business law test 6 - FINAL
False
Unconscionability exists only under Article 2 of the UCC. T/F
Is an unenforceable wagering agreement.
A and B make a bet concerning whether a certain rich citizen will die within the next year. Neither party has any economic interest in this person's fate, except for that created by the bet. This agreement: - Is an unenforceable wagering agreement. - Is unenforceable because it tends toward the commission of a crime. - Is unconscionable because it contemplates the destruction of life. - Is a valid and enforceable risk-allocation agreement.
May be divisible from the rest of the agreement, which means that the court will enforce the agreement without it.
A clearly illegal provision in an agreement: - Infects the whole agreement and makes it unenforceable. - Means criminal liability for the party who drafted it. - May be divisible from the rest of the agreement, which means that the court will enforce the agreement without it. - Can be rescinded if the weaker party voluntarily waives it.
Can only be ratified after the person has regained his mental capacity.
A contract made by a mentally impaired person: - Can only be disaffirmed after the person has regained his mental capacity. - Can only be ratified after the person has regained his mental capacity. - Normally is void rather than voidable. - a and b are true.
True
A contract made by a person who has been adjudicated to be insane and institutionalized or put under a guardian's care is void rather than voidable. T/F
False
A contract of adhesion is one that the courts will always enforce, because the strong public policies underlying the contract make it one to which courts must adhere. T/F
True
A minor's contract for necessaries makes the minor liable for the reasonable value of the necessaries furnished to him. T/F
True
A person who at the time of the contract lacked capacity due to mental impairment can ratify the contract once he regains his normal mental faculties. T/F
None of the above.
A person who is older than the age of majority may disaffirm a contract if: - The other party is a minor who lied about his age. - The other party is an emancipated minor. - The contract is for necessaries. - None of the above.
Are unenforceable if one of the parties is married to someone else.
Agreements made by unmarried people who are living together: - Are unenforceable regardless of their nature. - Are enforceable so long as they do not involve the division of property upon separation. - Are unenforceable if one of the parties is married to someone else. - Are enforceable regardless of their nature.
True
An agreement can be illegal even if no statute specifically states that such an agreement is illegal. T/F
True
An agreement to divorce one's spouse is illegal. T/F
True
An agreement to divorce one's spouse may be illegal. T/F
True
An exculpatory clause relieving a person from liability for her fraud will not be enforced. T/F
True
An exculpatory clause relieving a person from liability for her fraud will not be enforced. T/F
False
Bill and Wanda are living together without being married. They make an agreement that in the event they split up, Wanda will get the couple's waterbed. In most states, this agreement is unenforceable because it is an agreement between unmarried cohabitors. T/F
True
Bruce and Raj make a bet regarding whether Syracuse University will win the NCAA Men's Basketball Championship this year. Neither has any economic interest in the championship other than that which he has created through the bet. This is a wagering contract, and will be illegal if the state has the normal kind of contract forbidding wagering contracts. T/F
Cindy can still disaffirm.
Cindy Smith, age 16, buys a 1973 Chevy Camaro from Mike Mason, age 23, for $400. Cindy's indulgent parents, who give her everything she wants, loaned her the money for the car. The reason for Cindy's purchase is that all her friends have cars and she feels left out without one. One week after buying the car, however, Cindy changes her mind and told Mike that she wants to disaffirm the contract. When Mike comes to pick up the car and give Cindy her money, though, Cindy changes her mind again, telling Mike that "I'll stick by the deal." But when Cindy's parents gave her a new car for her seventeenth birthday, she finally decides to disaffirm once again. Which of the following is true? - Cindy cannot disaffirm because the car is a necessary. - Cindy cannot disaffirm because she ratified the contract by saying "I'll stick by the deal." - Cindy cannot disaffirm because we have a sale of goods and Article 2 of the UCC says that 16 is the age of contractual capacity. - Cindy can still disaffirm.
Cannot be ratified until the person has regained his mental faculties.
Contracts made by severely intoxicated people: - Are void rather than voidable. - Cannot be disaffirmed until the person has regained his mental faculties. - Cannot be ratified until the person has regained his mental faculties. - Are always binding, because the law does not want to reward drug or alcohol abuse.
True
Contracts that affect title to real estate cannot be disaffirmed until the age of majority. T/F
True
Contracts that affect title to real estate cannot be disaffirmed until the age of majority. T/F
False
Exculpatory clauses are enforced so long as the parties to the contract had equal bargaining power. T/F
False
Exculpatory clauses are enforced so long as the parties to the contract had equal bargaining power. T/F
They cannot relieve a party from liability for battery.
