Chapter 11 LENB Capacity and Legality Mult Choice

49) How many states regulate professional licenses? A) 50 B) 49 C) 45 D) 30 E) 25

A Explanation: All 50 states have statutes requiring that people working in certain professions obtain a license before practicing their craft.

41) A(n) ________ occurs when a former minor does not specifically state that he affirms a contract entered into as a minor, but takes some action that is consistent with an intent to ratify the contract. A) implied ratification B) express ratification C) express novation D) implied novation E) disaffirmance

A Explanation: An implied ratification occurs when the former minor takes some action after reaching the age of majority that is consistent with an intent to ratify the contract.

54) How many states engage in at least some regulation of gambling? A) 50 B) 47 C) 40 D) 35 E) 10

A Explanation: As with licensing statutes, all states engage in at least some regulation of gambling.

23) A person may have either no capacity, and therefore any attempted contract is ________, or limited capacity, resulting in ________ contracts. A) void; voidable B) voidable; void C) conditional; unconditional D) unconditional; conditional E) informal; formal

A Explanation: Depending on the nature of his or her mental or physical defect, a person may have either no capacity, and therefore any attempted contract is void, or limited capacity, resulting in the ability to form only voidable contracts.

29) In most cases, when a minor marries, she or he is considered ________. A) emancipated B) subrogated C) subjugated D) disaffirmed E) either emancipated or subrogated, depending on the details of the marital arrangement

A Explanation: Emancipation occurs when a minor's parents or legal guardians give up their right to exercise legal control over the minor. In most cases, when a minor marries, she or he is considered emancipated.

44) Which of the following is true if a contract is disaffirmed on the basis of intoxication? A) Each party to the contract must return the other to the condition he or she was in at the time the contract was entered into. B) Only the intoxicated person must be returned to the condition he or she was in at the time the contract was entered into. C) Any party other than the intoxicated person must be returned to the condition he or she was in at the time the contract was entered into. D) So long as the contract was objectively fair, neither party must be returned to the condition he or she was in prior to the time the contract was entered into. E) So long as the contract was subjectively fair in the opinion of the intoxicated party, neither party must be returned to the condition he or she was in prior to the time the contract was entered into.

A Explanation: If the contract is disaffirmed on the basis of intoxication, each party to the contract must return the other to the condition she or he was in at the time the contract was entered into.

27) A minor may be given full legal capacity to enter into contracts when he or she becomes ________. A) emancipated B) aware C) sentient D) employed full-time E) employed at least part-time

A Explanation: In most states, a person is given full legal capacity to enter into contracts when he or she becomes emancipated. Difficulty: 1 Easy

21) A person who has legal ________ to contract is one who has the mental ability to understand his or her rights and obligations under a contract. A) affirmance B) capacity C) ratification D) construction E) assent

B Explanation: A person who has legal capacity to contract is one who has the mental ability to understand his or her rights and obligations under a contract and, therefore, will presumably be able to understand how to comply with the terms of the agreement.

40) Which of the following occurs when a person reaches the age of majority and states, either orally or in writing, that he or she intends to be bound by the contact entered into as a minor? A) Implied ratification B) Express ratification C) Express novation D) Implied novation E) Disaffirmance

B Explanation: An express ratification occurs when, after reaching the age of majority, the person states, either orally or in writing, that he or she intends to be bound by the contract entered into as a minor.

26) In most states, a minor is someone under the age of ________. A) 21 B) 18 C) 19 D) 23 E) 25

B Explanation: Today, in all but three states, a minor is someone under the age of 18. Difficulty: 1 Easy

22) Which of the following is an element of a legally binding contract? A) Inquiry B) Acknowledgement C) Capacity D) Knowledge E) Affirmance

C Explanation: Capacity is one of the elements of a legally binding contract.

28) Which of the following occurs when a minor's parents or legal guardians give up their right to exercise legal control over the minor? A) Ratification B) Disaffirmance C) Emancipation D) Subrogation E) Reaffirmance

C Explanation: Emancipation occurs when a minor's parents or legal guardians give up their right to exercise legal control over the minor, typically when the minor moves out of the parents' house and begins supporting him or herself.

