Intro to Business Law Chapter 15 and Chapter 16

Which of the following terms refers to an agreement so unfair that it is void of conscience?

unconscionable

Two exceptions to the preexisting duty rule are ____________ circumstances and _____________ work

unforeseen, additional

To facilitate business, most states with___________ statutes allow corporations to borrow at rates exceeding the maximum

usury

__________________ occurs when a party gives a loan at an interest rate exceeding the legal maximum

Usury

Despite the existence of Sabbath laws, most states allow the performance of __________________ work on Sundays

charity

Andy is an artist and Jane runs a famous art gallery. Jane calls Andy and tells him she has seen some of his work and likes it. She tells him to bring his newest paintings to her gallery and says "I promise that if I like them, I will show them in my gallery." Which of the following is true?

1) Andy has no contract to compel Jane to show his paintings 2) Jane made an illusory promise

What are the conditions for promissory estoppel to occur? (Check all that apply)

1) One party makes a promise and either knows or should know that the other party will reasonably rely on it 2) The other party does reasonably rely on the promise 3) The only way to avoid injustice is to enforce the promise

Celia is a college student who just took her first trip to Las Vegas. While there, she charged $2,000 on her new credit card. When her credit card statement arrived, she noted that there were $3,000 in charges related to her Las Vegas trip! Horrified, she called the credit card company to dispute the excess charges. The credit card company insisted she had charged $3,000 on the card and Celia insisted she had only charged $2,000 on the card. Finally, Celia and the credit card company agreed that Celia would pay $2,500 as full payment of the credit card. Celia promptly sent them a check for $2,500. The following month, the credit card company billed Celia for the remaining $500! Celia sued, arguing that the credit card company had agreed to accept $2,500 as payment in full. The court agreed and ruled in Celia's favor, holding that the credit card company and Celia had entered into an accord and satisfaction. But what if the facts of the case were different? Select each set of facts below that could change the outcome of the court's decision. Celia actually did charge $3,000 on her credit card and admitted such to the credit card company, but argued she only had $2,500 in her bank account to pay off the credit card. Celia actually did charge $3,000 on her credit card and admitted such to the credit card company. However, Celia had no money, so she offered the credit card company her car in exchange for full payment of the debt and the credit card company accepted. Celia turned over title to her car to the credit card company. Celia and the credit card company agreed that Celia would pay $2,500 as full payment of the disputed debt, but Celia never paid the $2,500. Celia believed she did not charge anything on her credit card during her trip to Las Vegas. The credit card company claims she charged $3,000 to the card while in Las Vegas.

1)Celia actually did charge $3,000 on her credit card and admitted such to the credit card company, but argued she only had $2,500 in her bank account to pay off the credit card. 2)Celia and the credit card company agreed that Celia would pay $2,500 as full payment of the disputed debt, but Celia never paid the $2,500.

Today, in all but three states, a minor is someone under the age of _______

18

A minor would be most likely able to disaffirm which of the following contracts?

A contract for a vacation

Which of the following businesses would most likely be able to enforce an exculpatory clause?

A night club

Which of the following is not a type of consideration

A promise to accept a gift

Which of the following statements is most accurate regarding a restrictive covenant made in conjunction with the sale of an ongoing business

A restrictive covenant made in conjunction with the sale of an ongoing business is enforceable

Which of the following is a legally-recognized way to expressly ratify a contract?

After reaching majority, a person states orally or in writing that he or she intends to be bound by the contract entered into as a minor

The following contracts would be deemed illegal by a state or federal EXCEPT? Agreements to commit a crime or tort are illegal in all states. Agreements regarding usurious loans may be illegal in some states. Agreements where an intoxicated person is so impaired that he is unable to understand his legal obligations under the contract he is entering into. Agreements regarding gambling are illegal in most states. Agreements that violate Sabbath or Sunday laws are illegal in some states.

Agreements where an intoxicated person is so impaired that he is unable to understand his legal obligations under the contract he is entering into.

