Business Law - Chapter 14

Which of the following are factors that favor upholding a noncompete agreement?

- It is ancillary to a legitimate bargain - It is fair to the employee - It is not overly broad - It is harmless to the public - It involves trade secrets

Which of the following are statements that, if true, would have strengthened the plaintiff's case in American Express Travel Related Services Company, Inc. v. Assih?

- Payments on the credit card are mailed to Utah - American Express is incorporated in Utah - Most of Assih's charges on his American Express card took place in Utah

Which of the following are circumstances under which an exculpatory clause is generally unenforceable?

- When the parties have unequal bargaining power - When it covers public transportation

When Alistair drops off his tuxedo at Whett Dry Cleaners for dry-cleaning, he signs Whett's standard exculpatory clause, which releases Whett from all liability in the event that any item of clothing is damaged, lost, or stolen while in its care. When Alistair returns to pick up his tuxedo, he is informed that the garment tore during the dry cleaning process. Alistair sues. Which of the following results is most likely?

Alistair loses because this is a valid exculpatory clause.

KwikKash is a payday loan company that gives cash to borrowers for a large fee. KwikKash recently loaned Claudette $1000 and required that she pay back $1500 within 30 days. Claudette fails to repay the loan and KwikKash sues. What is the most likely result?

Claudette will win because the loan violates usury laws.

Over her objections, Carlene's husband Silvio borrows $10,000 from his friend Evan so that he can achieve his dream of swimming with great white sharks in South Africa. Carlene knows Silvio has a reputation for being reckless, but she still finds it pretty alarming that Evan and Silvio's friend Constantine and Silvio's business partner Persephone each take out a life insurance policy on Silvio a month before his trip. Who can legally have an insurance policy on Silvio?

Evan, Persephone and Carlene.

Gambling on credit is always illegal.

False

Students should go to Las Vegas and incur large gambling debts because the debt will not be enforced against them.

False

The UCC's unconscionability rule makes it harder for a plaintiff to recover.

False

Bailment

Giving possession and control of personal property to another person.

Guyan Machinery, a North Carolina manufacturing corporation, hired Albert Voorhees as a salesman and required him to sign a contract stating that if he left Guyan he would not work for a competing corporation anywhere within 250 miles of North Carolina for a two-year period. Later, Voorhees left Guyan and began working at Polydeck Corp., another North Carolina manufacturer. The only product Polydeck made was urethane screens, which comprised half of 1 percent of Guyan's business. Is Guyan entitled to enforce its noncompete clause?

No, because it is not essential to the employer.

Richard and Michelle Kommit live in California, where gambling on credit is illegal. They travel to Atlantic City, where they used their credit card to withdraw cash from an ATM conveniently located in the "pit"— the gambling area of a casino. They ran up debts of $5,500 and did not pay. The California National Bank sued for the money in a California court. Who wins?

Richard and Michelle Kommit

Rudolph hired Moe to walk his dog every weekday. Rudolph hands Moe a check for a month of excellent work. "Thanks!" says Moe. "This will help me pay for the silly citation I just got from the city, since I never licensed my dog walking business. They make us get licenses just to raise money for the city! What a scam." When Rudolph learns that Moe's business is unlicensed, he refuses to pay. What result?

Rudolph owes Moe money because the licensing issue is irrelevant to their agreement.

Sophie is an accomplished plastic surgeon who has lost her medical license due to her addiction to illegal drugs. Vanessa hires Sophie for a "Filler party" in which Sophie, using a simple medical procedure designed to reduce wrinkles, injects a filler into the foreheads of Vanessa and ten of her friends. Vanessa fails to pay Sophie and Sophie sues. What result?

Sophie will lose because she does not have a medical license.

