ACCT 324 - 16

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

anticompetitive

Public policy involves: _______. the beliefs people hold regarding the proper subject of business transactions the government's concern for its citizens neither the government's concern for its citizens nor the beliefs people hold regarding the proper subject of business transactions both the government's concern for its citizens and the beliefs people hold regarding the proper subject of business transaction

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

An agreement in violation of a statute or legal code is illegal: ______. per diem. per se. pro hac vice. pro bono.

per se.

As a general rule, covenants not to compete in employment contracts are: _______. per se unconstitutional restraints on trade permissible void per se violations of public policy

permissible

Which of the following is a legally-recognized way to expressly ratify a contract? After reaching majority, a person states orally or in writing that he or she intends to be bound by the contract entered into as a minor. Before reaching majority, a person indicates by actions or conduct that he or she intends to be bound by the contract entered into as a minor. After reaching majority, a person indicates by actions or conduct that he or she intends to be bound by the contract entered into as a minor. Before reaching majority, a person states orally or in writing that he or she intends to be bound by the contract entered into as a minor.

After reaching majority, a person states orally or in writing that he or she intends to be bound by the contract entered into as a minor.

Which of the following statements is correct regarding the legality and enforceability of contracts? A contract that requires an illegal act for performance is enforceable, while a contract for an illegal purpose is unenforceable. Both a contract that requires an illegal act for performance and a contract for an illegal purpose are unenforceable. A contract for an illegal purpose is enforceable, while a contract that requires an illegal act for performance is unenforceable. Both a contract that requires an illegal act for performance and a contract for an illegal purpose are enforceable.

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

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. (Check all that apply.) Child support contracts Lease agreements Employment contracts Marriage contracts Enlistment in the armed services

Child support contracts Marriage contracts Enlistment in the armed services

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? Inculpatory Subrogation Indemnification Exculpatory

Exculpatory

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

Indivisible

What does a minor need to do to disaffirm a contract? File an injunction with the court Show an intention by words or action to rescind the contract Sue the other party for wrongful conduct Claim undue influence

Show an intention by words or action to rescind the contract

An implied _______ occurs when a former minor takes some action after reaching the age of majority consistent with intent to ratify a contract. disaffirmance exception ratification restraint

ratification

Identify the legal exception whereby loans may exceed the predetermined maximum in a state despite usury statute. Education loans Refinancing mortgages to prevent foreclosure Vehicle loans Corporate loans for facilitating business transactions

Corporate loans for facilitating business transactions

A minor would be most likely able to disaffirm which of the following contracts? A contract for health insurance A contract for life insurance A contract for psychological counseling A contract for stereo equipment

A contract for stereo equipment

In which of the following situations is a contract enforceable? (Check all that apply.) A contract that violates the state law but not the federal law A contract with a legal subject matter A contract that is against generally accepted public policy but does not violate a statute A contract that can perform legally

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

Which of the following is a correct statement regarding a minor's obligations on disaffirmance? A minor has no obligations on disaffirmance A minor's obligations on disaffirmance are the same from state to state A minor's obligations on disaffirmance vary from state to state A minor's obligations on disaffirmance are a matter of federal law

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 utility A nightclub A bank An airline

A nightclub

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 against public policy. A restrictive covenant made in conjunction with the sale of an ongoing business is unconscionable. A restrictive covenant made in conjunction with the sale of an ongoing business is enforceable. A restrictive covenant made in conjunction with the sale of an ongoing business is unconstitutional.

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

What happens if a legal contract is formed and its subject later becomes illegal under a new statute? Both parties are legally bound to fulfill the contract and must modify the service or product in question. The parties have the freedom to decide whether they want to proceed with the terms of the contract. Both parties must fulfill the contract as is as it was legal when it was formed. Both parties are discharged from their obligations.

Both parties are discharged from their obligations.

Which of the following activities are allowed on Sundays in most states under the Sabbath law? (Check all that apply.) Charity work Obtaining necessities Executing contracts Alcohol sale

Charity work Obtaining necessities Executing contracts

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

Gambling

Identify the examples of procedural unconscionability. (Check all that apply.) Hard-to-read print on the back of an agreement Excessive use of legalese A person's negligence in asking questions before signing A person's inability to fully read a contract

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

Which of the following is a correct statement regarding a minor's power to disaffirm or void a contract? A minor only has the right to disaffirm any portion of a contract pertaining to the provision of services. A minor only has the right to disaffirm any portion of a contract pertaining to the sale of goods. A minor has the right to disaffirm a portion of a contract. If a minor chooses to disaffirm a contract, he or she must void the entire contract.