30) In order to disaffirm a contract, a minor must ________. A) petition the court B) express in writing the intention to disaffirm C) express an intention by words or actions D) have his parents confirm in writing their consent to the disaffirmance E) select a portion of the contract to disaffirm, because a minor cannot disaffirm an entire contract

C Explanation: In terms of a minor's right to disaffirm a contract, no formalities are required; the minor need only manifest an intention to rescind the contract, either by words or by actions. The minor must disaffirm the entire contract; he or she cannot choose to disaffirm only a portion of it.

45) Which of the following is a correct statement regarding the remedy available for an unenforceable agreement? A) Only compensatory damages are available for an unenforceable agreement. B) Only consequential damages are available for an unenforceable agreement. C) No remedy is available for an unenforceable agreement. D) Compensatory damages and punitive damages are available for an unenforceable agreement, depending on the circumstances of the case. E) Compensatory damages, consequential damages, and punitive damages are available for an unenforceable agreement, depending on the circumstances of the case.

C Explanation: No remedy is available for an unenforceable agreement. Difficulty: 2 Medium

58) A party who claims that he or she could not understand contractual terms because of tiny, hard-to-read print on the back of an agreement and the excessive use of legalese is referring to which of the following? A) Substantive unconscionability B) Adhesion conscionability C) Procedural unconscionability D) Commercial impracticability E) An in pari delicto agreement

C Explanation: Procedural unconscionability relates to conditions that would impair one party's understanding of a contract, as well as to the integration of terms into a contract. Factors contributing to procedural unconscionability range from tiny, hard-to-read print on the back of an agreement to excessive use of legalese (unnecessarily technical legal language) or even the inability of a person to fully read over a contract and ask any questions before he or she is required to sign.

57) The term ________ refers to the fact that an agreement is so unfair that it is void of conscience. A) unreasonable B) outrageous C) unconscionable D) unrealistic E) unbelievable

C Explanation: There are times when agreements are so one-sided, or heavy-handed against one party, that the courts will not make the harmed, innocent person fulfill his or her contractual duties. These heavily one-sided agreements are known as unconscionable agreements. The term unconscionable refers to the fact that the agreement in question is so unfair that it is void of conscience.

55) Which of the following refer(s) to laws that limit the types of business activities in which parties may legally engage on Sundays? A) Sabbath laws only B) Blue laws only C) Red laws only D) Sabbath and blue laws, but not red laws E) Sabbath laws, blue laws, and red laws

D Explanation: A large number of states still have what are known as Sabbath, Sunday, or blue laws on the books which limit the types of business activities in which parties can legally engage on Sundays.

61) A statement releasing one of the parties to an agreement from all liability, regardless of who is at fault or what the injury suffered is, would be referred to as a(n) ________. A) substantive agreement B) adhesion agreement C) in pari delicto agreement D) exculpatory clause E) res ipsa loquitur

D Explanation: An exculpatory clause is a statement releasing one of the parties to an agreement from all liability, regardless of who is at fault or what the injury suffered is. Because tort law attempts to return the wronged party to the state he or she was in before the wrong occurred, anything preventing this corrective mechanism is against public policy. The patently unfair nature of an exculpatory clause is closely tied to the idea of unconscionable contracts.

64) A(n) ________ contract is one requiring complete performance by both parties, even if it appears as if the contract contains multiple parts. A) adhesion B) divisible C) in pari delicto D) indivisible E) independent

D Explanation: An indivisible contract requires complete performance by both parties, even if it appears as though the contract contains multiple parts, similar to a severable contract.

