BIZ LAW Chapter 11/12 Online

In most states, a minor is someone under the age of __________.

18

A(n) _____ contract is a contract created by a party to an agreement that is presented to the other party on a take-it-or-leave-it basis. procedurally unreasonable unreasonable adhesion outrageous substantively unconscionable

Adhesion

Which of the following is an element of a legally binding contract? Knowledge Inquiry Capacity Affirmance Acknowledgement

Capacity

Suppose a 17-year-old, Kendall, enters into an agreement to purchase a Harley Davidson from an ad she saw in the paper. She will pay $1,000/month until the bike is paid off. After making the third payment, Kendall turns 18 and decides to move out of state. She e-mails the seller of the motorcycle and tells him not to worry because even though she is moving, she still intends to make her monthly payments to purchase the bike. The above scenario is an example of what legal concept? Express ratification Minor's right to disaffirm Emancipated minor contract Implied ratification Contract for necessaries

Express ratification

Which of the following is true of a severable contract? It needs complete performance by both parties. It contains multiple parts that need to be performed collectively. It has both legal and illegal portions in the contract. It must be enforced or rejected in its entirety.

It has both legal and illegal portions in the contract.

An expressed ratification ____________ in writing. must be cannot be may be is always

May be

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

Minors, insane persons, and married women

Suppose an operator of a weight scale certifies the weight of a good that is for sale. However, the accuracy of the scale used to weigh the good has not been checked in more than four years, even though the weight scale operator could have easily checked the accuracy of the scale. The scale gave an improper weight measurement that resulted in many problems with the shipping and sale of the product. The above scenario is an example of what? Negligent misrepresentation Innocent misrepresentation Intentional misrepresentation Fraudulent misrepresentation Nondisclosure

Negligent misrepresentation

Suppose Bekah agrees to do bodywork on Fatima's car. In exchange, Fatima agrees to be a poker dealer at Bekah's underground casino. In the state where Bekah and Fatima live, there is a gaming statute that says all games of chance other than slot machines and the state lottery are illegal. Would the agreement between Bekah and Fatima be enforceable? Yes, because all types of gambling are not illegal in the state. No, because part of this agreement violates a law and therefore, the agreement calls for crime. Yes, if they conduct the poker game in secret. No, because this agreement violates usury regulations. No, because this action does not violate a criminal statute.

No, because part of this agreement violates a law and therefore, the agreement calls for crime.

On rare occasions, rescission is permitted for unilateral mistakes. Which of the following scenarios is an example of when rescission might be available for a unilateral mistake? Both parties' actions had a material effect on the agreement. All of these factors are required to show unilateral mistake. There is an adverse effect on one party in a contract. One party made a basic assumption about the subject matter of the contract. One party made a mistake about a material fact, and the other party had reason to know about the mistake.

One party made a mistake about a material fact, and the other party had reason to know about the mistake.

Irresponsible Teen. At age 17, in a state in which the age of majority is 18, Sally purchased a prom dress from Formal Stuff. She wore it to the prom and then attempted to return it to the store claiming that she was a minor and that she was entitled to a refund. The dress had clearly been worn and had a purple stain that Sally claimed was from grape juice. Additionally, a few days before she turned 18, Sally purchased a used car from Dings and Dents used cars. She had a deal whereby she paid $100 per month on the car. She drove the car and made payments for fourteen months after she turned 18. Then, she returned the car to Dings and Dents and told them that she wanted all her money back. Dings and Dents claimed the car was a necessity. Sally and her parents claimed that the parents were ready and willing to provide a car to Sally and that she only purchased the car from Dings and Dents because she liked that particular style and color. When purchases of the dress and car were made, the sellers knew that Sally was under the age of 18. In the dispute between Sally and the owner of Dings and Dents, which of the following is true regarding any claim that Sally affirmed the contract? An implied ratification occurs when parents agree to accept the debt entered into by a minor. So long as, after reaching the age of majority, Sally did not state orally or in writing that she intended to be bound by the contract, then she did not commit the type of express ratification required for her to be bound. If Sally caused any damage whatsoever to the car, she was said to have impliedly ratified the contract. Sally may have impliedly ratified the contract by making payments for so long after she turned 18. Sally was required to expressly ratify the contract before she could be bound to it so long as no damage was done; however, if she did any damage to the car, as a matter of law, she is said to have expressly ratified it.

So long as, after reaching the age of majority, Sally did not state orally or in writing that she intended to be bound by the contract, then she did not commit the type of express ratification required for her to be bound.