In which of the following situations would the contract in question be void? A person suffers from delusions, but can understand that she is entering into a contract, with certain obligations. A minor enters into a contract with a psychology counselor who is not a minor. An intoxicated individual with poor judgment enters into a contract. An individual who has been adjudicated insane enters into a contract. A minor enters into a contract with a health insurance agency.

An individual who has been adjudicated insane enters into a contract

Which of the following statements is correct regarding the legality and enforceability of contracts?

Both a contract that requires an illegal act for performance and a contract for an illegal purpose are unenforceable

Which of the following is a type of legal capacity a person suffering from a mental illness may have, depending on the nature and extent of their deficiency?

Full

William tells his neighbor George that he will give George a job as Walter's butler if George promises to drop out of college. Which of the following is true?

George's promise to refrain from going to college is consideration

Which of the following is not a recognized purpose of licensing statues?

Government protection of the public's constitutional rights

Which of the following is a correct statement regarding a minor's power to disaffirm or void a contract?

If a minor chooses to disaffirm a contract, he or she must void the entire contract

According to the Restatement (Second) of Contracts, if a court as a matter of law finds a contract or any clause of the contract to have been unconscionable at the time it was made, the court may do all but which of the following?

Impose statutory sanctions on the party who drafted the contract

Which of the following terms refers to a contract that must be enforced or rejected in its entirety?

Indivisible

Joan teaches Bobby how to shoot an outside jump shot in basketball. Bobby becomes such a good basketball player he gets a full scholarship to college and becomes highly sought after by professional teams. Just before he signs a contract with a pro team, Bobby tells Joan, "I promise I'll give you $500,000 when I sign that contract. I owe you for teaching me that jump shot." Which of the following is true?

Joan's work with Bobby in the past is not consideration to enforce Bobby's promise

Donna is an accountant and decides to do her friend Mike a favor by filing his taxes for free. Mike is very thankful and tells Donna "I will pay you $500 for being so kind and generous!" Mike fails to keep his promise and does not pay Donna the $500. Donna then brings an action to have the promise enforced. Will the court hold that a contract exists? Yes, what Mike did to Donna was unjust and therefore the contract is enforceable. No, past consideration is no consideration at all. Yes, due to the preexisting duty rule. No, it is an illusory promise and is no consideration at all.

No, past consideration is no consideration at all

Eugene agrees to finish painting Hazel's house within two weeks of the time they agree to in the contract. A week in, Eugene realizes he cannot finish without additional help. He tells Hazel he will need an extra $700 to do this. Hazel agrees. With the additional help, Eugene finishes painting the house within the agreed two weeks. Does Hazel have to pay the extra $700? Yes, since Hazel agreed to pay the extra money, she is obligated to do so. Yes, Hazel must pay the extra money because this was additional work Eugene had to do. No, under the preexisting duty rule, Hazel does not have to pay. No, this was an illusory promise made by Hazel that does not count as consideration for an agreement.

No, under the preexisting rule, Hazel does not have to pay

Performance of a duty you are obligated to do under the law is not good consideration. This is known as the ________________ duty rule

Preexisting

_______________________ unconscionablility describes conditions that impair one party's understanding of a contract, as well as the integration of terms into a contract

Procedural

Which of the following was the judge's ruling in Jamil Blackmon v. Allen Iverson, the case in the text in which the plaintiff alleged that the defendant, a professional athlete, wrongfully failed to pay him a percentage of proceeds received from using the nickname "The Answer" in merchandising although the defendant agreed to do so after the plaintiff suggested the use of the nickname?

That the defendent's promise to pay was past consideration insufficient to create a binding contract.