24) Which of the following is some sort of mental or physical defect that prevents a person from being able to enter into a legally binding contract? A) Undue influence B) Subjugation C) Duress D) Incapacity E) Insubordination

D Explanation: Incapacity, or incompetence, as it is sometimes called, is some sort of mental or physical defect that prevents a natural person from being able to enter into a legally binding contract. Depending on the nature of his or her mental or physical defect, a person may have either no capacity, and therefore any attempted contract is void, or limited capacity, resulting in the ability to form only voidable contracts.

31) Because their contracts are ________, minors have the right, until a reasonable time after reaching the age of majority, to ________, or avoid, their contracts. A) void; disaffirm B) void; affirm C) void; rescind D) voidable; disaffirm E) voidable; remand

D Explanation: One of the oldest limitations on capacity is the ability of minors to enter into only voidable contracts. Because their contracts are voidable, minors have the right, until a reasonable time after reaching the age of majority, to disaffirm, or avoid, their contracts.

42) Which of the following is true regarding the ability of persons suffering from a mental illness to enter into a binding contract? A) Persons suffering from a mental illness never have capacity to enter into a binding contract. B) Persons suffering from a mental illness have full capacity to enter into a binding contract, so long as they do not present a danger to themselves or others. C) Persons suffering from a mental illness have full capacity to enter into a binding contract, so long as they inform the other party that they are either in, or in the process of seeking, professional treatment. D) Persons suffering from a mental illness may have full, limited, or no legal capacity to enter into a binding contract, depending on the nature and extent of their mental deficiency. E) Persons who suffer from a mental illness always have full capacity to enter into a binding contract.

D Explanation: Persons suffering from a mental illness or deficiency may have full, limited, or no legal capacity to enter into a binding contract, depending on the nature and extent of their mental deficiency. Difficulty: 2 Medium

52) Which of the following occurs when a party gives a loan at an interest rate exceeding the legal maximum? A) An implied-in-law contract B) Interest prohibition C) Principal reduction D) Usury E) Plenary

D Explanation: Statutes prohibiting usury exist in nearly every state. Usury occurs when a party gives a loan at an interest rate exceeding the legal maximum.

63) A(n) ________ contract contains multiple parts that can each be performed separately. A) in pari delicto B) substantive C) adhesion D) executed E) severable

E Explanation: A severable contract, also known as a divisible contract, contains multiple parts that can each be performed separately. In addition, separate consideration is offered for each individual part. In essence, a severable contract is like numerous contracts in one.

43) Guardians may be appointed for which of the following individuals? A) Only those who have been adjudicated insane. B) Only those who have been adjudicated habitual drunkards. C) Only those whose judgment has been impaired because of a condition such as Alzheimer's. D) Those who have been adjudicated insane or those whose judgment has been impaired because of a condition such as Alzheimer's, but not those who have been adjudicated habitual drunkards. E) Those who have been adjudicated insane, those whose judgment has been impaired because of a condition such as Alzheimer's, and those who have been adjudicated habitual drunkards.

E Explanation: Guardians may be appointed not only for those who have been adjudicated insane but also for those who have been adjudicated habitual drunkards and those whose judgment has been impaired because of a condition such as Alzheimer's.

25) Historically, which of the following people were considered as having limited or no capacity to contract? A) Minors and single women over 16 B) Insane persons, single women, and minors C) Single women over 18 and insane persons D) Minors and insane persons E) Minors, insane persons, and married women

E Explanation: Historically, people with limited or no capacity to contract included married women, minors, and insane persons. Difficulty: 2 Medium

53) Which of the following is the maximum interest rate permitted by law? A) 20%. B) 15%. C) 12%. D) 10%. E) It varies, depending on the state involved.

E Explanation: Statutes prohibiting usury exist in nearly every state. Usury occurs when a party gives a loan at an interest rate exceeding the legal maximum. The legal maximum interest rate varies from state to state, but it is easy to determine the rate in any given state.

46) When contracts are against generally accepted public policy, these agreements are deemed ________. A) quasi-contracts B) voidable C) implied D) ratified E) unenforceable

E Explanation: When contracts are against generally accepted public policy, these agreements are deemed unenforceable and not void. No remedy is available for unenforceable agreements.