Exam 3 study guide
Which of the following would generally be considered to be a regulatory licensing law?
A statute requiring that doctors be licensed after finishing medical school
Which of the following would generally be considered to be a revenue-raising licensing law?
A statute requiring that salespeople be licensed, but not establishing any educational or training requirements
A contract by which of the following is void?
A thirty-six year old man under a court-ordered guardianship for mental incompetency
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:
Agreement is unenforceable and opposed to public policy
Al has a tax service and accounting business in Redwood City. He decides to move to Center City, which is 150 miles away and sells his accounting practice to Able and Baker, a CPA firm. In the sales contract he agrees that he will refrain from practicing accounting anywhere within a 20-mile radius of Redwood City for a period of two years. However, on weekends he returns to his house in Redwood City and when clients call he meets with them in his home
Al is in violation of the sales agreement
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.
All of these are correct
Which of the following would be considered a valid and legally enforceable agreement?
An agreement by a cars salesman not to sell automobiles or automobile parts in Marin County for a period of one year after terminating his employment
Which of the following would always be considered to be contrary to public policy?
An agreement to pay someone to make false, negative statements about a competitor's product
Which of the following is true with regard to an exculpatory clause?
An exculpatory clause excuses on party from liability for her own tortious conduct Where one party has a superior bargaining position that has enabled him to impose an exculpatory clause upon the other, the courts are inclined to nullify the provision An exculpatory clause may be unenforceable for unconscionability
Claudia sells her highly successful hair salon to Carl. In the sales contract, Claudia agrees never to open a hair salon in the state. Which of the following best describes this
An unenforceable restraint of trade contrary to public policy
Non-compete agreements drafted for employees of internet companies
Are subject to larger geographic restrictions than for other types of companies
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?
Because this is a partially illegal contract, the remainder of the contract may be enforced
Cheryl, age 16, ordered a new dress to wear to the school prom. She has contracted to pay $500 when the dress arrives. Before the dress arrives, Cheryl decides that the dress is too expensive and now wishes to cancel the order
Cheryl may disaffirm this executory contract
Anna, a minor, disaffirmed her agreement to buy $127 worth of cosmetics from Facial Glo Company. She had used up all the eye shadows, lipsticks, and powders. The general rule is that she may:
Disaffirm but she has to return the makeup that is not used up
Donald, a minor, makes a contract with Albert, an adult, to buy a computer. One week later, Donald has his eighteenth birthday and shortly thereafter tells Albert he will pick up the computer next week
Donald has expressly ratified the contract
Fay, age 17, ordered a pair of skis on the installment plan. She paid $20 every month until she turned 18, the age of majority. The next day, she sold them to Sharon and disaffirmed the contract. What result
Fay is still liable because selling the skis amounts to a ratification.
Which of the following is most likely to be classified as a necessary for which a minor will be held liable on a contract?
Food.
Sixteen year old Laura's disaffirmance of a contract
For a sale of land by her is not effective until after she reaches the age of majority
Which of the following is correct regarding the contractual liability of incompetent persons?
For executed, fair contracts with a mentally incompetent who understands but cannot control his behavior to act rationally, the incompetent must restore the competent party to the status quo before the transaction by a return of the consideration received or its equivalent in money
Theresa is a travel agent at the Fly Away Travel Agency. She has signed an agreement with her employer which prohibits her from working in any similar business in any town within a 100-mile radius of where she works. If she wants to quit her job and go to work for another travel agency, it is likely that
If no trade secrets are involved and she has no dominion over customers, a court would rule the restrictions to be invalid
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 ad withdraw from the transaction
Juliet cannot sue to recover any money because the contract wager is unenforceable
Nell gives Al $50 in return for Al's promise to defame Sara. Nell hopes to ruin Sara's chances at a promotion. Nell finds out that Al did not hold up his end of the agreement. Which of the following is true?
Legally, Nell can neither get the money back nor force Al to do as he promised.
Divided Parcel (DP) includes the following on its mailing receipts: "We are not responsible for any damages to packages whether or not through the fault or negligence of our employees. Send packages at your own risk." Mary reads this clause but send her watch back to its manufacturer to be repaired anyway. The watch is destroyed when the DP driver uses the package for a ball and tosses it to his buddy. Mary is
Likely to collect from DP because it is a common carrier
Numerous states impose no limit on the rate of interest that may be charged on
Loans to corporations Credit card transactions Loans made by certain designated types of lenders
Wanda at age 17 purchased an expensive stereo system from Stereo Sales. If Wanda wishes to ratify this contract, Wanda:
Must reach the age of majority and ratify the contract as a whole
Before granting an injunction enjoining a former employee from competing in a described territory, the courts insist that the employer demonstrate that the restriction is:
Necessary to protect the employer's legitimate interest
Todd, a minor, rents an automobile from Rosa, an adult. Todd damages the vehicle when he negligently backs into a pole. Under the majority rule view, can Rosa recover damages from Todd?
No, his contractual immunity protects him from legal action by Rosa
Mary, age 17, sold Mark, age 22, the briefcase she got for graduation. Mark's father liked it and bought it from him. If Mary decides to disaffirm the contract, will Mark's father have to return the brief case to her?