Exculpatory clauses: - They cannot relieve a party from liability for battery. - always are enforceable if they are clearly and conspicuously stated in the agreement. - may relieve an employer from liability for workers' compensation benefits. - are effective only when the party benefited by them owes a duty to the public.
True
Generally speaking, courts do not enforce illegal agreements or compensate parties who have performed under such agreements. Instead, the court leaves the parties where it finds them. T/F
Void.
In October of 1988, a court with the necessary subject-matter jurisdiction holds Rodney Doodle mentally incompetent and appoints a guardian for him. Rodney, a former business law professor, is the victim of a debilitating mental illness brought on by teaching the law of contractual capacity for too many years. In November of 1997, Rodney escapes his guardian's care and takes off on his own. While eating lunch with Ed Sleaze, who knows about Rodney's condition, Rodney signs an agreement to sell a valuable property he owns. When he signs the contract, Rodney believes that he is a movie star signing an autograph for an adoring female fan. The agreement between Rodney and Ed is best described as: - Void. - Voidable. - Unenforceable. - Perfectly valid, if the price Ed pays for the property is fair.
Can sometimes be ratified.
In general, contracts made by insane (mentally impaired) persons: - Can sometimes be ratified. - Are always void. - Are always voidable. - Are voidable only if they involve necessaries.
False
In most states today, minors have the right to disaffirm medical insurance contracts. T/F
False
In most states today, the age of contractual capacity remains 21. T/F
False
In most states, in order for a minor to have the capacity to contract, he must be emancipated. T/F
False
In order to have any chance of being enforced, an illegal agreement must be indivisible. T/F
False
In order to have any chance of being enforced, an illegal agreement must be indivisible. T/F
Smith probably wins, because parties for whose protection a regulatory statute has been enacted often can recover amounts paid under a contract declared illegal by the statute.
In violation of a state licensing statute, Jones purports to be an attorney. After making that allegation, he contracts to perform legal service for Smith. Smith then pays Jones a $500 retainer. Later, after discovering that Jones is not licensed and therefore cannot get the job done, Smith sues Jones for the $500. What is the most likely result, and why? - Smith definitely wins, because here we have a revenue-raising statute. - Smith probably wins, because parties for whose protection a regulatory statute has been enacted often can recover amounts paid under a contract declared illegal by the statute. - Smith definitely loses, because here we have a regulatory statute. - Smith probably loses, because the law obligates one to check the licensure of a professional with whom one deals.
False
In virtually all the states today, a minor's misrepresentation of his age has no effect on his ability to disaffirm a contract. T/F
Mary cannot disaffirm, but she is only bound to pay $25.
Mary, a self-employed 16 year old whose parents are dead, buys a dress on credit for $50. After receiving the dress and discovering that its reasonable value is only $25, Mary tries to disaffirm the deal before paying the $50 (and while she is still 16). In this case: - Mary cannot disaffirm, and she is bound to pay the full $50. - Mary cannot disaffirm, but she is only bound to pay $25. - Mary can disaffirm, and she can return the dress without paying for it. - Mary can disaffirm, and she can keep the dress without paying for it.
Mike cannot disaffirm because he has already ratified the contract.
Mike Minor buys some real estate for investment purposes. The contract obligates Mike to make monthly installment payments for ten years. Mike reaches the age of majority one month after making the contract. After this, Mike makes 25 monthly payments under the contract, but then decides that he wants to rescind (disaffirm) the deal. Which of the following is most true? - Mike can disaffirm. - Mike cannot disaffirm because contracts for the sale of land can only be disaffirmed before the age of majority. - Mike cannot disaffirm because contracts for the sale of land must be disaffirmed within one year of the age of majority. - Mike cannot disaffirm because he has already ratified the contract.
True
Non-competition clauses in employment contracts are especially unlikely to be enforced where they restrict employees from earning a livelihood. T/F
True
Non-competition clauses in employment contracts are especially unlikely to be enforced where they restrict employees from engaging in a common calling. T/F
True
Non-competition clauses in employment contracts are less likely to be enforced than noncompetition clauses in other kinds of contracts. T/F
True
Non-competition clauses in employment contracts are only one form of agreement that places restrictions on an employee's conduct after the employment is over. T/F
Hefty will win, because the clause restricts him from engaging in a common calling.
