Chapter 13

does not prohibit

In the absence of a statutory prohibition, the common law ________ entering into contracts on Sunday

enforcability

All states have legislation pretaining to gambling or wagering, and U.S. courts generally refuse to recognize the ________ of a gambling agreement

Usury Statue

Collectively, the laws of a jurisdiction regulating the charging of interest rates

C

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.

A

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.

unlawful; lawful; unenforceable; unenforceable; enforce

A contract may be partly ________ and partly ________ . The courts view such a contract in one of two ways. First, the partial illegality may be held to taint the entire contract with illegality, so that it is wholly ________ . Second, it may be possible to separate the illegal from the legal part, in which case the court will hold the illegal part ________ but will ________ the legal part

not to compete

A court order enjoining a former employee from competing in a described territory for a stated time is the usual method by which an employer seeks to enforce the employee's promise ___________

B

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.

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

withdraw; whatever she has contributed

A party to an illegal agreement may ___________, prior to performance, from the transaction and recover ________________, if the party has not engaged in serious misconduct

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

unenforceable

Agreements that may adversely affect the public interest through the corruption of public officials or the impairment of the legislative process are ____________

unaware; damages

An 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 _______. In such case, the courts permit the party who is ignorant of the illegality to maintain a lawsuit against the other party for _______________

Restraint of Trade

An agreement that eliminates or tends to emilinate competition

1. property interest 2. reasonably necessary

An agreement to refrain from a particular trade, profession, or business is enforcebale if 1. the purpose of the restraint is to protect a _________ of the promisee and 2. the restraint is no more extensie than is __________ to protect that interest

Covenant Not to Compete

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

legaility of object

An essential requirement of a binding promise or agreement is ___________

unenforceable; all or part; recover in restitution

As a general rule, illegal contracts are __________. In a few instances, however, one of the parties may be permitted to enforce ______ or ______ of the contract; whereas under other circumstances, the courts will allow one party to _______________ for his performance of the illegal contract.

defined area; stated time

As part of an agreement to sell a business, the seller frequently promises not to compete in that particular type of business in a _______ for a _________

necessary

Before granting such injunctions, the courts insist that the employer demonstrate that the restriction is __________ to protect his legitimate interests, such as trade secrets or customer lists

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.

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

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

Substantive Unconscionability

Consists of oppressive or gorssly unfair provisiosn, such as an exorbinant price or an unfair exclusion or limitation of contractual remedies

ratification

Even in a State that prohibits contracts on Sunday, a court nonetheless will enforce a subsequent weekday _____________ of a loan made on Sunday or a promise to pay for goods sold and delivered on Sunday.

license

Every jurisdiction has laws requiring a _______ for those who engage in certain trades, professions, or businesses.

1. loan or forbearance 2. money 3. repayable absolutely 4. interest charge

For a transaction to be usurios, courts usually require evidence of the following factors: 1. A ______ or ________ 2. of ________ 3. which is ______ and in all events 4. for which an ________ in exacted in excess of of the interest rate allowed by law

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.

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

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.

chance; possible loss

In a wager, the parties comtemplte gain through mere _______, where as in an insurance contract, they seek to distibute _________

necessity and charity

In addition, Blue Laws usually do not apply to activities of "________" and "________"

recover

If the statue is regulatory, a person cannot _______ for professional services unless he has the required license, as long as the public policy behind the regulatory purpose clearly outweighs the person's interest in being paid for his services.

sue; plaintiff

In most cases, when an agreement is illegal, neither party can successfully _____ the other for breach or recover for any performance rendered. Whichever party is ________ is immaterial to the courts. As is frequently said in these cases, the court will leave the parties where it finds them.

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.

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.

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.

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.

Revenue [License]

Measure to raise money

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

C

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

Usurious Loan

One whose interest rates are determined to be in excess of those permitted by the usury law

1. the sale of a business 2. employment contracts

Restraints typically arise in two situations: ______________ and _____________

Blue Laws

Prohibition of certain types of commercial activity on Sunday

Regulatory [License]

Requirement to protect the public interest

substantive and procedural unconscionability; degree

Some courts hold that for a contract to be unenforceable, both _____________ and _______________ must be present. Nevertheless, they need not exist to the same _______ ; the more oppressive one is, the less evidence of the other is required.