For 20 years, Art's Flower Shop relied almost exclusively on advertising in the Yellow Pages to bring business to its shop in a small West Virginia town. One year, the Yellow Pages printer accidentally did not print Art's ad, and Art's suffered an enormous drop in business. Art's sued for negligence and won a judgment of $50,000 from the jury. The printing company appealed, claiming that under an exculpatory clause in the contract, the company could not be liable to Art's for more than the cost of the ad (about $910). Art's claimed that the exculpatory clause was unconscionable. Please rule.

The clause is unenforceable because it is unconscionable.

Zazzles Jewelry sells Chic Boutique 150 necklaces. Zazzles sues when Chic defaults on its payments, and the court finds that some of the repayment terms in the contract are unconscionable because they place undue burdens on Chic. Zazzles is willing to make the repayment terms more favorable to Chic but wants the rest of the contract enforced. What is likely to occur?

The contract is governed by the UCC, so the court may choose to enforce the remainder of the contract.

Which of the following are examples of what a lender who charges usurious rates of interest may forfeit?

The entire loan The illegal interest All interest

Bailee

The person accepting possession.

Bailor

The person giving up possession of personal personal property.

When Tremaine arrived in Cincinnati, he rented an SUV from a car rental company in the airport terminal. A month after the trip, he noticed that the charge on his credit card for the SUV was much higher than he anticipated because the rental company had charged him $30 per gallon to refill the gas tank. He reviewed the eleven-page rental contract and noticed on page seven a provision about the gas charge. He saw another provision on page ten stating that in order to file a dispute with the company he would be charged a $750 "Investigation Fee" for his claim to be reviewed. Tremaine sues the rental company. Which of the following outcomes is most likely?

Tremaine will win because the contract was procedurally and substantively unconscionable.

An exculpatory clause is generally unenforceable unless the clause is clearly written and readily visible.

True

__________ laws prohibit charging excess interest on loans.

Usury

The court in American Express Travel Related Services Company, Inc. v. Assih declined to apply ____________ to the dispute because New York ____________.

Utah law follows the "substantial relationship" approach

You have decided to take out insurance policies on as many people as possible. Of the individuals listed below, highlight the five on whom you can most likely take out a policy:

Your business partner An acquaintance who owes you money Yourself Your father Your wife

A contract may be void even if it does not violate a statute. When this occurs it is usually because the agreement is prohibited _______ and the contract will be struck down __________.

by public policy under common law rules

Judges are slightly more apt to enforce a(n) __________ clause in a _________ case because any harm is to ___________ and not __________.

exculpatory bailment property persons

A gambling contract is ________ unless it is a type of wagering __________ by state statute.

illegal specifically authorized

Based on the language in the decision in Cesar's suit against Soheil Sadri, it is reasonable to infer that the California court _________________.

is very skeptical of gambling

In 1824 an English jurist described public policy as "an unruly horse" because ______________.

it is unpredictable

In Williams v. Walker-Thomas Furniture Co., the court held that even though the defendant signed the contract, the bargain could be unconscionable because ____________.

it was unlikely that the defendant consented to all the terms

When Dahlia finds out that Marlon does not have the license required to do his job, she tries to get out of their contract. If the contract is enforced, it is probably because _____________.

licensing requirements in Marlon's industry are not designed to protect the public.

A person may take out an insurance policy on ____________________.

someone on whom he has an insurable interest.

In King v. Head Start Family Hair Salons, Inc., the court ____________________________.

sought to balance the interests of King and Head Start

Fill in the blanks with the words that best complete the statement:

unconscionable fundamental unfairness

Free trade is the basis of the U.S. economy, and any bargain that restricts it is ______________.

suspect

The Supreme Court has ruled that when national banks issue a credit card, they can use the interest rate of ________ or of ____________, whichever is __________.

their own state The consumer's state higher

To be __________, an agreement _________ must be _________ to a legitimate bargain.

valid not to compete ancillary

Illegal agreements fall into two groups: those that violate a public policy and those that _________.

violate a statutue

When hearing a case involving an illegal and void contract, a court will:

will not intercede to assist either party