Ch.12 Capcity

Which of the following is an INCORRECT statement regarding the enforceability of immoral​ contracts?

Judges are free to define morality based on their individual views.

Two companies, aiming to avoid competition, enter into an agreement to engage in price fixing. However, this is in violation of federal antitrust statutes and is illegal. This contract is an example of which of the following?

A contract contrary to law

Which of the following is a correct statement regarding the enforceability of a contract entered into by an intoxicated​ person?

A contract entered into by an intoxicated person is voidable only if the person was so intoxicated when the contract was entered into that he or she was incapable of understanding the nature of the transaction.

As more and more people move toward purchasing electric vehicles, Tesla Motors, Ford, and Toyota enter into an agreement to fix the prices of the automobiles they sell to avoid competition. Tesla, Ford, and Toyota's contract would be an example of which of the following?

A contract in restraint of trade

When you decide to take on a mortgage for your new house, you're asked to sign a preprinted form whose terms you cannot negotiate and that you must sign in order to obtain the mortgage terms. The form you sign to obtain your mortgage is an example of which of the following?

A contract of adhesion

Lauren is about to be hired by a large video game company. Before she's hired, the company requires her to sign a contract agreeing not to work for another employer or for herself in a position that would compete with the video game company for a year after she has left or been terminated by them. The restriction that Lauren is required to acknowledge is an example of which of the following?

A covenant not to compete

_______ is called the Indian Gaming Regulatory Act.

A federal statute that sets the requirements for establishing casino gambling and other gaming activities on tribal land

________ is called the Indian Gaming Regulatory Act.

A federal statute that sets the requirements for establishing casino gambling and other gaming activities on tribal land

In order to become a teacher, an applicant must be granted a certificate that demonstrates that he or she has the proper schooling, experience, and moral character required by the relevant law. This mandatory certificate is required by which of the following?

A licensing statute

Suppose a state has set the upper limit on the annual interest rate on certain types of loans at 15 percent. Joey borrows $1,000 from Chandler, who requires Joey to pay $4,000 in one year to pay off the loan. That amount of interest—$3,000—calculates to a 300 percent annual interest rate. The interest rate Chandler has set for Joey is in violation of which of the following?

A usury law

Two parties enter into an agreement. Their contract is based on the exchange of sex for money. This contract is an example of which of the following?

An immoral contract

Suppose an internet company sells a low-income family a freezer full of meat and other foods for $3,500, with monthly payments for 60 months at 20 percent interest. The internet company advertises the freezer and the groceries as a good, convenient bargain. However, the actual cost of the freezer and the food is only $1,000. This contract is likely an example of which of the following?

An unconscionable contract

To be relieved of his or her duties under a contract, a person's mental incapacity must render that person incapable of understanding or comprehending the nature of the transaction under the objective cognitive "understanding" test. Mere weakness of intellect, slight psychological or emotional problems, or delusions will not relieve a person of his or her duties under contract. If a person is indeed relieved of his or her duties as determined by the objective cognitive "understanding" test, which of the following applies?

Legal insanity

​_____ is the act of a​ minor, after the minor has reached the age of​ majority, by which he or she accepts a contract entered into when he or she was a minor

Ratification

State law provides that legal services can be provided only by lawyers who have graduated from law school and passed the appropriate bar exam. Suppose Margaret, a first-year law student, agrees to draft Jack a will for $600. Her state's licensing statute is silent as to whether unlicensed persons can enforce contracts to provide these services. Which type of licensing statute would make Margaret's recovery of payment from Jack impermissible?

Regulatory statute

Which of the following is an INCORRECT statement regarding a​ minor's right to disaffirm a​ contract?

Special formalities are required for a minor to expressly disaffirm a contract.

Which of the following is an INCORRECT statement regarding the doctrine of​ unconscionability?

The doctrine of unconscionability may be used merely to save a contracting party from a bad bargain.

Which of the following is an INCORRECT statement regarding contracts entered into by minors for the necessaries of​ life?

The minor is obligated to pay the contract price for the necessaries he or she received.

A contract that has a negative impact on society or that interferes with the public's safety and welfare is called ________.

a contract contrary to public policy

A state licensing statute requires licensed attorneys to pay an annual $500 renewal fee without requiring continuing education or other new qualifications. If a lawyer provides legal services but has not paid the annual licensing fee, the lawyer can still recover for her services because the fee requirement is part of ________.

a revenue-raising statute

Preprinted forms whose terms the consumer cannot negotiate and that they must sign in order to obtain a product or service are called contracts of​ _____.

adhesion

Revenue-raising statutes ________.

are licensing statutes whose primary purpose is raising revenue for the government

A covenant not to compete is a(n) ________.

contract that provides that a seller of a business, an employee, a franchisee, or another covered party will not engage in a similar business or occupation within a specified geographical area for a specified time following the sale of the business or termination of employment

An exculpatory clause is a ________.

contractual provision that relieves one (or both) of the parties to a contract from tort liability for ordinary negligence

If a​ door-to-door salesperson sells a poor family a stereo system for​ $3,000, with monthly payments for 60 months at 20 percent interest and the actual cost of the stereo system is about​ $800, this contract​ _______.

could be found to be unconscionable

The act of a minor rescinding a contract under the infancy doctrine, which may be accomplished orally, in writing, or by the minor's conduct, is called ________.

