Deck 15: Legality and Public Policy

Question 1

In the absence of a valid restrictive covenant, the seller of a business may compete with an ex-employee and solicit customers of the former employer.

Answer 1

True

Question 2

If the law is intended to protect one of the parties to an otherwise illegal contract, that party may seek relief in court.

Answer 2

True

Question 3

An agreement that calls for the commission of a civil wrong is illegal and void.

Answer 3

True

Question 4

An agreement is illegal only when either its performance is a crime.

Question 5

Legislation commonly requires that an installment-sale contract specify the cash price, down payment, finance charges, and insurance costs.

Question 6

Agreements that are contrary to public policy are binding but voidable.

Question 7

Parties to illegal agreements are generally not entitled to help from the courts.

Question 8

A standard arbitration clause can be substantively unconscionable if the fees and costs are so excessive as to deny the innocent party the ability to resolve his claim.

Question 9

If a contract can be interpreted in two ways, one legal and the other illegal, the court will assume that the legal meaning was intended unless the contrary is clearly indicated.

Question 10

A take-it-or-leave-it contract of adhesion is an example of substantive unconscionability.

Question 11

A court may sever an unconscionable clause from a contract and enforce the remainder of the contract.

Question 12

Participation in a free raffle without consideration is lawful, because there is no lottery.

Question 13

Substantive unconscionability has to do with matters of freedom of assent.

Question 14

In certain situations, the law may hold a contract provision unenforceable because it is too harsh or oppressive to one of the parties.

Question 15

An unlicensed doctor can sue a patient for the doctor's fee if the patient in fact recovered because of the doctor's care.

Question 16

An agreement that unreasonably restrains trade is illegal and void on the ground that it is contrary to public policy.

Question 17

Ordinarily, a court will not consider whether a contract is fair or unfair.

Question 18

An agreement may involve the performance of several promises, some of which are illegal and some legal.

Question 19

When parties are not in pari delicto, the least guilty party is granted relief when it is in the public interest.

Question 20

If an illegal agreement has already been performed, either party can sue for damages.

Question 21

Sales promotion schemes calling for the distribution of property according to chance among the purchasers of goods are:

A) legal, as long as they are called raffles.
B) illegal as lotteries.
C) legal, whether the contract is wise or foolish
D) legal, because the contract spreads the risk equally over all the parties.

Question 22

Agreements not to compete are always void.

Question 23

An illegal provision in a contract:

A) causes the entire contract to be void.
B) causes the entire contract to be rescinded.
C) can be ignored by the parties in their performance of the remaining legal provisions of the contract.
D) can be ignored by the parties, because an illegal provision in a contract is not deemed substantial.

Question 24

The failure to have a license will not render agreements void if the license:

A) is based on formal education
B) is required for engaging in a particular business or trade
C) is a regulatory license
D) is readily obtainable by anyone who offers payment of a required fee

Question 25

One element involved in the determination of unconscionability is:

A) the comparative bargaining power of the parties.
B) the opportunity to make a contract for better terms with someone else.
C) the course of the economy after the contract is made.
D) whether a loss will be sustained by performance of the contract.

Question 26

In most states the usury laws apply to loans made to both individuals and corporations.

Question 27

All of the following are types of contracts that might be unenforceable as contrary to public policy except:

A) a contract that is contrary to the protection of the public welfare, health, or safety
B) a contract that is contrary to the protection of the person
C) a contract that is contrary to the protection of recognized social institutions
D) a contract that does not harm the public good

Question 28

Private lotteries, which generally are held to be illegal, involve three elements:

A) prize, chance, and consideration.
B) return, skill, and wager.
C) prize, skill, and consideration.
D) attractive return, minimal involvement, and skill.

Question 29

Fees charged by a lender for the reasonable expense of making a loan, such as the cost of appraising property, are treated as interest for purposes of the usury law.

Question 30

Public policy:

A) can be precisely defined
B) is frequently used by the courts as a reason to invalidate contracts
C) is protections from that which violates any established interest of society
D) is policy that is made during a trial.

Question 31

The validity of a contract is not affected by:

A) the effect of the contract on the community.
B) unconscionability.
C) the absence of good faith.
D) the fact that the contract turned out to be a bad bargain for one of the parties.

Question 32

Which of the following is not illegal?