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

Which of the following legal principles holds both contracting parties equally responsible for an illegal agreement? Lux libertas Veni vidi vici In pari delicto Esse quam videri

In pari delicto

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

Indivisible

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. Julie can void the contract once she reaches the age of majority in her state. Julie has a legal obligation to complete the duration of the contract. Julie must pay restitution to the agency to get out of the contract.

Julie can void the contract immediately.

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? Secular Resolute Limited Draconian

Limited

In the context of contracts for necessaries, which of the following statements is true of the liability of minors? (Check all that apply.) Minors can be held liable for the reasonable value of necessaries. Minors must enter contracts for necessaries through their legal guardian. Minors can disaffirm contracts for necessaries. Minors do not have the right to void contracts for necessaries.

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 not enter into contracts. Minors may enter into only void contracts. Minors may enter into only voidable contracts. Minors may enter into fully enforceable, valid contracts.

Minors may enter into only voidable contracts.

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 before an illegality occurs. Justifiable ignorance of facts leaves one party unaware of a provision of an agreement that would make it illegal. One of the parties withdraws from an illegal agreement after an illegality occurs. A member of a protected class is a party to an agreement that contradicts a statute intended to protect the specific class.

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. Substantive Subversive Procedural Procurement

Procedural

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 Integrated Indivisible Sequential

Severable

Identify the activities that are forms of gambling? (Check all that apply.) Pubs and bars State-run lotteries Trading Horse tracks

State-run lotteries Horse tracks

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. The competent party may recover the contract price for the consideration from the minor. The competent party has the right to reject or revoke the minor's disaffirmance. The competent party may recover the fair market value of the consideration from the minor.

The competent party has no recourse against the minor.

Which of the following is true of severable contracts? (Check all that apply) They are not enforceable. Their legal portion can be enforced by the court. They can be voided by either party at any time. They can be partially voided by the court.

Their legal portion can be enforced by the court. They can be partially voided 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. They deem any contracts with unlicensed professionals to be illegal. They allow contracts with unlicensed professionals but do not enforce them. They require unlicensed professionals to pay fine.

They enforce contracts with unlicensed professionals.

Which of the following statements is correct regarding the legal exceptions to usury statutes? The legal exceptions to usury statutes apply to personal loans, but not business loans. To facilitate business, a minority of states with usury statutes allow corporations to borrow at rates exceeding the maximum. To facilitate business, most states with usury statutes allow corporations to borrow at rates exceeding the maximum. There are no legal exceptions to usury statutes.

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

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

Usury

When can a minor be given full legal capacity to enter into contracts? (Check all that apply.) 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

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

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

adhesion

According to Section 2-302 of the Uniform Commercial Code, if a court -- as a matter of law -- finds a contract or any clause of the contract to have been unconscionable at the time it was made, the court may do all of the following except: _______. award the affected party treble damages refuse to enforce the contract enforce the remainder of the contract without the unconscionable clause limit application of any unconscionable clause in order to avoid an unconscionable result

award the affected party treble damages

Public policy involves: _______. neither the government's concern for its citizens nor the beliefs people hold regarding the proper subject of business transactions both the government's concern for its citizens and the beliefs people hold regarding the proper subject of business transaction the beliefs people hold regarding the proper subject of business transactions the government's concern for its citizens

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

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

complete

Capacity is an element of a legally binding: _______. order decree dictate contract

contract

Covenants not to compete in connection with the sale of a business are generally: _______. only enforceable with a foreign court's order only enforceable overseas enforceable not enforceable

enforceable

Usury occurs when a party gives a loan at an interest rate ______ the legal ______. exceeding; maximum below; maximum below; minimum exceeding; minimum

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. (Select BEST answer) implied disaffirming necessary express

express

Ratification may be either ______ or ______. active; passive express; implied proactive; reactive licensed; non-licensed

express; implied

In many states, parents may be liable when a child causes harm if it can be proved that the parents: _____. are part-time workers are the legal guardians of the child failed to complete their college education failed to properly supervise the child

failed to properly supervise the child

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? Felicitous Fallacious Full Federated

full

Industry officials prefer to use the term ______, 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. profiteering wagering usury gaming

gaming

When an agreement is deemed ______, courts will usually label it void. enforceable indivisible illegal limited

illegal

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) _______. restraint of trade implied ratification disaffirmance covenant

implied ratification

According to the Restatement (Second) of Contracts, if a court -- as a matter of law -- finds a contract or any clause of the contract to have been unconscionable at the time it was made, the court may do all of the following except: _______. refuse to enforce the contract impose statutory sanctions on the party who drafted the contract limit application of any unconscionable clause in order to avoid an unconscionable result enforce the remainder of the contract without the unconscionable clause

impose statutory sanctions on the party who drafted the contract

According to the legal principle of ______ both contracting parties are equally responsible for an illegal agreement. severability in pari delicto lack of capacity exculpatory remedies