violates a statue

Sometimes an agreement is illegal because it __________ designed to protect persons in the position of one of the parties

statue and policy; public policy

Sometimes, the courts, by analogy, use the ______ and ______ it seeks to serve as a guide in determining the private contract rights of one harmed by a violation of the statue. In addition, the courts must frequently articulate the "_______" of the State without significant help from statutory sources

Adhesion Contract

Standard "form" contract, usually between a large retailer and a consumer, in which the weaker party has no realistic choice of opportunity to bargain

restitution; inequitable conduct

The Restatement of Restitution provides that a person who renders performance under an agreement that is illegal or otherwise unenforceable for reasons of public policy may obtain __________ from the other party, as necessary to prevent unjust enrichment, if the allowance of restitution will not defeat or frustrate the policy of the underlying prohibition. However, a claim in restitution is not allowed if it is foreclosed by the claimant's ________________

1. Employee 2. Customer 3. Protected class

The Restatement provides that exculpatory clauses excusing negligent conduct are unenforceable on grounds of public policy if they exempt (1) an employer from liability to an ___________, (2) a public service business (such as a common carrier) from liability to a ____________, or (3) a person from liability to a party who is a member of a ______________

D

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 Anderson was contributorily negligent in her operation of the Curves equipment. c. Whether Anderson had a medical release from her doctor to use the equipment at Curves. d. Whether the exculpatory clause in the Curves contract released the club from liability for negligence.

refuse to enforce

The court may __________ an unconscionable contract in its entirety or any part it finds to be unconscionable

own facts

The court, in determining what is reasonable under particular circumstances, must consider each case on its ____________

D

The court, in ruling on Dunnam v. Burns,applied what reasoning to the matter? a. The court observed that Dunnam's default on the loan waived any objection to the usurious interest rate. b. The court noted that agreements to pay a set amount, rather than an interest rate, are per se usurious. c. The court reviewed the contract and found that Dunnam drafted the document. d. 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.

unenforcable

The courts generally agree that exculpatory clauses relieving a person from tort liability for harm caused intentionally or recklessly are __________ as violating public policy

exceptions

The courts recognize several _______________ to the general rule regarding the effect of illegality on a contract and may, after considering the circumstances surrounding a particular contract, grant relief to one of the parties, though not to the other.

illegal; criminal conduct

The courts will not enforce an agreement declared ______ by statue or an agreement induced by __________.

law of torts; public policy

The courts will not permit contract law to violate the ____________. Any agreement attempting to do so is considered contrary to ________________

recourse

The doctrine of unconscionability has been justified on the basis that it permits the courts to resolve issues of unfairness explicitly as regards that unfairness without ______ to formalistic rules or legal fictions.

varies; prinicpal and interest; all interest; portion of interest exceeding the permitted maximum

The legal effect to be given a usurious loan _____ from state to state. In some states the lender forfeits __________. In others, the lender can recover the principal for forfeits __________. In others, only that ______________________ is forfeited.

extend beyond

The reach of a statue may _______ its language.

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.

1. Trade 2. Liability 3. Unconscionable 4. Tortious 5. Corrupt; legislative process 6. Justice 7. Family

The term public policy eludes a precise definition. Contracts raising questions of public policy include agreements that 1. restrain _______, 2.exempt or exculpate a party from _____ of his own tortious conduct, 3. are ________, 4. involve ________ conduct, 5. tend to ______ public officials or impair the ______ process, 6. tend to obstruct the administration of __________, or 7. impair ______ relationships

limit or relax

Though, historically, every state had a usury law, a recent trend has been to _____ or ______ usury statues

insurance contracts

To be distinguished from wagers are ordinary ____________ in which the insured, having an "insurable interest," pays a certain sum of money or premium in exchange for an insurance company's promise to pay a larger amount upon the occurance of some event, such as a fire

resaonable limitation

To protect the business's goodwill, the buyer must be allowed to enforce such a covenant by the seller not to compete with the purchaser within _____________

Unconscionable

Unfair or unduly harsh

Procedural Unconscionability

Unfiar or irregular bargaining

A

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

reover; payments; property

Where one of the parties is less at fault than the other, he will be allowed to ______ _______ made or ______ transferred

licensing statue; unlicensed

Whether or not a person may recover for services rendered if he has failed to comply with a licensing requirement depends on the terms or type of ________. This rule pretains only to the rights of the ______ party to enforece the obligations of the other party

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.

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

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