A) an office football "pool" with a cash entry fee and cash prize
B) a raffle with an entry fee to win a car
C) a "giveaway" to every tenth person who buys meat at a butcher shop
D) a "giveaway" to every tenth person entering a department store

Question 33

Even if a contract appears legal on its face, it may be unenforceable if:

A) the illegal contract has not been performed.
B) the contract has been partially performed.
C) the contract has been fully performed.
D) the contract has an illegal purpose.

Question 34

When a nationally-known neurosurgeon in Chicago, Illinois sells her practice, the contract may specify that the seller will not practice within a 100-mile radius of Chicago for one year.

Question 35

An agreement to slander a third person would not be enforceable because slander is a(n):

A) crime.
B) civil wrong.
C) infringement of privacy.
D) restraint against trade.

Question 36

A(n) _______ contract is a take-it-or-leave-it contract that is unenforceable because it is deemed to be too harsh or oppressive to one of the contracting parties.

A) unilateral influence
B) bilateral influence
C) adhesion
D) non-compete

Question 37

A noncompetition covenant may be held invalid because of vagueness concerning the duration and geographic area of the restriction.

Question 38

Illegal agreements are:

A) enforceable if one party acted in good faith.
B) voidable by one of the parties.
C) void.
D) voidable by either party.

Question 39

Which party to an illegal agreement may get relief from the court?

A) Plaintiff
B) Defendant
C) the less-guilty party, when public interest is advanced by granting relief
D) a doctor who was unlicensed at the time of the making of an agreement for the provision of medical services, but who later obtained a proper license

Question 40

Dealing honestly, reasonably, and in good faith means all the following except:

A) these are implied duties in every contract for services.
B) these are implied duties in every contract for the sale of goods.
C) the parties will not injure each other.
D) these are express duties in every contract for services.

Question 41

All of the following agreements represent an unreasonable restraint of trade except:

A) a combination to create a monopoly.
B) an agreement to obtain a "corner" on a market.
C) an association of merchants to increase prices.
D) a valid restrictive covenant.

Question 42

An agreement to restrain trade may be void on the grounds that it is:

A) fraudulent.
B) contrary to public policy.
C) illegal lobbying.
D) unfair to merchants.

Question 43

An agreement between Jim and his 18-year-old daughter, Betty, provides that he will give her $25,000 if she does not marry until after her 22nd birthday. One month after reaching the age of 22, Betty, still unmarried, claims the $25,000.?Jim refuses to pay, claiming that the agreement was illegal. Is Jim correct?

Question 44

In the sale of a business, all the following elements are necessary to create an enforceable noncompete clause, except:

A) not unduly burdensome on buyer
B) reasonable time limitation
C) estimated value of the seller's business
D) geographic restriction not overly broad

Question 45

Art and Mary were good friends who went through high school and college together. Art eventually became a college philosophy professor and Mary went into the business world. Mary became a senior vice-president of a management firm and learned many of the company's trade secrets. Both Art and Mary signed one-year contracts with their respective employers. The contracts contained clauses that provided that they would not compete against their former employers for a period of one year after leaving their jobs. The area covered by the restrictions for both Art and Mary was a radius of 500 miles from the place of employment.?Both Art and Mary resigned and within two months took other jobs. Art went to work for another college 50 miles away, teaching philosophy. Mary took a job 75 miles from her former employment. Her new position was similar to her former job. The former employers sued to enforce the anticompetitive covenants in the original contracts. Discuss the probable outcome of the lawsuits.

Question 46

When money is loaned at a greater rate of interest than is allowed by law, __________ is committed.

A) Usury
B) credit misfeasance
C) petty theft
D) credit malfeasance

Question 47

In an employment contract, agreements not to compete are:

A) illegal
B) uniformly held to be in the public interest and therefore legal
C) valid only if the restriction protects the employee
D) valid, if the restriction is reasonable and necessary for the protection of the former employer

Question 48

Sam Wilson often goes to the horse races, participates in his state's lottery, and invests heavily in the stock of major U.S. companies. At work, Wilson is approached by his coworkers and asked to participate in a football pool. "It's totally based upon skill," his friends claim. In addition, Wilson's philanthropic club is holding a raffle in which an individual could win a new car. Are these activities gambling and therefore illegal activities?

Question 49

An agreement not to compete is enforceable:

A) in the sale of a business.
B) between competitors.
C) in contracts for the sale of goods.
D) in contracts for the sale of securities.