his 18th birthday, David telephones the seller and says, "I intend to keep my promise to you in our contract." C. Before his birthday David behaves as though he intends to be bound by the contract, but two days after his 18th birthday, he calls the seller and says, "The deal's off." D. None of these answers are correct.

B

Ryan, a 15-year-old, negligently crashed into Crystal's car and caused extensive damage and severely injured Crystal. Which statement is correct? (p. 7) A. Ryan can disaffirm liability for the damage to Crystal's car and resulting damages unless he has automobile liability insurance. B. Ryan cannot disaffirm liability for his negligence. C. Ryan can disaffirm liability for the damage to Crystal's car and resulting damages because he is a minor. D. Ryan can disaffirm liability for the damage to Crystal's car and resulting damages unless he was intoxicated.

B

The court in Anderson v. McOskar Enterprises, Inc .ruled on which of the following issues? A. Whether the injury Anderson suffered stemmed from a pre-existing medical condition. B. Whether the exculpatory clause in the Curves contract released the club from liability for negligence. C. Whether Anderson was contributorily negligent in her operation of the Curves equipment. D. Whether Anderson had a medical release from her doctor to use the equipment at Curves.

B

The court, in ruling on Dunnam v. Burns,applied what reasoning to the matter? A. The court noted that agreements to pay a set amount, rather than an interest rate, are per se usurious. B. The court reasoned that a document that contains an absolute obligation to repay a loan together with interest in excess of the allowed amount is usurious on its face. C. The court reviewed the contract and found that Dunnam drafted the document. D. The court observed that Dunnam's default on the loan waived any objection to the usurious interest rate.

B

The type of substance ingestion that could lead a court to find one lacking in capacity is: A. the person is a chronic alcoholic. B. because of mental impairment, the person does not comprehend that a contract is being made or understand its consequences. C. the person is a drug addict. D. All of these are correct.

B

Wendy is taking a prescribed medication which makes her drowsy and inattentive. If she enters into a contract when she is in that condition, the contract: A. would be void. B. would be voidable if, when she makes them, she is unable to comprehend the subject, nature, and consequences of the contracts. C. would be void only if the medication impaired her ability to act in a reasonable and rational way. D. would be unaffected as long as she took the medication exactly as prescribed by her doctor.

B

__________ means contrary to the dictates of the conscience; unscrupulous or unprincipled; exceeding that which is reasonable or customary; inordinate, unjustifiable. A. Usury B. Unconscionable C. Exculpatory D. Illusory

B

A __________ is an essential element for a promise or agreement to binding. An agreement without this is unenforceable and contrary to public policy. A. licensing statute B. past consideration C. legal objective D. All of these are correct.

C

Buyer and Seller have entered into a contract for the sale of several goods worth hundreds of thousands of dollars. In the contract, which was prepared by Seller, Seller included a clause that stated conspicuously "If Seller sues Buyer for any and all claims related to this contract, Buyer hereby waives all available defenses in law and equity." If the court finds this clause substantively unconscionable, what would be the reason? A. This was unfair negotiation process. B. Seller obscured this waiver clause. C. Such a clause is grossly unfair because it takes away any legal defenses that Buyer has. D. None of the answers are correct.

C

For the issue of capacity, a court will examine whether a party to the contract lacked contractual capacity when: A. the time set for performance of the contract. B. the time the value of the bargain becomes clear. C. the time the contract was made. D. the time the plaintiff expresses dissatisfaction with the contract terms.

C

In a __________, the parties stipulate that one shall win and the other lose depending on the outcome of an event in which their only interest is the possibility of such gain or loss? A. monopoly B. usury C. wager D. All of these are correct.

C

Juan sold his gas station business in San Antonio, Texas to Fred and promised Fred not to enter the gas station business in Texas for the next twenty-five years. If the court finds this agreement unreasonable and invalid, what grounds would support the court's decision. A. Unreasonable in time only. B. Unreasonable in geography only. C. Unreasonable in both time and geography. D. None of these answers are correct.

C

Once __________ a minor cannot avoid a contract. A. processed B. signed C. ratified D. voidable

C

One issue before the court in the In Re The Score Board, Inc. case was: A. whether the contract with Scoreboard supplied sufficient consideration for Bryant's autographs. B. whether the deal made for Bryant to sign autographs was a good opportunity. C. whether Kobe Bryant, by his actions, ratified a contract with Score Board after reaching the age of majority. D. whether a person playing in the NBA needed protection during the time before he reached the age of majority.