Which of the following is a correct statement regarding a competent party's recourse against a minor who disaffirms when the consideration the minor received is damaged or destroyed

The competent party has no recourse against the minor

Which of the following was the result on appeal in King v. Riedl, the case in the text in which the plaintiffs claimed that the defendant lacked the right to proceed against them for sums allegedly owed because the contractor was not licensed as a residential home builder as required by state law? The court ruled in favor of the plaintiffs on the basis that the contractor was statutorily barred from bringing an action to enforce payment because he lacked a residential home builder license and the amount of the contract satisfied statutory requirements. Although recognizing that the contractor's failure to be properly licensed would not in and of itself bar recovery, the court ruled in favor of the plaintiffs because the facts at trial showed that the contractor performed inadequate work. The court ruled that because the contractor lacked the required state license and the amount of the contract satisfied statutory requirements, under common law he could only recover for expenses for materials and labor costs, not the full contract price. The court ruled that the defendant could maintain an action against the plaintiffs and prevail because the proof showed that he was eligible for the required license although he had not yet obtained it. The court ruled that the defendant could maintain an action against the plaintiffs and prevail because the state statute only applied when the cost of a contractual undertaking exceeded $10,000, and because the contractor billed periodically, the plaintiffs were never presented with a bill exceeding $10,000.

The court ruled in favor of the plaintiffs on the basis that the contractor was statutorily barred from bringing an action to enforce payment because he lacked a residential home builder license and the amount of the contract satisfied statutory requirements.

Walter contracts to purchase Marie's mansion and estate for $50,000. Marie's mansion and estate has a property tax value of $1 million. There is no fraud or undue influence involved in the transaction. Which of the following is an incorrect statement regarding the enforcement of this contract?

The court will find the $50,000 an insufficient amount of consideration and cancel the contract

Alex worked as a programmer for the GPS device and phone application known as MyWaze. He signed a covenant not to compete with MyWaze. However, when he received an offer by Google to start an innovative GPS Google phone application, he left his job at MyWaze. MyWaze sued Alex for breaching his contract and the covenant not to compete. The court ruled in favor of MyWaze. But what if the facts of the case were different? Select each set of facts below that could change the outcome of the court's decision. The covenant to not compete was created in the state of California. The court found that Alex had signed the covenant not to compete in an adhesion contract. That is, upon being hired, Alex was forced to either sign or be immediately fired from MyWaze. Less than one week passed during the time that Alex quit his job at MyWaze and went to work for Google, and according to the covenant to not compete, employees of MyWaze had to wait at least 6 weeks before working for a potential competitor. Rather than going to work on creating a GPS Application for Google, Alex was hired to be a programmer for Google's e-mail system.

The covenant to not compete was created in the state of California. The court found that Alex had signed the covenant not to compete in an adhesion contract. That is, upon being hired, Alex was forced to either sign or be immediately fired from MyWaze. Rather than going to work on creating a GPS Application for Google, Alex was hired to be a programmer for Google's e-mail system.

Which of the following is true about a partial payment of a liquidated debt?

The debt remains outstanding

Which of the following is true of Sabbath laws?

These laws typically do not apply to contracts for obtaining necessities, anything related to health or survival.

Past consideration may be enforceable "to the extent necessary to avoid

injustice".

Natalie promises Brett that she will pay him $1,000 for painting her house. Brett then agrees and purchases the painting materials, costing him $300. The following day Brett arrives at Natalie's house to paint but she had hired Kobe instead. Is Brett entitled to damages?

Yes, Brett relied on Natalie's promise and bought all the paints with his own money

Usury occurs when:

a party gives a loan at an interest rate above the legal maximum

An __________ and ________ occurs when the debit is unliquidated, the creditor agrees to accept as full payment less than it claims it owed, and the debtor pays the amount they have agreed to pay

accord, satisfaction

An agreement presented as the only chance the presented party will have to enter it is known as a(n)

adhesion

Without being asked, Johan washed his neighbor Bill's car every Saturday for a month. At the end of the month, Johan demanded payment of $100 from Bill for his services. Bill refused. If Johan sues for breach of contract, Johan will likely lose because there was no __________ exchange.

bargained for

In a __________ contract, the consideration for each promise is a return promise

bilateral

A person who has legal _________ has the ___________ ability to understand his or her rights and obligations under a contract

capacity; mental

Under the UCC, writing " paid in full" on a check for less than the full amount of the debt owed will not be an accord and satisfaction unless the creditor inadvertently cashes the check and waits longer than 90 days to offer the debtor repayment in the same amount, or unless the

check is sent to a special address for disputed amounts per the creditor's request.