Norm Hefty was a door-to-door salesman for Toothrot Candy Company. His duties were to call on customers and make sales in Bedford, Indiana, which is located in the southern part of the state. Toothrot's business territory covers the entire state of Indiana. Hefty and Toothrot had entered into a written employment contract at the time he joined the firm. One of the clauses in the contract stated that if Hefty ceased working for Toothrot, he could not work as a salesman for a competing company anywhere in Indiana for a period of five years. Hefty left his employment with Toothrot and promptly went to work as a salesman for a candy company that competed with Toothrot. His duties with the new employer were confined to the town of Elkhart, which is located in northern Indiana. Toothrot has sued Hefty in an effort to obtain an injunction against further violation of the non-competition clause in the parties' employment contract. Which of the following is most true? - Toothrot will win, because the clause's geographic scope was restricted to the state in which Toothrot does business. - Toothrot will win, because the time period of the clause was reasonable. - Both a and b are true. - Hefty will win, because the clause restricts him from engaging in a common calling.
False
Normally, a minor's power to disaffirm a contract ends once he reaches the age of majority. T/F
unenforceable.
Normally, an illegal contract is: - voidable - unconscionable - unenforceable - adhesive
True
Once a contract made by a minor has been effectively ratified, it cannot be disaffirmed. T/F
True
Once a contract made by a minor has been ratified, it cannot be disaffirmed. T/F
All of the above.
Once a court finds a contract or a term of the contract to be unconscionable, it may: - Refuse to enforce the entire agreement. - Enforce the contract without the unconscionable provision. - Change the unconscionable term so as to avoid any unconscionable result. - All of the above.
True
One example of procedural unconscionability is the statement of a contract's provisions in "fine print." T/F
True
One example of procedural unconscionability is the statement of a contract's provisions in "fine print." T/F
True
One example of substantive unconscionability is a grossly excessive price for a product. T?F
True
One example of substantive unconscionability is a grossly excessive price for a product. T/F
True
Ordinarily, an item is not considered to be a necessary if a parent or guardian already supplies the minor with similar items. T/F
True
Ordinarily, an item is not considered to be necessary if a parent or guardian already supplies the minor with similar items. T/F
False
Ordinarily, contracts entered into by mentally impaired people are void, while contracts entered into by intoxicated people are voidable. T/F
False
Ordinarily, contracts entered into by mentally impaired people are void, while contracts entered into by intoxicated people are voidable. T/F
Percy can disaffirm the contract, and he must return the coat.
Percy is a rich boy whose parents supply him with every conceivable necessity of life. While still a minor, Percy buys a coat on credit from a men's store for $5000. After wearing the coat for a while, Percy decides that it bores him and that he'd like to disaffirm. Which of the following is most likely to be true? Assume that Percy is still a minor. - Percy can disaffirm the contract, and he must return the coat. - Percy cannot disaffirm the contract, but he only is liable for the reasonable value of the coat. - Percy cannot disaffirm the contract, and he is liable for the full price of the coat ($5000). - Percy can disaffirm the contract and he need not return the coat.
False
Ratification of a contract made by a minor must be express (in words). T/F
May be unconscionable.
So-called "contracts of adhesion": - May be unconscionable. - Are absolutely binding. - Are always unenforceable. - Are voidable at the option of the weaker party.
False
State X has a statute saying that one must be licensed in order to engage in the business of mowing lawns. The statute also imposes a $50 annual license fee on anyone who would engage in this business. Joe contracts with Billy for Billy to mow Joe's lawn; the price is $20. Joe is not liable to Billy for the $20 because the contract is illegal. T/F
False
State X has a statute saying that one must be licensed in order to engage in the profession of mowing lawns. The statutes also imposes a $50 annual license fee on anyone who would engage in this business. Joe contracts with Billy for Billy to mow Joe's lawn; the price is $20. Joe is not liable to Billy for the $20 because the contract is illegal. T/F
True
The majority of courts do not enforce exculpatory clauses signed by parents releasing a party from negligence liability for future harm to their minor children. T/F
True
The traditional rule is that, where the consideration given a minor under a minor's contract has been lost, stolen, or dissipated, the minor can disaffirm without compensating the adult for the loss in any way. T/F
It is voidable.
Three days before she was judicially declared mentally incompetent and institutionalized, Irma bought a $50,000 automobile for cash and took delivery of it. Which of the following is true about this contract? Assume that Irma was pretty far gone when she bought the car. - It is voidable. - Due to Irma's institutionalization, it is void. - The contract cannot be disaffirmed because it is fully executed. - By paying cash, Irma ratified the contract.
Exists both at common law and under Article 2 of the UCC.