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

Another term for incapacity is: _______. incompetence coercion duress impracticability

incompetence

A(n) ______ contract must be enforced or rejected in its entirety. severable unconscionable indivisible restraint of trade

indivisible

Once a person reaches the age of majority, she may ratify, or ______ contracts made as a minor. legally concede legally affirm legally disaffirm legally void

legally affirm

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 license; consideration agreement; consideration agreement; contract

license; contract

In most states, ______ are liable for a minor's personal torts. parents, but not their minor children, minors, not their parents, neither minors nor their parents both minors and their parents

minors, not their parents,

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

necessities

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

necessities

If no exception allows a usurious loan, a few states declare all usurious loans void, which means that the lender is ______. entitled to recover the principal but not the interest not entitled to recover either principal or interest entitled to recover half of the principal amount, but no interest entitled to recover the principal and interest up to, but not exceeding, the statutory maximum

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 not to poach covenant not to deal covenant not to solicit covenant

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. null void not voidable voidable

not voidable

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

private; public

An exculpatory clause releases one of the contracting parties from all liability: _______. assuming neither of the parties was at fault assuming the other party was at fault assuming both contracting parties were equally at fault regardless of who is at fault

regardless of who is at fault

A covenant not to compete is also known as a(n): _______. restrictive collusion commercial collusion restrictive covenant commercial covenant

restrictive covenant

A divisible contract is also known as a(n) ______ contract. severable unconscionable several conscionable

severable

In the context of contracts, the legal capacity of a party refers to ______. the mental ability to understand his or her rights the maximum value that the party can offer in the exchange the promise to buy or sell that the courts will require the party to fulfill the maximum value that the party can receive in the exchange

the mental ability to understand his or her rights

In the context of general rules for illegal agreements, a party is allowed to sue for performance if ______. the contract was unilateral the party has already performed and fulfiled its part of the contract the contract was unconscionable the violated statute is intended to protect the specific class to which the party belongs

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

Substantive _____________ occurs when an agreement is overly harsh or lopsided.

unconscionability

The common law would not enforce contracts the courts deemed ______. unconscionable restrictive unilateral to be in violation of usury

unconscionable

Under common law, a(n) ______ contract is unenforceable. unconscionable equitable conscionable equanimous

unconscionable

Heavily one-sided agreements are known as ______. unilateral contracts unconscionable contracts quasi-contracts limited-capacity contracts

unconscionable contracts

The enforceability of covenants not to compete in employment contracts: _______. is a matter of federal statutory law is governed by the Uniform Employment Code (UEC), a uniform law adopted by 48 of the 50 states is a matter of federal constitutional law varies from state to state

varies from state to state

A contract overturned for illegal subject matter or for being illegal to perform is generally declared: _______. void voidable ab initio voidable void esse quam videri

void

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

void

When an agreement is deemed illegal, courts will usually label it ______. void enforceable salvageable contradictory

void

Generally, contracts made by intoxicated persons are ______. voidable enforceable unless they violate the Statute of Frauds valid void

voidable

Which of the following is not typically considered a necessary? Shelter Basic medical services A vacation Clothing

A vacation

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

Emancipation

Which of the following is not a recognized purpose of licensing statutes? Government protection of the public's safety Government protection of the public's welfare Government protection of the public's health Government protection of the public's constitutional rights

Government protection of the public's constitutional rights

Which of the following is not a recognized purpose of licensing statutes? Government control over which people can perform certain jobs Government retribution Government revenue Government control over how many people can perform certain jobs

Government retribution

Which of the following states allows casino gambling? Louisiana South Carolina Hawaii Utah

Louisiana

______ unconscionability occurs when an agreement is overly harsh or lopsided. Adhesion Exculpatory Procedural Substantive

Substantive

Which of the following is true of anticompetitive agreements? (Check all that apply.) They are against public policy. They follow antitrust laws. They are good for consumers. They restrain trade.

They are against public policy. They restrain trade.

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

Unconscionable

In which of the following situations are covenants not to compete enforceable? When it generates anticompetitive agreements in day-to-day business When it imposes restraints on trade When it is an integral part of the main agreement When it is in conjunction with the sale of a business

When it is in conjunction with the sale of a business

A severable contract is also known as a(n) ______ contract. derisive derogatory divisible divisive

divisible

The public policy argument in favor of supporting the enforceability of a restrictive covenant regarding the sale of a business involves the ______. transparency of the books fairness of the sale consideration in the contract execution of the sale at the agreed price

fairness of the sale

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

necessities