ACCT 324: Smartbook Chapter 16

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

complete

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

contract

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

severable

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

unconscionable contracts

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

varies from state to state

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

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. void valid voidable enforceable

void

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

void

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

voidable

A minor would be most likely able to disaffirm which of the following contracts? A contract for a vacation A contract for a student loan A contract for psychological counseling A contract for enlistment in the armed services

A contract for a vacation

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

A contract for stereo equipment

In which of the following situations is a contract enforceable? (Check all that apply.) 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 violates the state law but not the federal law

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

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

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

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

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 unconstitutional. 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 unconscionable.

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

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

A vacation

Which of the following is a legally-recognized way to expressly ratify a contract? 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 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 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 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 unenforceable. 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 enforceable.

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

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

Both parties are discharged from their obligations.

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

Corporate loans for facilitating business transactions

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

Emancipation

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

Executing contracts Obtaining necessities Charity work

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? Full Felicitous Fallacious Federated

Full

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

Gambling

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

Government protection of the public's constitutional rights

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

Horse tracks State-run lotteries

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 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. A minor only has the right to disaffirm any portion of a contract pertaining to the provision of services.

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

Which of the following occurs when a former minor takes some action after reaching the age of majority consistent with the intent to ratify a contract? Express reaction Implied ratification Express renunciation Implied reaction

Implied ratification

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

In pari delicto

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

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? Limited Draconian Secular Resolute

Limited

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

Louisiana

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 do not have the right to void contracts for necessaries. Minors can disaffirm 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 enter into fully enforceable, valid contracts. Minors may enter into only void contracts. Minors may not enter into contracts. Minors may enter into only voidable contracts.

Minors may enter into only voidable contracts.

______ unconscionability describes conditions that impair one party's understanding of a contract, as well as the integration of terms into a contract. Subversive Procedural Procurement Substantive

Procedural

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.

Which of the following aspects are guaranteed government protection under licensing statutes? (Check all that apply.) Free speech Public health Public safety Business licenses

Public health Public safety

Rules against unconscionable contracts exist in both the ______ (Second) of Contracts and the Uniform ______ Code. Reformation; Commercial Restatement; Consent Reformation; Consent Restatement; Commercial

Restatement; Commercial

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

Show an intention by words or action to rescind the contract

Which of the following terms refers to an agreement that is overly harsh or lopsided? Substantive accountability Substantive unconscionability Procedural responsibility Procedural divisibility

Substantive unconscionability

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 may recover the fair market value of the consideration from the minor. The competent party has the right to reject or revoke the minor's disaffirmance. 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 no recourse against the minor.

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

Their legal portion can be enforced by the court. They can be partially voided by the court.

Which of the following are true of states where the purpose of licensing is to provide government control over the profession or generate revenue? They allow contracts with unlicensed professionals but do not enforce them. They enforce contracts with unlicensed professionals. They deem any contracts with unlicensed professionals to be illegal. They require unlicensed professionals to pay fine.

They enforce contracts with unlicensed professionals. They require unlicensed professionals to pay fine.

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

They restrain trade. They are against public policy.

Which of the following statements is correct regarding the legal exceptions to usury statutes? 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. 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.

Some types of agreements that are not illegal per se, are nevertheless unenforceable because courts deemed them to be against public policy. True False

True

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

Usury

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

When it is in conjunction with the sale of a business

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 marries When the minor starts getting an allowance from his or her parents When the minor moves out of the parents' house and begins supporting himself or herself

When the minor's parents or legal guardians give up their right to exercise legal control over the minor When the minor marries When the minor moves out of the parents' house and begins supporting himself or herself

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

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

adhesion

Public policy involves: _______. 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 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

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

enforceable

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

exceeding; maximum

A(n) ______ clause releases one of the contracting parties from all liability, regardless of who is at fault or what injury is suffered. severable restraint of trade adhesion exculpatory

exculpatory

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) necessary disaffirming implied express

express

Ratification may be either ______ or ______. active; passive proactive; reactive express; implied 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: _____. failed to complete their college education failed to properly supervise the child are part-time workers are the legal guardians of the child

failed to properly supervise the child

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

fairness of the sale

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 gaming wagering usury

gaming

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: _______. enforce the remainder of the contract without the unconscionable clause refuse to enforce the contract limit application of any unconscionable clause in order to avoid an unconscionable result impose statutory sanctions on the party who drafted the contract

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. exculpatory remedies lack of capacity severability in pari delicto

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: _______. impracticability duress incompetence coercion

incompetence

If declaring parts of a contract void would substantially alter it, such a contract is _________________________; in such a situation, a court must either enforce or reject the contract in its entirety.

indivisible

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

indivisible

Adhesion contracts are : _______. legal equitable per se illegal per se inequitable

legal

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

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. agreement; consideration license; consideration agreement; contract license; contract

license; contract

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

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. necessities frugalities desirables electives

necessities

As a general rule, parents are ______ liable for contracts entered into by their minor children. absolutely strictly conditionally not

not

If no exception allows a usurious loan, a few states declare all usurious loans void, which means that the lender is ______. entitled to recover half of the principal amount, but no interest entitled to recover the principal but not the interest not entitled to recover either principal or 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 deal covenant not to solicit covenant not to compete covenant not to poach 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. voidable void null not voidable

not voidable5

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

permissible

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

private; public

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

ratification

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

regardless of who is at fault

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

restrictive covenant

In the context of contracts, the legal capacity of a party refers to ______. the maximum value that the party can offer in the exchange the mental ability to understand his or her rights 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 violated statute is intended to protect the specific class to which the party belongs the party has already performed and fulfiled its part of the contract the contract was unilateral the contract was unconscionable

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

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

unconscionable