Unconscionability: - Exists only under Article 2 of the UCC. - Requires a jury trial. - Makes a contract voidable. - Exists both at common law and under Article 2 of the UCC.
True
Under the Restatement (Second) of Contracts, intoxication will make a contract voidable if the other party had reason to know that the intoxicated person was so intoxicated that he/she did not understand the transaction. T/F
False
Under the Restatement (Second) of Contracts, intoxication will make a contract voidable only if the other party had reason to know that the intoxicated person lacks the mental ability to contract. T/F
False
Under the theory that alcohol and drug use should not be rewarded, today most courts say that contracts made by intoxicated people are perfectly binding, no matter how severe the intoxication. T/F
False
Usery statutes have fallen out of favor; vitually no states have such statutes today. T/F
A contract that affects title to real estate.
Which of the following cannot be disaffirmed until after the age of majority? - A contract that affects title to real estate. - A contract for a necessary. - A contract that is fully executed. - A contract for the sale of goods.
A contract made by a person who has been adjudicated insane and institutionalized or put under a guardian's care.
Which of the following contracts is void? - A contract made by an unemancipated minor. - A contract made by a person who has been adjudicated insane and institutionalized or put under a guardian's care. - A contract made by a person under the influence of mind-altering drugs. - A contract made by a minor who receives no support from a parent or guardian.
A contract that violates a licensing contract whose aim is to raise revenue.
Which of the following contracts or contract provisions is most likely to be enforced? - A gambling contract. - A contract that violates a licensing statute whose aim is regulatory. - A contract that violates a licensing contract whose aim is to raise revenue. - A loan agreement that charges an interest rate which exceeds the limit set by state law.
A fine-print price term in a contract.
Which of the following is a possible example of procedural unconscionability? - A clause excluding a seller's liability for consequential damages arising from a defect in goods sold. - A clause imposing a penalty for a seller's failure to deliver the goods on time. - A high price term in a contract. - A fine-print price term in a contract.
A penalty clause obligating the buyer to pay five times the product's price for failing to accept goods when delivered.
Which of the following is an example of substantive unconscionability? - Terms that are stated in "fine print." - A disparity in bargaining power between the parties. - High-pressure sales tactics. - A penalty clause obligating the buyer to pay five times the product's price for failing to accept the goods when delivered.
Failing to disaffirm a completely executory contract within one month after the age of majority.
Which of the following is least likely to constitute ratification of a contract made by a minor? - Performing one's duties under the contract after reaching the age of majority. - Accepting performance from the other party to the contract after the age of majority. - Failing to disaffirm a completely executory contract within one month after the age of majority. - Making an oral statement that "I ratify the contract."
Such clauses are less likely to be enforced when they occur in an employment contract.
Which of the following is most true regarding non-competition clauses in contracts? - Such clauses are less likely to be enforced when they occur in an employment contract. - If they have a legitimate business purpose, such clauses will be enforced--no matter what their other provisions. - Such clauses only are enforced when they restrict one or both parties from engaging in a common calling. - A competitor cannot use such a clause to protect trade secrets, because this would inhibit competition.
Today, some courts let a minor disaffirm despite the misrepresentation.
Which of the following is true about situations where a minor misrepresents his age to get an adult to contract with him? - Today, some courts let a minor disaffirm despite the misrepresentation. - Traditionally, the courts would not let a minor disaffirm in such cases, since to allow disaffirmance would be to reward dishonesty. - Today, the courts all agree that a minor can disaffirm despite the misrepresentation. - Today, the courts all agree that a minor cannot disaffirm where the minor has misrepresented his age.
None of the above.
Which of the following is true about situations where a minor or former minor tries to disaffirm an executed contract in which the consideration furnished to the minor has been lost, stolen, or dissipated? - The traditional rule here is that the minor cannot disaffirm because the minor has nothing to give back to the other party. - The traditional rule here is that the minor cannot disaffirm because the contract is executed, and only executory contracts can be disaffirmed. - Today, the courts all agree that a minor can disaffirm here--without giving anything back to the adult. - None of the above.
None of the above.
Which of the following is true regarding exculpatory clauses in contracts? - So long as there is equal bargaining power and voluntary consent, such contracts will be enforced. - So long as the terms of the contract are conspicuously disclosed and clearly known, such contracts will be enforced. - Such clauses can be used to disclaim intentional tort liability. - None of the above.
True
X and Y make a bet concerning whether a particular warehouse will burn down within the next year. Neither has any economic interest in the warehouse. This is a wagering contract, and will be illegal if the state has the normal kind of contract forbidding wagering contracts. T/F