Under __________________ law, unconscionable contracts are unenforceable

common

Upon disaffirmance, most states simply require a minor to notify the ____________ party and return any ____________ received, regardless of its condition

competent; consideration

An indivisible contract requires _____________ performance by both parties, even if it appears to contain multiple parts

complete

A promise to refrain from doing something is sufficient _________

consideration

Gambling refers to agreements in which parties pay ___________ (money placed during bets) for the chance, or opportunity, to obtain an amount of money or property

consideration

Anticompetitive agreements are viewed as being harmful to _____________ and against public __________________

consumers; policy

Technically, a minor can __________ a contract for a necessary, but upon doing so, the minor is still liable for the ____________value of the necessary

disaffirm;reasonable

A severable contract is also know as a ___________ contract

divisible

In most states, a person is given full legal capacity to enter into contracts when he or she becomes ___________ before reaching the age of majority

emancipated

An _________________ ratification occurs when, after reaching the age of majority, the person states he or she intends to be bound by the contract entered into as a minor

express

Although most people do not consider them to be such, state-run lotteries are a form of ________________

gambling

As a general rule, when an agreement is deemed illegal, courts will usually label it void, meaning either party can enforce the agreement, and neither is entitled to recovery. Once exception to this rule is when justifiable _____________ of facts leaves one party unaware of a provision of the agreement that would make it illegal

ignorance

When an agreement is deemed _____________, courts will usually label it void

illegal

In terms of the effect of entering into an agreement with a person who is unlawfully unlicensed, if the licensing statute is intended to protect the public's health, safety, and welfare, the subject agreement is typically deemed ______________ and ____________

illegal ; unenforceable

which of the following occurs when a former minor takes some action after reaching the age of majority consistent with the intent to ratify a contract?

implied ratification

Which of the following legal principals holds both contracting parties equally responsible for an illegal agreement?

in pari delicto

A severable contract may have both ________________ and ______________________ portions

legal; illegal

For a ______________ debt, if the debtor offers to pay less money than is owed as full payment and the creditor agrees, there is not a accord, and even if the debtor pays the money agreed to, the creditor may nevertheless sue for the balance it believes is owed

liquidated

Once a person reaches the age of ______________, he or she may ratify contracts made as a(n) ______________

majority;minor

Consideration, as a required contractual element, can be: __________________

money, service

Leslie sold Tom her house for $5,000 but lied to Tom because she did not actually own the house. The court is likely to ______________

not enforce the contract

Prior to the UCC, if a debtor wrote "_________ in _______" on a check for an amount less than actually owed and the creditor cashed the check, the debt was considered completely satisfied.

paid, full

Work provided in the _______________ does not make _____________ in the present

past, consideration

An agreement in violation of statute or legal code is illegal _________

per se

As a general rule, covenants not to compete in employment contracts are ______________

permissible

When a person makes a _________ in return for another person's performance of an act, this is called an ___________ contract

promise, unilateral

Because general contractors have to be able to rely on the bids of the subcontractors, general contractors may be able to use _____________ to enforce subcontractors bids.

promissory estoppel

When a court determines a restraint on trade is ________________ and the restraint is part of a ___________________, or ancillary, clause in contract, the restraint is typically allowed

reasonable, subordinate

An exculpatory clause releases one of the contracting parties from all liability, ________________________

regardless of who is at fault

Promissory estoppel and contracts under _____________ are two exceptions to the common law rule requiring consideration

seal

Which of the following terms refers to an agreement that is overly harsh or lopsided?

substantive unconscionability

In many states, parents may be liable when a child causes harm if it can be proved that the parent failed to properly __________ the child, thereby subjecting others to a__________ risk of harm

supervise ; unreasonable

A contract overturned for illegal subject matter or for being illegal to perform is generally declared

void

If no exception allows a usurious loan, a few states declare all usurious loans ______________, which means the lender is not entitled to recover either interest or principal from the borrower

void

Depending on the nature and extent of the mental or physical defect, a person may have either no capacity, the complete inability to enter into contracts, or limited capacity, the ability to form only _____________ contracts

voidable

Generally, contracts made by intoxicated persons are ___________

voidable