No, if Mark's father bought it without knowing that Mary was a minor
When a minor's guardian furnishes her with an adequate wardrobe would a new hoodie be a necessary (in the majority of states)?
No, necessaries are items not provided by the guardian
Patrick agrees to sell two different goods to his friend Ron, a retailer. One item is legal, and one item is illegal. The contract price is $2,000.
Patrick may not recover payment for either of the goods if delivered Patrick may recover from the legal item but he may not recover from the illegal item
Percy, age 17, purchased a used mobile home from a mobile home dealer for $20,000. This price, however was twice the reasonable value of a mobile home. One month later, Percy wishes to disaffirm the contract. If the mobile home is considered a necessary, then:
Percy may keep the mobile home but is only liable for the reasonable value of the mobile home
Randy, a minor, buys a new four-wheel drive truck from the Jones Dealership. Randy sells this truck to his cousin, Steve, who is an adult. Steve converys this vehicle to Arthur Smith. Arthur does not personally know Steve or Randy. Which of the following expresses the status of this situation?
Randy may not recover the vehicle from Mr Smith
William recently sold his successful business to Janice. The contract for the sale contained an unreasonable restriction that did not allow William to open a similar business for fifteen years. The courts would, in this instance,
Reform the contract to make it reasonable and enforceable Refuse to enforce the unreasonable restriction
The UCC provides that if a court matter of law finds a contract for the sale of goods or a clause of such a contract to have been unconscionable at the time it was made, the courts may
Refuse to enforce the contract Enforce the part of the contract that is not unconscionable Limit the application of any unconscionable clause in order to avoid an unconscionable result
Robert is 17 years old. He lies to Bouyers Auto in order to induce it to sell him a new pickup. Bouyers falls for this lie and sells him the pickup. In most jurisdictions, which of the following is correct?
Robert may disaffirm and get his money back
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)
Ryan cannot disaffirm liability for his negligence
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?
Samantha is still liable because selling the earrings amounted to a ratification.
R&R Inc, entered into a contract with Scott, an agent, under the terms of which Scott would receive $20,000 if he stole trade secrets from the leading competitor of R&R. Scott performed his end of the agreement by delivering the trade secrets. R&R now refuses to pay Scott for his services
Scott will be unable to recover because this is an illegal contract
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?
Sean's slight intoxication did not destroy his capacity to contract.
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?
Seller obscured this warranty clause
Which of the following is not true regarding the contracts of intoxicated persons?
Slight intoxication will destroy one's contractual capacity
What is the effect of slight intoxication on the capacity of a person to enter into a contract?
Slight intoxication will not destroy one's contractual capacity.
Steve purchases a four-wheel drive truck from Belk Auto Sales. Steve is only 17 years of age. He wrecks the vehicle and attempts to disaffirm the contract and have Belk repay him all that he has paid. In the majority of jurisdiction, what would happen?
Steve may simply return the vehicle and get his money
John operates a small repair business and is in desperate need of a certain type of building material. He obtains the material from a large corporation, but is charged grossly unreasonable price and is forced to buy other material he does not need. In view of the buyers unequal bargaining power and unreasonable terms of the contract, this may be a case of
Substantive unconscionability
______ is a set of oppressive or grossly unfair contract terms or exclusions
Substantive unconscionability
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?
Such a clause is grossly unfair because it takes away any legal defenses that Buyer has
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?
That Jack, by waiting two years, ratified the contract.
Andrew owns a store in Polk County. His trade extends throughout River City, but not beyond the county limits. He sells his store to Betty and, as part of the transaction, agrees not to engage in the same business anywhere within the state for a period of 3 years.
The agreement is unreasonable and the agreement unduly interferes with the interests of the public
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?
The contract is valid unless Jack did not know he was entering into the contract, or lacked the mental capacity to comprehend its nature.
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?
The contract to purchase the land is voidable, because Veronica has not been adjudicated insane, and possible could still have understood the contract.
In most states, whether the time within which a minor disaffirms a contract constitutes a reasonable time is determined by:
The facts and circumstances of the case
Andrew owns a store in Polk County. His trade extends throughout River City, but not beyond the county limits. He sells his store to Betty and, as part of the transaction, agrees not to engage in the same business anywhere within River City for a period of 5 years
The geographic restraint is reasonable.
Which of the following is correct with regard to an enforceable restraint of trade?
The restraint should be no more extensive than is required to protect a specified property interest Restraints typically arise in connection with the sale of a business A typical restraint is a covenant not to compete
When a minor falsely advises the other party that he is of age and based upon that misrepresentation, the other party in good faith enters into a contract with the minor:
There is no uniform rule. States differ and depending upon the state, any of the above could be correct
Sarah is working hard on the mayoral campaign of Timothy. She thinks that just a few more votes could win the election, so she promises to pay her friend Violet $50 to register and vote. Violet does so, but timothy loses the election and Sarah now refuses to pay
This agreement is unenforceable and opposed to the public policy
Carl and rob are both engaged in road construction work. They know that several jobs are going to be up for public bids, and agree between themselves that Carl will bid on one job and Rob will bid on the other, so that they both have work this summer. When the bids are opened, Carl realizes that Rob has bid on both jobs. Rob is awarded both contracts. Carl now wants to sue Rob for breech of contract.
