Chapter 13

Assume that a contract was entered into for the sale of the restaurant, and that the sale included the covenant not to compete. Which of the following is true? The contract would be void, as covenants not to compete are a restraint of trade. The contract for the sale of the business would be valid, but the covenant not to compete will be void. The covenant not to compete must be reasonable in geographic scope to be valid. The contract would be void as covenants not to compete are only valid when they are part of a valid employment contract.

The covenant not to compete must be reasonable in geographic scope to be valid.

Suppose that Jack, Hal, and Sophia enter into a contract for the sale of the restaurant. Hal and Sophia inventory the restaurant and find that there is a case of bald eagle meat in the refrigerator, which is illegal to possess. This was unknown to them at the time of the agreement. Which of the following is true? The illegal part of the contract would be severed from the contract for the sale of the business, which would be enforced. The contract would likely be voidable by Jack. The contract would be void due to illegality. The contract would be void since the parties are in pari delicto.

The illegal part of the contract would be severed from the contract for the sale of the business, which would be enforced.

Which of the following would generally be considered to be a regulatory licensing law? a. A statute requiring that doctors be licensed after finishing medical school. b. A statute requiring that salespeople be licensed, but not establishing any educational or training requirements. c. A statute requiring plumbers to be licensed, but not establishing any standards of competence. d. A statute that requires flag makers to register with the state before selling flags.

a. A statute requiring that doctors be licensed after finishing medical school.

Jacqueline entered into an employment contract with The Umbrella Corporation that contained a covenant not to compete, as well as other provisions involving salary, a severance package, holiday compensation, and other employment-related benefits. If the court finds only the covenant not to compete illegal, what effect will such a ruling have on the remainder of the contract? a. Because this is a partially illegal contract, the remainder of the contract may be enforced. b. Because the covenant not to compete is illegal, the entire contract is illegal. c. Because this is a partially illegal contract, Jacqueline is entitled to liquidated damages on the remainder of the contract. d. None of these answers are correct.

a. Because this is a partially illegal contract, the remainder of the contract may be enforced.

George and Laura make mutual promises to marry, but unknown to Laura, George is already married to Barbara. In the state where George and Laura live, bigamy (marriage to more than one person) is illegal and makes a bigamous marriage void. If Laura sues George for damages and wins, what principle may she use? a. Excusable ignorance. b. Duress. c. Unconscionability. d. None of these answers are correct.

a. Excusable ignorance.

A buyer of a business may negotiate a __________ contract clause to keep the seller from running a competing business. a. covenant not to compete b. good faith c. contract in restraint of trade d. None of these are correct.

a. covenant not to compete

A noncompete agreement may be held invalid, the courts insist that the employer demonstrate that the restriction is __________ to protect the employer's legitimate interest without overly restricting the employee's ability to find another job. a. reasonable and necessary b. unconscionable c. exculpatory d. usurious

a. reasonable and necessary

One issue before the court in Payroll Advance, Inc. v. Yates case was: a. whether the covenant not to compete between a check cashing company and its former employee was reasonable in scope and duration. b. whether Yates's new employer was in competition with Payroll. c. whether Yates was trying to recruit clients away from Payroll. d. whether there was any consideration to Yates for signing the noncompetition provision.

a. whether the covenant not to compete between a check cashing company and its former employee was reasonable in scope and duration.

Buyer and Seller have entered into a contract for the sale of several goods worth hundreds of thousands of dollars. In the contract, seller includes an "as is" warranty clause that is in extremely small print and inconspicuous. If the court finds this clause procedural unconscionable, what would be the reason? a. Such a clause is oppressive. b. Seller obscured this warranty clause. c. Such a clause is grossly unfair because it takes away any legal defenses that Buyer has. d. None of these answers are correct.

b. Seller obscured this waiver clause.

The court, in ruling on Dunnam v. Burns,applied what reasoning to the matter? a. The court reviewed the contract and found that Dunnam drafted the document. b. The court reasoned that a document that contains an absolute obligation to repay a loan together with interest in excess of the allowed amount is usurious on its face. c. The court observed that Dunnam's default on the loan waived any objection to the usurious interest rate. d. The court noted that agreements to pay a set amount, rather than an interest rate, are per se usurious.

b. The court reasoned that a document that contains an absolute obligation to repay a loan together with interest in excess of the allowed amount is usurious on its face.

__________ means contrary to the dictates of the conscience; unscrupulous or unprincipled; exceeding that which is reasonable or customary; inordinate, unjustifiable. a. Usury b. Unconscionable c. Exculpatory d. Illusory

b. Unconscionable

Marilyn sells her highly successful travel agency to Adelle. In the sales contract, Marilyn agrees never to open a travel agency in the state. Which of the following best describes this contract clause? a. Binding as fair protection. b. Unenforceable as a violation of public policy. c. Valid as a reasonable restraint on trade. d. Void as an illegal violation of a statute.

b. Unenforceable as a violation of public policy.

A given agreement may not violate any statute but may still be so offensive to society that courts feel that enforcing the contract would be: a. fraudulent. b. contrary to public policy. c. illegal lobbying. d. unfair to merchants.

b. contrary to public policy.

