chapter 12

50) Which of the following is true about the ratification of a contract by a minor? A) A minor can only ratify a contract after reaching the age of majority. B) A minor cannot ratify a contract that falls under the necessaries of life doctrine. C) A minor can ratify a contract during the period of minority if he or she so wishes. D) A minor can ratify a contract under the guidance of a parent or legal guardian.

A) A minor can only ratify a contract after reaching the age of majority.

43) ________ is a rule that states that a minor is obligated only to return the goods or property he or she has received from the adult in the condition it is in at the time of disaffirmance. A) Duty of restoration B) Duty of restitution C) Infancy doctrine D) Emancipation doctrine

A) Duty of restoration

75) How is the doctrine of unconscionability related to public policy? A) The doctrine of unconscionability is derived from public policy. B) All contracts contrary to public policy are considered unconscionable. C) Both are used to save a contracting party from a bad bargain. D) Both are very distinctly defined by law.

A) The doctrine of unconscionability is derived from public policy

61) Which of the following is an example of a contract contrary to statutes by its very existence? A) a usurious loan contract B) a contract between two minors C) a contract where one party is insane but not adjudged insane D) a contract of adhesion

A) a usurious loan contract

76) Preprinted forms whose terms the consumer cannot negotiate, and must sign in order to obtain a product or service are referred to as ________. A) contracts of adhesion B) quasi-contracts C) contracts in restraint of trade D) voidable contracts

A) contracts of adhesion

47) If a minor ratifies a contract while still being a minor, ________. A) the contract can still be disaffirmed by the minor B) the minor is bound by the terms of the contract C) the minor is exempt from the duty of restitution D) the minor has to hold the adult in status quo in case of disaffirmance

A) the contract can still be disaffirmed by the minor

74) A(n) ________ is a contract that courts refuse to enforce in part or at all because it is so oppressive or manifestly unfair as to be unjust. A) unconscionable contract B) contract of adhesion C) contract in restraint of trade D) quasi-contract

A) unconscionable contract

57) A person who has alternative periods of sanity and insanity can enter into contracts ________. A) when he or she is in a state of sanity B) when there is a legal guardian appointed by the court for that person C) once he or she has been adjudged to be insane D) only once he or she has been adjudged to be legally insane

A) when he or she is in a state of sanity

40) Which of the following is true for a minor under the infancy doctrine? A) A minor is bound to the adult's decisions in a contract between them. B) A minor can disaffirm contracts he or she has entered into with adults. C) A minor cannot enter into a legal contract with another minor. D) A minor cannot choose to enforce a contract at his or her whim.

B) A minor can disaffirm contracts he or she has entered into with adults.

42) ________ is the act of a minor to rescind a contract under the infancy doctrine, either orally, in writing, or by the minor's conduct. A) Ratification B) Disaffirmance C) Sanction D) Adherence

B) Disaffirmance

45) 16-year-old Frank bought a video game console from John for $150. Frank is a minor, while John is a competent adult. A month later, the console started malfunctioning on its own. Frank returned the console to John. If Frank disaffirms his contract with John for buying the console, which of the following will be considered true? A) John is not bound by the contract any more as the exchange has been completed. B) Frank can reclaim full refund of the amount he paid. C) Frank can only ask for full refund once he has reached the age of majority. D) Frank is legally obligated to fix the console before returning it to John.

B) Frank can reclaim full refund of the amount he paid.

59) ________ set an upper limit on the interest rate that can be charged on certain types of loans. A) Federal banking reforms B) State usury laws C) Congressional committees D) Chambers of commerce

B) State usury laws

56) Which of the following is true of a contract where one of the parties is insane but not adjudged insane? A) The contract is voidable by the competent party. B) The contract is only voidable by the insane person. C) Only the court appointed legal guardian to the insane person can modify contracts. D) The non-insane person must be placed in status quo if the insane person voids the contract.

B) The contract is only voidable by the insane person.

55) Which of the following is true of a contract with an adjudged insane person? A) The adjudged insane person is bound by the terms of the contract. B) The contract is void. C) Only the competent party can enforce the contract. D) The competent party is legally obligated to uphold the contract.

