ch.14 BL

A judge ruled that Ron was mentally incompetent, placed him in a hospital, and appointed a guardian. Ron escaped from the hospital and purchased a recreational vehicle. In this situation: a. Ron's contract was void from the start. b. Ron can avoid the contract only if the salesperson knew he was mentally ill. c. Ron has a valid contract. d. Ron cannot avoid the contract as long as he had sufficient funds to pay for the vehicle.

a. Ron's contract was void from the start.

George is a minor who lives on his own. He orders clothing from FastShop. George later wants to disaffirm the contract. George can: a. disaffirm the contract, but must pay for the reasonable value of the goods. b. disaffirm the contract because this contract is unconscionable. c. disaffirm the contract and keep the clothing without payment because he is a minor. d. not disaffirm the contract.

a. disaffirm the contract, but must pay for the reasonable value of the goods.

Paul goes to a bar, has seven shots of whiskey, and then goes to an electronics store and buys a $2,500 stereo system. If he later wants to avoid the contract based on his intoxication when he made the purchase, he will need to prove that: a. he lacked the mental capacity to enter into the contract. b. the store clerk knew he was intoxicated. c. a reasonable person would have known that he was intoxicated. d. his capacity to act would be classified as "legally unstable."

a. he lacked the mental capacity to enter into the contract.

Egbert, who is sixteen years old, purchases a $500 video game system and a $50 computer chair from CompuStore. Egbert changes his mind and wants to avoid the contract for the video game system but not the computer chair. Egbert may: a. only disaffirm the entire contract. b. disaffirm part of the contract for the video game system as he wishes. c. may not disaffirm the contract because it is for necessaries. d. disaffirm only the computer chair because it is incidental to the contract.

a. only disaffirm the entire contract.

Floyd signs a contract to buy a drum kit just before reaching the age of majority. After reaching the age of majority, Floyd does not take possession or make payments. With respect to the contract, most courts would hold that this is a. ​disaffirmance. b. ​emancipation. c. ​ratification. d. ​restitution

a. ​disaffirmance.

Shannon signs a contract with Tevin, an unlicensed contractor in a state that requires all contractors to be licensed for safety reasons, to build a deck and gazebo at the rear of her house. This contract is enforceable by a. ​no one. b. ​Shannon. c. ​Tevin. d. ​any third party who is not aware that Tevin is not licensed.

a. ​no one.

Jake and Kline make an illegal contract that unjustly enriches Jake at the expense of Kline. A court will a. ​not be concerned with the unjust enrichment of Jake. b. ​enforce the contract as it was originally written. c. ​reform the contract to prevent undue burdens. d. ​award damages to Kline.

a. ​not be concerned with the unjust enrichment of Jake.

A court adjudicates Henry mentally incompetent and appoints Inez to be his guardian. Later, without Inez's knowledge, Henry signs a contract to sell his farm to Jason for its real market value. The contract is a. ​void. b. ​enforceable if Henry comprehended the consequences. c. ​enforceable if Henry was the record owner of the farm. d. ​enforceable if Henry knew the market value of the farm.

a. ​void.

Jacob decides to sell his well-known dry cleaning business to Fred. In the sale agreement for the business, there is a clause stating that Jacob cannot open a competing dry cleaning business within ten miles of the business he is selling to Fred. This part of the agreement is known as: a. a covenant of goodwill. b. a covenant not to compete. c. a reformation. d. a covenant of satisfaction

b. a covenant not to compete.

GavelCo Insurance sells an insurance policy to Barry in the state of Colorado. GavelCo violates a Colorado state statute when doing so. Later, Barry gets into a dispute with GavelCo over coverage under the insurance policy and wants to enforce the contract. The insurance contract will be: a. unenforceable. b. enforceable by Barry, the purchaser, and he can recover from the insurer if applicable. c. enforceable by both parties just as any other contract. d. enforceable, but only if a court finds the contract unconscionable.

b. enforceable by Barry, the purchaser, and he can recover

Daniel enters into a contract that requires him to pay interest at a rate greater than the legal state maximum. The contract might be enforceable if: a. Daniel is a minor. b. the loan is for a small amount and Daniel would not be able to obtain a loan otherwise. c. Daniel's guardian entered into the contract for him. d. the contract is reasonable.

b. the loan is for a small amount and Daniel would not be able to obtain a loan otherwise.

Amjed sues Larry, a landowner on whose property Amjed was injured. Larry believes that Craig is a lawyer and hires Craig to defend him in the lawsuit. Craig is not a lawyer, so the contract between Larry and Craig: a. will be enforced only if Craig wins. b. will not be enforced. c. will be enforced unless Craig loses the case. d. will be enforced despite Craig's winning or losing of the case.

b. will not be enforced.