A(n) __________ is a measure designed to raise money by requiring the purchase of a license. a. exculpatory clause b. revenue license c. regulatory license d. usury statute

b. revenue license

Fred operates a fledgling remodeling business and is in desperate need of a certain type of drywall. He obtains the material from Megaworks, but is charged a grossly unreasonable price and is forced to buy other material he does not need. In view of the buyer's unequal bargaining power and unreasonable terms of the contract, this may be a case of: a. discrimination. b. substantive unconscionability. c. supervening illegality d. restraint of trade.

b. substantive unconscionability.

__________ is a set of oppressive or grossly unfair contract terms or exclusions. a. Procedural unconscionability b. An exculpatory clause c. Substantive unconscionability d. Tortious conduct

c. Substantive unconscionability

Buyer and Seller have entered into a contract for the sale of several goods worth hundreds of thousands of dollars. In the contract, which was prepared by Seller, Seller included a clause that stated conspicuously "If Seller sues Buyer for any and all claims related to this contract, Buyer hereby waives all available defenses in law and equity." If the court finds this clause substantively unconscionable, what would be the reason? a. This was unfair negotiation process. b. Seller obscured this waiver clause. c. Such a clause is grossly unfair because it takes away any legal defenses that Buyer has. d. None of the answers are correct.

c. Such a clause is grossly unfair because it takes away any legal defenses that Buyer has.

When the court ruled on Alcoa Concrete & Masonry v. Stalker Bros. what law did the court use for its ruling? a. The court determined whether Alcoa had a construction lien on the property involved in the jobs assigned by Stalker. b. The court examined the matter under the laws of unjust enrichment. c. The court reviewed the matter under the case law and statutes in the state on enforcement of the contracts of unlicensed contractors. d. The court based the ruling on the law of contractual interpretation.

c. The court reviewed the matter under the case law and statutes in the state on enforcement of the contracts of unlicensed contractors.

Juan sold his gas station business in San Antonio, Texas to Fred and promised Fred not to enter the gas station business in Texas for the next twenty-five years. If the court finds this agreement unreasonable and invalid, what grounds would support the court's decision. a. Unreasonable in time only. b. Unreasonable in geography only. c. Unreasonable in both time and geography. d. None of these answers are correct.

c. Unreasonable in both time and geography.

__________ is when money is loaned at a higher rate of interest than the law allows. a. Lotteries b. In pari dilecto c. Usury d. Adhesion

c. Usury

The court in Anderson v. McOskar Enterprises, Inc .ruled on which of the following issues? a. Whether the injury Anderson suffered stemmed from a pre-existing medical condition. b. Whether Anderson had a medical release from her doctor to use the equipment at Curves. c. Whether the exculpatory clause in the Curves contract released the club from liability for negligence. d. Whether Anderson was contributorily negligent in her operation of the Curves equipment.

c. Whether the exculpatory clause in the Curves contract released the club from liability for negligence.

The sole hospital in a city offers a standard patient care agreement. The contract is prepared on a standard form and offers terms on a take-it-or-leave-it basis. Such a contract is called: a. exculpatory. b. a usurious contract. c. an adhesion contract. d. an illegal restraint of trade.

c. an adhesion contract.

A __________ is an essential element for a promise or agreement to binding. An agreement without this is unenforceable and contrary to public policy. a. licensing statute b. past consideration c. legal objective d. All of these are correct.

c. legal objective

In a __________, the parties stipulate that one shall win and the other lose depending on the outcome of an event in which their only interest is the possibility of such gain or loss? a. monopoly b. usury c. wager d. All of these are correct.

c. wager

Juliet has wagered $500, which Lance, as her bookie, is holding, on a prize fight. If, before the race starts, Juliet wants to take back her money and withdraw from the transaction: a. Lance can successfully sue for breach. b. Juliet, by law, cannot withdraw from the transaction. c. Lance, by law, cannot withdraw from the transaction. d. Juliet cannot sue to recover any money because the contract to wager is illegal and unenforceable.

d. Juliet cannot sue to recover any money because the contract to wager is illegal and unenforceable.

Nila is working hard on Sam's election campaign for the legislature. She thinks that just a few more votes could win the election, so she promises to pay her friend Daphne $50 if she will register and vote for Sam. Daphne does so, but Sam loses the election, and Nila now refuses to pay. This: a. agreement is enforceable. b. is an unconscionable contract covered by the UCC. c. is an agreement to obstruct the administration of justice. d. agreement is unenforceable and opposed to public policy.

d. agreement is unenforceable and opposed to public policy.

Cinnful Buns, Inc. entered into a contract with Darius under the terms of which Darius would receive $10,000 if he stole the trade secret recipe from the leading competitor of Cinnful Buns. Darius performed his end of the agreement by delivering the recipe. Cinnful Bunns now refuses to pay Darius for his services. Darius has this option, he: a. may recover based upon the express contract of the parties. b. may recover based upon a quasi-contractual theory in order to prevent the unjust enrichment of Cinnful. c. will be able to recover based upon promissory estoppel, because he has detrimentally relied upon the promises made by Cinnful. d. will be unable to recover, because this is an illegal contract.

d. will be unable to recover, because this is an illegal contract.