B) The contract is void.

Darren is a certified interior designer with a lucrative client list in the city of Kelsa, situated in the state of Touslon. His business affords him a substantial amount of goodwill from his clients. Darren sells his accounting interior designing business to Glenda. When he sells his business to Glenda, Darren agrees not to open another interior designing firm in the city of Kelsa for a 25- year period.5 Copyright © 2013 Pearson Education, Inc. 72) What kind of agreement exists between Darren and Glenda in this case? A) contract in restraint of trade B) covenant not to compete C) unconscionable contract D) quasi-contract

B) covenant not to compete

51) The act or process of a minor voluntarily leaving home and living apart from his or her parents is referred to as ________. A) restitution B) emancipation C) restoration D) adhesion

B) emancipation

69) A(n) ________ is a contractual provision that relieves one or both of the parties to a contract from tort liability. A) contract of adhesion B) exculpatory clause C) duty of restitution D) fundamental breach

B) exculpatory clause

70) Bobby voluntarily enrolls in a skydiving course at OpenSkies Pvt. Ltd., an adventure firm. He signs a contract that relieves OpenSkies of liability. After receiving proper instruction, he jumps from an airplane. Unfortunately, Bobby is injured when he could not steer his parachute toward the target area while landing. He sues the parachute center for damages. But the court found that the contract protected OpenSkies from damages, as Bobby had voluntarily joined the course knowing all the risks involved. What kind of contractual provision protected OpenSkies from having to pay Bobby damages? A) noncompete clause B) exculpatory clause C) duty of restitution D) disaffirmance

B) exculpatory clause

68) According to the regulatory licensing statute, ________. A) unlicensed persons can recover payment for services B) only licensed persons can recover payment for services C) persons breaching a revenue-raising statute cannot recover payment for services D) all government-licensed persons have to pay an annual fee to renew their licenses

B) only licensed persons can recover payment for services

58) Which of the following groups is legally deprived from directly entering into contracts? A) minors B) persons adjudged insane C) persons with alternating states of sanity and insanity D) intoxicated persons

B) persons adjudged insane

67) Damien, a first-year law student, offers his services to Mr. Jenkins to help draft his will. Mr. Jenkins agrees to Damien's offer, and promises to pay him $400 for his services. Damien completes the draft of the will. But when Damien goes to collect his payment, Mr. Jenkins refuses payment. Damien knew that he had no legal recourse to enforce the contract. What statute had Damien violated in his contract with Mr. Jenkins? A) revenue-raising statute B) regulatory licensing statute C) usury statute D) ratification statute

B) regulatory licensing statute

52) The equitable doctrine of ________ obligates a minor to only pay reasonable value for goods or services received. A) emancipation B) restraint of contract C) contract of adhesion D) quasi-contract

B) restraint of contract

44) ________ is a rule that states that if a minor has transferred money, property, or other valuables to the competent party before disaffirming the contract, that party must place the minor in status quo. A) Emancipation doctrine B) Infancy doctrine C) Duty of restitution D) Duty of restoration

C) Duty of restitution

38) What is the significance of the age of majority in relation to legal contracts? A) People below the age of majority can directly enter into lawful contracts. B) Mentally incompetent persons need to achieve the age of majority in order to enter into a legal contract. C) It is the age above which people of capacity can enter into a legal contract. D) Minors who have entered the age of majority require his or her parents or guardian's consent to enter into a legal contract with adults

C) It is the age above which people of capacity can enter into a legal contract.

53) Which of the following is true of a minor's duty towards a contract for necessaries of life? A) Minors need to reach the age of majority to enter into contracts for necessaries of life. B) Minors are exempt from paying for contracts of necessaries of life. C) Minors must pay the reasonable value of necessaries of life for which they contract. D) Parents are liable to provide necessaries of life to their minor children if they become emancipated.