This is an agreement in violation of public policy that will not be enforced by the courts
Bill bets his friend $100 that the Patriots will win the next Superbowl
This is an illegal wagering agreement
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?
Three days after his 18th birthday, David telephones the seller and says, "I intend to keep my promise to you in our contract."
Ratification can occur in which of the following ways?
Through express language, through failure to make a timely disaffirmance, as implied from conduct
Which of the following would be a valid ratification?
Two weeks after his 18th birthday, Jerry sells the motorcycle he contracted to buy when he was 17 Two weeks after his 18th birthday, Jerry makes a payment on the installment contract he signed a month before Two weeks after attaining his 18th birthday, Jerry calls the bank to assure them that he will continue making payments on the loan agreement he signed a month before his 18th birthday
Under which of the following circumstances would a court be likely to enforce an illegal contract
Under certain circumstances in which the aggrieved party was unaware of the illegality
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?
Unenforceable as a violation of public policy
Which of the following is not true regarding the contracts of incompetent persons?
Unlike a minor, an incompetent person can never ratify a contract
Tim, who is a minor, enters into a contract with Violet, who is an adult. Which of the following is correct?
Violet may not disaffirm the contract
In which of the following situations would a minor be unable to disaffirm a contract which he had made?
Where the minor wishes to affirm part of a contract and disaffirm another part of the same contract
The court in Keser v. Chagnon examined which of the following issues?
Whether Chagnon ratified the contract for the purchase of the Edsel by delaying his disaffirmance of the contract.
When it is said that a contract made by a minor is voidable, which of the following is true?
While still a minor, he can disaffirm the contract and return the property.
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 Buns now refuses to pay Darius for his services. Darius has this option, he:
Will be unable to recover, because this is an illegal contract
Don has an employment contract with Dunkirk ice-cream. He sells ice cream and novelty ice-cream products. He has nine children and doesn't make enough money, so he decides to see if another dairy will hire him too. "After all," he reasons, "most stores carry four or five different brands." His employment contract prohibits him from competing. If Don sells for another dairy in addition to Dunkirk, will he e in trouble under his contract?
Yes, it is likely to be enforceable during employment.
Which of the following is least likely to be classified as a necessary for which a minor will be held liable on a contract?
a camera
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 reasonable period of time after reaching the age of majority.
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.
all of these are correct
A contract prepared on a standard form and offering terms on a take-it-or-leave-it basis is called
an adhesion contract
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
an adhesion contract
The type of substance ingestion that could lead a court to find one lacking in capacity is:
because of mental impairment, the person does not comprehend that a contract is being made or understand its consequences.
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
contrary to public policy
A buyer of a business may negotiate a ______ contract clause to keep the seller from running a competing business
covenant not to compete
A minor may avoid or __________ a contract by any expression of an intention to repudiate the contract.
disaffirm
The exercise of power to avoid a contract is known as
disaffirmance
Every adult is presumed to have capacity unless:
it is proven that capacity is lacking or there is status incapacity.
A ___ is an essential element for a promise or agreement to binding. An agreement without this is unenforceable and contrary to public policy
legal objective
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:
must sober up and ratify the contract as a whole
Custom Sales and rentals uses a four-page contract with important contract terms buried in the fine print. This is an example of
procedural unconscionability
Once __________ a minor cannot avoid a contract.
ratified
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 employees ability to find another job
reasonable and necessary
If a restriction in an employment contract is found to be too harsh, a court may do any of the following except:
refuse to void the restriction
A(n) ______ is a measure designed to protect the public from unqualified practitioners.
regulatory license
A(n) _______ is a measure designed to raise money by requiring the purchase of a license
revenue license
Fred operates a fledging remodeling business and is in desperate need of a certain type of drywall. He obtains the material from Megaworks, but is charged only a grossly unreasonable price and is forced to buy other materials 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:
substantive unconscionability
For the issue of capacity, a court will examine whether a party to the contract lacked contractual capacity when:
the time the contract was made.
Anna is 88 years old and under the legal guardianship of her daughter. One day Anna receives a telephone call from a health insurance salesmen and purchases $$00-a-moth Medigap insurance policy
this contract is void
______ means contrary to the dictates of the conscience; unscrupulous or unprincipled; exceeding that which id reasonable or customary; inordinate, unjustifiable
unconscionable
______ is when money is loaned at a higher rate of interest than the law allows.
usury
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:
void
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:
void
Alma enters into a contract while drinking a highly intoxicating beverage that causes memory loss. The resultant contract is:
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.
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 in the possibility of such gain or loss
wager
One issue before the court in the In Re The Score Board, Inc. case was:
whether Kobe Bryant, by his actions, ratified a contract with Score Board after reaching the age of majority.
One issue before the court in the First State Bank of Sinai v. Hyland case was:
whether the contract between Hyland's father and the Bank was void due to alcohol-related incapacity.
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:
would be voidable if, when she makes them, she is unable to comprehend the subject, nature, and consequences of the contracts.