disaffirmance

A minor's act of legally separating from his or her parents and providing for him- or herself is called ________.

emancipation

A(n) _____ clause is also called a release of liability clause.

exculpatory

In contract law, adjudged insane refers to a person who ________.

has been declared legally insane by a proper court or administrative agency

Under the duty of restitution rule, ________.

if a minor has transferred money, property, or other valuables to the competent party before disaffirming the contract, that party must place the minor in status quo

If a department store had a sign above the entrance​ stating, "The store is not liable for the ordinary negligence of it​ employees," this would be​ a(n) _____clause.

illegal exculpatory

If a train ticket indicates​ that, "The train company is not liable for the ordinary negligence of its​ employees," this would be​ (a)n _______.

illegal exculpatory clause

A situation in which both parties are equally at fault in an illegal contract is called ________.

in pari delicto

At common​ law, parties to an illegal contract were considered​ _____

in pari delicto

Legal insanity is a state of contractual​ _____, as determined by law.

incapacity

The​ _____ doctrine allows minors to disaffirm most contracts they have entered into with adults.

infancy

If no formal ruling has been made about a person's sanity but the person suffers from a mental impairment that makes him or her legally insane, that person is ________.

insane but not adjudged insane

A contract contrary to law ________.

is a contract to perform activities that are prohibited by law

A contract contrary to public policy is ________.

one that has a negative impact on society or interferes with the public's safety and welfare

An exculpatory clause can be used to relieve a party from tort liability for​ _____.

ordinary negligence

A contract of adhesion is a ________

preprinted contract prepared by a provider of goods or services where the contract terms are set and the consumer or other party cannot negotiate the contract terms and must accept the terms of the contract in order to obtain the product or service

A contract of adhesion is a ________.

preprinted contract prepared by a provider of goods or services where the contract terms are set and the consumer or other party cannot negotiate the contract terms and must accept the terms of the contract in order to obtain the product or service

The doctrine of unconscionability is based on public policy

public policy

Sally is a certified public accountant​ (CPA) with a lucrative accounting practice in​ Providence, Rhode Island. When she sells her practice to​ Gregory, Sally agrees not to open another accounting practice in the state of Rhode Island for a​ 20-year period. This covenant not to compete is​ _______.

reasonable in the line of business protected but is unreasonable in geographic scope and duration

Statutes that are enacted to protect the public are called licensing statutes. Generally, unlicensed persons cannot recover payment for services when they do not have the required license. Problems arise if an unlicensed person tries to collect payment for services provided to another under a contract. Some statutes expressly provide that unlicensed persons cannot enforce contracts to provide these services. If a statute is silent on this point, enforcement depends on whether it is a(n) ________ statute or a revenue-raising statute.

regulatory

A regulatory licensing statute is enacted to protect the public.

regulatory licensing

A licensing statute ________.

requires a person or business to obtain a license from the government prior to engaging in a specified occupation or activity

According to the duty of​ _____, if a minor has transferred​ money, property, or other valuables to the competent party before disaffirming the​ contract, the party must place the minor in status quo.

restitution

According to the duty of​ _____, a minor is obligated only to return the goods or property he or she has received from the adult in the condition it is in at the time of disaffirmance.

restoration

Licensing statutes enacted to raise money for the government are called​ _____ statutes.

revenue-raising

A usury law ________.

sets an upper limit on the interest rate that can be charged on certain types of loans

In pari delicto is a ________.

situation in which both parties are equally at fault in an illegal contract

The duty of restoration ________.

states that a minor is obligated only to return the good or property he or she has received from the adult in the condition it is in at the time of disaffirmance

The effect of illegality doctrine ________

states that the courts will refuse to enforce or rescind an illegal contract and will leave the parties where it finds them

An unconscionable contract is a contract ________.

that courts refuse to enforce in part or at all because it is oppressive or so manifestly unfair as to be unjust

A federal statute that sets the requirements for establishing casino gambling and other gaming activities on tribal land is called ________.

the Indian Gaming Regulatory Act

Ratification is ________.

the act of a minor after the minor has reached the age of majority by which he or she accepts a contract entered into when he or she was a minor

Disaffirmance is ________.

the act of a minor rescinding a contract under the infancy doctrine

A rule that states that a minor is obligated only to return the goods or property he or she has received from the adult in the condition it is in at the time of disaffirmance is called ________.

the duty of restoration

A doctrine that allows minors to disaffirm most contracts they have entered into with adults is called ________.

the infancy doctrine

If​ Marie, a​ first-year law​ student, agrees to draft a will for Randy for a​ $450 fee, but is not licensed in a state that requires those who draft wills to be a licensed​ attorney, the contract is​ _______

unenforceable by Marie

State​ _____ laws set an upper limit on the annual interest rate that can be charged on certain types of loans.

usury

An illegal contract is​ _____.

void

Any contract entered into by a person who has been adjudged insane is​ _____.

void

Contracts contrary to public policy are _____

void

Contracts to commit criminal acts are ______

void

Exculpatory clauses that result from superior bargaining power are usually found to be​ _____.

void as against public policy

A contract entered into by a person who is​ insane, but not adjudged​ insane, is generally​ _____.

voidable

Which of the following does NOT terminate a​ parent's duty of​ support?

when a child begins summer camp