C) Minors must pay the reasonable value of necessaries of life for which they contract

46) ________ is the act of a minor after he or she has reached the age of majority, by which he or she accepts a contract entered into when he or she was a minor. A) Exculpation B) Restitution C) Ratification D) Emancipation

C) Ratification

60) The state of Transas has set a maximum interest rate of 12 percent on loans. Matt borrows $10,000 from Tony to pay off a gambling debt. Both are residents of Transas. They sign a contract, which states that Matt would have to pay $1,500 as interest in one year to pay off the loan. Later Matt finds out the state usury limit and sues Tony. What is the nature of the contract between Matt and Tony?

C) The contract is void as it violates usury laws.

71) A ________ is a contract that provides that a seller of a business or an employee will not engage in a similar business or occupation within a specified geographical area for a specified time following the sale of the business or termination of employment. A) quasi-contract B) contract in restraint of trade C) covenant not to compete D) contract of adhesion

C) covenant not to compete

49) In order for a minor to be bound by a contract with an adult after he becomes an adult himself, he must ________. A) disaffirm the contract before reaching the age of majority B) complete his or her contractual duties of restitution and restoration C) ratify the contract after reaching the age of majority D) place the adult in status quo till reaching the age of maturity

C) ratify the contract after reaching the age of majority

73) Which of the following aspects of the contract would the courts find reasonable? A) the line of business protected B) the geographic area protected C) the duration of the restriction D) the restriction of employment

C) the duration of the restriction

65) In which of the following situations would the effect of illegality be an exception? A) when both parties of an illegal contract execute their agreements B) when both parties of an illegal contract are considered in pari delicto C) when person is justifiably ignorant of the law or fact that made the contract illegal D) when a person completes his act of an illegal contract but is not paid for his consideration.

C) when person is justifiably ignorant of the law or fact that made the contract illegal

41) Which of the following is true about a minor's right to disaffirm a contract? A) A minor must reach the age of majority to disaffirm a contract. B) Contracts that come under the necessaries of life can be disaffirmed by minors. C) Minors are exempt from duty of restoration during the period of minority. D) A minor can disaffirm a contract any time prior to reaching the age of majority.

D) A minor can disaffirm a contract any time prior to reaching the age of majority.

64) What is the doctrine of in pari delicto with reference to contracts? A) It is a situation in which both parties are equally at fault in an illegal contract. B) It is a situation where one party has unknowingly signed a contract to commit crimes. C) It gives minors the right to disaffirm a contract. D) It is a special exemption right to circumvent usury laws.

D) It is a special exemption right to circumvent usury laws.

66) ________ is a licensing statute with the primary purpose of increasing earnings for the government. A) Usury statute B) Ratification statute C) Regulatory licensing statute D) Revenue raising statute

D) Revenue raising statute

63) The term ________ refers to a doctrine that states that the courts will refuse to enforce or rescind an illegal contract and will leave the parties where it finds them. A) disaffirmance B) exculpatory clause C) emancipation D) effect of illegality

D) effect of illegality

39) The ________ is a legal principle that allows minors to cancel most contracts they have entered into with adults. A) duty of restoration B) duty of restitution C) contract of adhesion D) infancy doctrine

D) infancy doctrine

48) If a minor entered into a contract, and then ratified the contract after reaching the age of majority, which of the following is he or she exempt from? A) duty of restoration B) duty of restitution C) necessaries of life D) infancy doctrine

D) infancy doctrine

54) Which of the following would constitute legal insanity? A) weakness of intellect B) emotional problems C) slight delusions D) mental retardation

D) mental retardation

77) Which of the following elements has to be proved for a contract to be deemed unconscionable? A) that the weaker party did not enter the contract under duress B) that the parties had equal bargaining power C) that the dominant party justly used its bargaining power D) that the adhering party had no reasonable alternative

D) that the adhering party had no reasonable alternative

62) Which of the following is true of a contract, the object of which has become unlawful after the creation of the contract? A) The contract is still legal as the object was legal at the time of creating that contract. B) The contract is illegal even if the parties don't complete the contractual agreement. C) The parties of the contract will be discharged from that contract. D) Both parties are still obligated to complete their contractual agreements.

The parties of the contract will be discharged from that contract.