Which of the following is not an element necessary to show a mutual mistake in a contract? The mistake was so serious that the contract is unconscionable, that is, so unreasonable that it is outrageous. A material effect on the agreement. A basic assumption about the subject matter of the contract. An adverse effect on a party who did not agree to bear the risk of mistake at the time of the agreement. All of these factors are required to show mutual mistake.

The mistake was so serious that the contract is unconscionable, that is, so unreasonable that it is outrageous.

Which one of the following is one of the conditions required for a mutual mistake to interfere with legal consent? The mistake is caused by a clerical error that resulted from gross negligence. The parties have a basic assumption about the subject matter of the contract. One party makes a mistake about a material fact that the other party is ignorant about. The mutual mistake does not have material effect on the agreement.

The parties have a basic assumption about the subject matter of the contract.

The court may invalidate a contract based upon a(n) ____________ mistake if the mistake was so serious that the agreement was unconscionable. bilateral. neutral. exculpatory unilateral.

Unilateral

Suppose you entered into a contract to clean someone's pool. Then, both you and the pool owner discovered that the pool water has produced toxic levels of chlorine over time. As a result, you cannot clean the pool without first decontaminating it. This change in knowledge about the toxicity levels of the pool is considered a material fact in the agreement. Can you rescind the contract? No, no mistake has occurred. Yes, this seems like a mutual mistake. No, this seems like a unilateral mistake. Yes, this seems like a unilateral mistake. No, this seems like a mutual mistake.

Yes, this seems like a mutual mistake.

Usury occurs when: a party gives a loan at an interest rate below the legal minimum. a party gives a loan at an interest rate above the legal maximum. a party gives a loan at the market interest rate or above. a party gives a loan at an interest rate below the market interest rate. a party gives a loan at an interest rate below the market rate, yet above the legal maximum.

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

An exculpatory clause is a statement releasing one of the parties to an agreement from no liability. all liability. some civil liability. criminal liability only.

all liability.

In contrast to undue influence, _______ is a much more visible and active interference with free will. duress mistake assent misrepresentation

duress

When both parties are mistaken about a current or past material fact, ____________________. no one can choose to rescind the contract only the injured party can rescind the contract either can choose to rescind the contract only the courts can rescind the contract only the non-injured party can rescind the contract

either can choose to rescind the contract

Another name for ______________ is intentional misrepresentation. concealment fraudulent misrepresentation innocent misrepresentation mistake of fact negligent misrepresentation

fraudulent misrepresentation

A(n) _____________ is a false statement about a fact material to an agreement that the person who made the statement believed to be true. intentional misrepresentation negligent misrepresentation innocent misrepresentation fraudulent misrepresentation

innocent misrepresentation

The effect of both _____________ and ____________ is that the victim can either rescind the contract or keep the contract and sue for damages. innocent misrepresentation; fraudulent misrepresentation negligent misrepresentation; innocent misrepresentation innocent misrepresentation; intentional misrepresentation intentional misrepresentation; concealment negligent misrepresentation; fraudulent misrepresentation

negligent misrepresentation; fraudulent misrepresentation

Each of the following is true of a mutual mistake of fact except a basic assumption about the subject matter of the contract must be present to establish a mutual mistake occurred. an adverse effect on a party who did not agree to bear the risk of mistake at the time of the agreement must be found to establish a mutual mistake occurred. courts can void a contract for reason of a mutual mistake of fact only after establishing three basic conditions. rescission is fair when a mutual mistake occurs because any agreement under such a condition is an illusion. one form of a mutual mistake occurs when one party makes a mistake about a material fact, and the other party knows about the mistake.

one form of a mutual mistake occurs when one party makes a mistake about a material fact, and the other party knows about the mistake.

A(n) _____ contract contains multiple parts that can each be performed separately. executed in pari delicto severable substantive adhesion

severable

A procedurally unconscionable contract contains conditions that would impair a party's ___________ a contract. time limitation under damages from understanding of responsibility under

understanding of

When one person has taken advantage of his or her dominant position in a relationship to persuade the other party unduly, that person has exercised ________ over the other. undue influence duress bullying misrepresentation

undue influence

A(n) ___________ is the result of an error by one party about a material fact. If both parties to a contract are mistaken about a material fact, either can opt to rescind it. This is known as a(n) ___________. misrepresentation; mutual mistake mutual mistake; unilateral mistake concealment; mutual mistake unilateral mistake; misrepresentation unilateral mistake; mutual mistake

unilateral mistake; mutual mistake