A contract between Kim and Larry to lease residential property contains an exculpatory clause. This clause is a. ​enforceable as a matter of public policy. b. ​generally unenforceable. c. ​enforceable if an event occurs to which the clause applies. d. ​enforceable if either party is in a business important to the public.

b. ​generally unenforceable.

Laurel enters into a contract to sell her bike to Melanie. Melanie takes possession of the bike as a minor and continues to use it well after reaching the age of majority. She has a. ​impliedly disaffirmed the contract. b. ​impliedly ratified the contract. c. ​expressly ratified the contract. d. ​expressly disaffirmed the contract.

b. ​impliedly ratified the contract.

Orin signs a covenant not to compete with his employer, Product Distribution, Inc. The covenant will be enforced if it a. ​none of the choices. b. ​is reasonable with respect to geographic area and duration. c. ​relieves the employer from liability for any injury to Orin. d. ​does not require either party to obtain a business license.

b. ​is reasonable with respect to geographic area and duration.

Fagin and Gage agree to hijack a truck carrying a load of almonds. If Fagin later refuses to go through with the crime, Gage can a. ​obtain damages in the amount of his own share of the illegal profits. b. ​none of the choices. c. ​obtain damages in the amount of his partner's share of the illegal profits. d. ​enforce the agreement.

b. ​none of the choices.

Emma, a minor, buys a water bottle, a set of weights, and a treadmill from Fitness Warehouse. Later, Emma disaffirms the deal. If the goods are still in her possession or control, she can keep a. ​all of the goods. b. ​none of the goods. c. ​the water bottle, but not the weights or the treadmill. d. ​only the damaged or used goods

b. ​none of the goods.

Oscar owns Payroll Company, a bookkeeping service. Oscar pays Remy $5,000 to steal a list of a competitor's clients, to whom Oscar will aggressively market Payroll's services. This deal is a. ​enforceable. b. ​void. c. ​voidable at the option of the party having less bargaining power. d. ​voidable at the option of either party.

b. ​void.

Keisha contracts with a broker to invest all of her savings. The year goes badly, and she loses almost all the money. She is too ill to return to work and will be penniless if she cannot avoid the contract. Which of the following applies? a. She can avoid the contract based on the general gambling rule. b. She can avoid the contract because stock market transactions are against public policy. c. She has no legal recourse. d. She can appeal to her governor for clemency.

c. She has no legal recourse.

Patrick agrees to pay Anna $25,000 in exchange for Anna taking Patrick's hazardous waste and surreptitiously dumping it on the property of a competitor. After Anna dumps the waste, Patrick refuses to pay. This contract will: a. be enforced because it has sufficient consideration and is a bargained-for exchange. b. be unenforceable due to usury laws. c. be void from the outset and thus unenforceable. d. be enforced because both parties agreed to the contract and will be held accountable to its terms.

c. be void from the outset and thus unenforceable.

To celebrate his seventeenth birthday, Alan buys a new computer. Two weeks later, his parents insist that he return it. Alan's attempt to return the computer will be: a. unsuccessful unless he gets court approval. b. successful, if he pays a fine. c. successful, because he has acted within a reasonable time. d. unsuccessful, because he has waited too long.

c. successful, because he has acted within a reasonable time.

Western Widget Co., Karelia Manufacturing Inc., and Johnson Industries Co. all enter into a contract to not recruit each other's employees, and to set coordinated prices for their products sold in the U.S. market for the next three years. This contract is: a. enforceable because it is not unconscionable against one or more of the parties. b. enforceable because it is not illegal. c. unenforceable because it is a restraint of trade. d. unenforceable because it involves an agreement between businesses.

c. unenforceable because it is a restraint of trade.

Countrywide Trucking Inc. contracts with Dewey to transport crated goods to a certain destination for $5,000. Countrywide delivers the crates, but Dewey does not pay. Countrywide learns that the crates contained stolen goods. Countrywide can recover from Dewey a. ​the goods but not $5,000. b. ​none of the choices. c. ​$5,000, but not the goods. d. ​the goods and $5,000.

c. ​$5,000, but not the goods.

Jeff is seventeen years old. Legally, Jeff is considered a. ​an adult. b. ​ratified. c. ​a minor. d. ​emancipated.

c. ​a minor.

The state of Illinois enacts a usury statute. The purpose is to a. ​prevent the misuse of money advanced as loans. b. ​establish a minimum rate of interest that may be charged for loans. c. ​establish a maximum rate of interest that may be charged for loans. d. ​prevent the misuse of money paid back on loans.

c. ​establish a maximum rate of interest that may be charged for loans.