C

Suppose that Jack, Hal, and Sophia enter in to a contract for the sale of the business. Jack was drunk at the time that the negotiations took place, and at the time of the signing of the contract. Is the contract valid? A. The contract is voidable only if Jack's intoxication was involuntary. B. The contract is void. C. The contract is valid unless Jack did not know he was entering into the contract, or lacked the mental capacity to comprehend its nature. D. The contract is voidable by any party.

C

Suppose that Jack, Hal, and Sophia enter into a contract for the sale of the restaurant. Hal and Sophia inventory the restaurant and find that there is a case of bald eagle meat in the refrigerator, which is illegal to possess. This was unknown to them at the time of the agreement. Which of the following is true? A. The contract would likely be voidable by Jack. B. The contract would be void since the parties are in pari delicto. C. The illegal part of the contract would be severed from the contract for the sale of the business, which would be enforced. D. The contract would be void due to illegality.

C

The sole hospital in a city offers a standard patient care agreement. The contract is prepared on a standard form and offers terms on a take-it-or-leave-it basis. Such a contract is called: A. exculpatory. B. a usurious contract. C. an adhesion contract. D. an illegal restraint of trade.

C

What is the effect of slight intoxication on the capacity of a person to enter into a contract? A. If an intoxicated person is unable to understand the nature and consequences of his act, then the contract is voidable. B. The effect of intoxication is generally the same as that given to contracts that are voidable because of incompetency. C. Slight intoxication will not destroy one's contractual capacity. D. To make a contract voidable, a person need not be so drunk that he is totally without reason or understanding.

C

When a minor's guardian furnishes her with an adequate wardrobe would a new hoodie be a necessary (in the majority of states)? A. Yes, the hoodie is a necessary because it is clothing. B. Yes, it is a necessary if the minor decides she needs it. C. No, necessaries are items not provided by the guardian. D. No, the minor is not stuck with clothing of the guardian's choice.

C

When the court ruled on Alcoa Concrete & Masonry v. Stalker Bros. what law did the court use for its ruling? A. The court based the ruling on the law of contractual interpretation. B. The court examined the matter under the laws of unjust enrichment. C. The court reviewed the matter under the case law and statutes in the state on enforcement of the contracts of unlicensed contractors. D. The court determined whether Alcoa had a construction lien on the property involved in the jobs assigned by Stalker.

C

__________ is a set of oppressive or grossly unfair contract terms or exclusions. A. Procedural unconscionability B. An exculpatory clause C. Substantive unconscionability D. Tortious conduct

C

__________ is when money is loaned at a higher rate of interest than the law allows. A. Lotteries B. In pari dilecto C. Usury D. Adhesion

C

A minor can avoid a contract to purchase a car if: A. the car has been destroyed. B. the car has been damaged. C. he grows tired of it. D. All of these are correct.

D

Alma enters into a contract while drinking a highly intoxicating beverage that causes memory loss. The resultant contract is: A. always unenforceable. B. always void. C. always enforceable. D. voidable if Alma can establish she was so intoxicated she didn't understand the nature and consequences of her actions and/or was unable to act in a reasonable manner.

D

Assume that a contract was entered into for the sale of the restaurant, and that the sale included the covenant not to compete. Which of the following is true? A. The contract would be void, as covenants not to compete are a restraint of trade. B. The contract would be void as covenants not to compete are only valid when they are part of a valid employment contract. C. The contract for the sale of the business would be valid, but the covenant not to compete will be void. D. The covenant not to compete must be reasonable in geographic scope to be valid.

D

Bertha was an alcoholic, and one weekend while she was extremely intoxicated, her son took her to the store and had her purchase an expensive computer. If Bertha wishes to rethink this contract, Bertha: A. may return the computer, but cannot get her money back. B. may at any time keep the computer, but doesn't have to pay for it as the store should have known better than to do business with an intoxicated customer. C. cannot ratify the contract it is void and without meaning. D. must sober up and ratify the contract as a whole.

D

Cinnful Buns, Inc. entered into a contract with Darius under the terms of which Darius would receive $10,000 if he stole the trade secret recipe from the leading competitor of Cinnful Buns. Darius performed his end of the agreement by delivering the recipe. Cinnful Bunns now refuses to pay Darius for his services. Darius has this option, he: A. may recover based upon the express contract of the parties. B. may recover based upon a quasi-contractual theory in order to prevent the unjust enrichment of Cinnful. C. will be able to recover based upon promissory estoppel, because he has detrimentally relied upon the promises made by Cinnful. D. will be unable to recover, because this is an illegal contract.