Baylor obtains a loan from City Bank at 4.5 percent interest. Their state's usury statute limits interest rates to a 3.5 percent maximum. Baylor's contract with the bank is enforceable only if a. ​the bank does not attempt to disaffirm it. b. ​both Baylor and the bank knew of the state limit. c. ​none of the choices. d. ​Baylor does not attempt to disaffirm it

c. ​none of the choices.

Check My Work Intoxicated and not aware of the consequences, Grady agrees to a two-year phone service contract with Horizon, Inc., at more than the average market price. This contract is a. ​not enforceable because contracting parties can change their minds. b. ​not enforceable because the contract favors Horizon. c. ​not enforceable if Grady was intoxicated enough to lack mental capacity. d. ​enforceable.

c. ​not enforceable if Grady was intoxicated enough to lack mental capacity.

Heather is sixteen but looks much older. She goes into a jewelry store and buys a diamond bracelet with the money she has been saving for college. If Heather realizes a year later that it was unwise to spend the money on the bracelet, she: a. can return the bracelet, but she will only get 50 percent of what she paid for it. b. cannot return the bracelet, because she has kept it too long. c. can disaffirm this contract only if she has turned eighteen. d. can return the bracelet and get her money back.

d. can return the bracelet and get her money back.

Melissa is a minor who agrees to purchase a car from Umberto for $10,000, one month after she turns 18. Upon turning 18, Melissa writes to Umberto, stating that she still agrees to purchase the car. Melissa's contract with Umberto is: a. enforceable because Melissa and Umberto agreed to the purchase of a car. b. unenforceable because Melissa was a minor when she entered into the contract. c. unenforceable because Melissa has a right to disaffirm the contract. d. enforceable because it has been expressly ratified by Melissa.

d. enforceable because it has been expressly ratified by Melissa.

Marcy owns a trucking company that hauls goods all over the country. Wilson contracts with Marcy's company to transport ten tractor-trailer loads of goods from Ohio to Texas. After delivery of the goods, Marcy learns that all the goods had been stolen when her company took possession of them. The contract: a. is unenforceable and Marcy's company is now liable for the stolen goods. b. is unenforceable because the goods had been stolen and Marcy's company cannot collect its fee. c. is unenforceable unless Marcy's company can return the goods. d. is enforceable because Marcy's company was justifiably ignorant of the fact that the goods had been stolen.

d. is enforceable because Marcy's company was justifiably ignorant of the fact that the goods had been stolen.

Elisa truly believes that she is a space alien from the planet Zelnor. She walks into a car dealership and buys a new Volkswagen Jetta, telling the salesperson that she needs a sample of Earthling transportation to beam back to her home planet. If Elisa wants the option to avoid her contract later, she must: a. prove that the car dealership did not take adequate precautions to prevent sales to mentally disturbed individuals. b. prove that the salesperson talked her into buying the car. c. prove that a court had judged her to be mentally incompetent previously. d. prove that she lacked adequate mental capacity when she bought the car.

d. prove that she lacked adequate mental capacity when she bought the car.

Chet, a minor, signs a contract with Denise, an adult. The contract is voidable at the option of a. ​neither party. b. ​either party. c. ​Denise only. d. ​Chet only.

d. ​Chet only.

Bay City Mall requires its tenants to sign a lease that includes a clause releasing Metro from liability in the event of monetary or physical injury no matter who is at fault. Coco's Chocolate signs a lease with Bay City that contains the clause. This is a. ​a covenant not to compete. b. ​an illusory promise. c. ​an adhesion contract. d. ​an exculpatory clause.

d. ​an exculpatory clause.

Geri is a minor. Without her parents' knowledge, she signs a contract to buy an airline ticket to Hawaii for spring break. Geri's parents are liable for a. ​the entire price of the ticket. b. ​up to half of the price of the ticket. c. ​up to two-thirds of the price of the ticket. d. ​no part of the price of the ticket.

d. ​no part of the price of the ticket.

Betty sells her Clothes Shop to Diane. In the sale agreement, there is a covenant not to compete that prohibits Betty from opening another clothing store within a certain distance. If a court concludes that this restriction is unreasonable, it will most likely a. ​award Betty damages equal to the speculative profit of a closer store. b. ​prohibit both parties from opening clothing stores. c. ​order Diane to stop doing business. d. ​reform the covenant

d. ​reform the covenant

Elena, a minor, obtains fruits and vegetables on credit from Fred at Growers' Market. Later, Elena disaffirms the purchase. She owes Fred a. ​the goods. b. ​the retail value of the goods. c. ​nothing. d. ​the reasonable value of the goods.

d. ​the reasonable value of the goods.