D

Juliet has wagered $500, which Lance, as her bookie, is holding, on a prize fight. If, before the race starts, Juliet wants to take back her money and withdraw from the transaction: A. Lance can successfully sue for breach. B. Juliet, by law, cannot withdraw from the transaction. C. Lance, by law, cannot withdraw from the transaction. D. Juliet cannot sue to recover any money because the contract to wager is illegal and unenforceable.

D

Nila is working hard on Sam's election campaign for the legislature. She thinks that just a few more votes could win the election, so she promises to pay her friend Daphne $50 if she will register and vote for Sam. Daphne does so, but Sam loses the election, and Nila now refuses to pay. This: A. agreement is enforceable. B. is an unconscionable contract covered by the UCC. C. is an agreement to obstruct the administration of justice. D. agreement is unenforceable and opposed to public policy.

D

The court in Keser v. Chagnon examined which of the following issues? A. Whether Keser should have been more careful in documenting Chagnon's age before entering into the contract. B. Whether Chagnon damaged the Edsel during the course of his possession of the vehicle. C. Whether Keser should have insisted that someone cosign the contract with Edsel. D. Whether Chagnon ratified the contract for the purchase of the Edsel by delaying his disaffirmance of the contract.

D

What is the capacity of a person adjudicated incompetent by a court order? A. A merchant might be able to recover the fair value of any necessaries. B. The person's own contracts are void. C. The guardian may be able to ratify contracts made by the ward. D. All of these are correct.

D

Which of the following is most likely to be classified as a necessary for which a minor will be held liable on a contract? A. A television. B. School supplies. C. Education. D. Food.

D

Revenue License

Does not seek to protect the public against unqualified persons * Licensing statute that seeks to raise money; an unlicensed person may recover for services he has performed

Party protected by statute

Even though there is an unlawful agreement, the statute usually expressly gives the purchaser the right to rescind the sale and recover the paid money

Adhesion Contract

Generally involves the preparer's offering the other party the contact on a "take-it-or-leave-it" basis

Regulatory License

Measure designed to protect the public against unqualified persons * Licensing statute that is intended to protect the public against unqualified persons

Minor's power regarding ratification

NO power to ratify a contract while a minor CANNOT be based on words or conduct occurring while a minor is still underage MUST take place when individual has received contractual capacity by attaining his majority

General Role: Unenforceability

Neither party may recover under an illegal agreement where both parties are equally in fault

Party not equally at fault

One of the parties is less at fault than the other, he will be allowed to recover payments or property transferred. ex illegal bargains through exercise of fraud, duress, or undue influence.

If the minor disaffirms the purchase of an automobile and the vehicle has been wrecked

Only return the wrecked vehicle

Minor

Person who has not attained the age of legal majority (age 18)

Blue Laws

Prohibiting certain types of commercial activity on Sunday

Sale of a business EX:

Promise of a person selling a service station business in Detroit not to enter the service station business in Michigan for the next 25 years ---> unreasonable because of area and time

Common Law Restraint of Trade (Violation of Public Policy)

Restraint of Trade - Any contract or agreement that eliminates or tends to eliminate competition or otherwise obstructs trade or commerce

Employment Contracts (when restraints typically arise)

Salespeople, management personnel and other employees frequently are required to sign employment contracts prohibiting them from competition with their employers during their time of employment and for some additional stated period after termination * An employment contract prohibiting an employee from competing with his employer for a reasonable period following termination is enforceable provided the restriction is necessary to protect legitimate interests of the employer

Procedural Unconscionability

Scrutiny for the presence of "bargaining naughtiness" - Was the negotiation process fair or were there procedural irregularities, such as burying important terms of the agreement or obscuring the true meaning of the contract?

Substantive Unconscionability

The actual terms of the contract, consists of oppressive or grossly unfair provisions, such as an exorbitant price or an unfair exclusion or limitation of contractual remedies EX: Price of $749 for a vacuum cleaner that cost the seller $140 - unconscionable

Violations of Statutes

The courts will not enforce an agreement declared illegal by statute: - Wagering or gambling contracts - Agreements to violate a statute prohibiting crimes (murder, robbery, embezzlement) - Induced by criminal conduct EX: If Alice enters into an agreement with Brent Co. through the bribing of Brent Co.'s purchasing agent - unenforceable

Can a minor disaffirm and recover property that his buyer has transferred to a good faith purchaser for value?

The minor could avoid and recover the property, but in the case of the sale of real estate the minor may rescind (cancel) her deed of conveyance even against a good faith purchaser of the land who did not know of the minority.

Unconscionable (morally wrong) Contracts

Unfair or unduly harsh agreements are not enforceable

A minor's contract is...

Voidable at his or his guardian's option (valid agreements, but one or both of the parties to the contract can void the contract at any time)