Deck 13: The Legality of Agreements

Question 1

Any contract to commit a crime is unenforceable. 

Answer 1

True

Question 2

Whether a contract with an unlicensed professional is legal and enforceable depends on the purpose of the licensing statute. 

Answer 2

True

Question 3

The maximum rate of interest is the same in every state. 

Answer 3

False

Question 4

Gambling involves the distribution of property by chance. 

Question 5

Statutes often prescribe the terms of contracts. 

Question 6

Any contract entered into with an unlicensed party is unenforceable. 

Question 7

Contracts in restraint of trade usually positively affect the public policy that favors competition in the economy. 

Question 8

All states require that members of certain professions obtain licenses allowing them to practice. 

Question 9

A tortious contract calls for an action that is contrary to public policy. 

Question 10

A contract that is void from the outset can be enforced in some circumstances. 

Question 11

A usurious contract involves the purchase and sale of usable goods. 

Question 12

Gambling debts will be enforced even if their enforcement violates a statute. 

Question 13

A contract with an unlicensed person is enforceable if the person is otherwise of good moral character. 

Question 14

If there is a statute that prohibits a certain action,a contract to do it is unenforceable. 

Question 15

All forms of gambling are legal in all states. 

Question 16

Legality is one of the requirements for creation of a valid contract. 

Question 17

Usury statutes place a minimum on allowable rates of interest. 

Question 18

In states that permit certain types of gambling,all gambling contracts are legal. 

Question 19

In an employment contract,a covenant not to compete is unenforceable. 

Question 20

A covenant not to compete is enforceable only if it is reasonable in duration and geographic area. 

Question 21

A covenant not to compete included in the sale of an ongoing business is unenforceable. 

Question 22

Unconscionability can involve the lack of an opportunity to read a contract or ask questions about its meaning. 

Question 23

An exculpatory clause in an employment contract is usually enforceable. 

Question 24

John obtains a loan from Liberty Credit Bank at an interest rate that exceeds the state's maximum.Liberty has​ 

A) ​created a risk for the purpose of assuming it. 
B) ​engaged in a restraint of trade. 
C) ​violated a licensing statute. 
D) ​committed usury.

Question 25

All adhesion contracts are unconscionable. 

Question 26

When a statute protects a certain class of people,a member of that class can enforce a contract in violation of the statute. 

Question 27

In a contract,an exculpatory clause releases a party from liability in the event of monetary or physical injury no matter who is at fault. 

Question 28

A contract that exculpates one party for negligence or other wrongdoing will often be viewed as unconscionable. 

Question 29

Exculpatory means serving to clear of blame. 

Question 30

The state of Illinois enacts a usury statute.The purpose is to​ 

A) ​establish a maximum rate of interest that may be charged for loans. 
B) ​establish a minimum rate of interest that may be charged for loans. 
C) ​prevent the misuse of money advanced as loans. 
D) ​prevent the misuse of money paid back on loans.

Question 31

In general,an illegal contract is void. 

Question 32

William obtains a loan from a bank at 4.5 percent interest.The state where he obtains the loan has a usury statute that limits interest rates to a 3.5 percent maximum.William's contract with the bank is​ 

A) ​enforceable only if William does not attempt to disaffirm it. 
B) ​enforceable only if the bank does not attempt to disaffirm it. 
C) ​enforceable only if both William and the bank knew of the statute when the contract was signed. 
D) ​not enforceable.

Question 33

Allen and Beth decide to wager,in violation of a state statute,on the out-come of a baseball game.They each deposit money with Cory,who agrees to pay the winner of the bet.Before the game begins,Beth tells Cory that she has changed her mind about the bet.Beth can recover​ 

A) ​the amount of her bet and the amount of Adam's bet. 
B) ​the amount of her bet minus Cory's expenses. 
C) ​the amount of her bet only. 
D) ​nothing.

Question 34

A covenant not to compete is enforceable only if it is necessary to restrain trade. 

Question 35

In certain circumstances,bargains are so oppressive that the courts relieve innocent parties of part or all of their duties. 

Question 36

Unconscionable means grossly unethical or unfair. 

Question 37

If one of the wrongdoers in an illegal contract is unjustly enriched at the expense of the other,the courts will usually require restitution. 

Question 38

John arranges a Bingo tournament at his house to raise money for the local nursing home.The Bingo tournament is​ 

A) ​illegal because it is a form of gambling. 
B) ​legal if John lives in a state that allows games of chance for charitable purposes. 
C) ​illegal because gambling is never allowed on private property. 
D) ​legal as long as John is unaware of any statutes against games of chance.

Question 39

In most illegal contracts,both parties are considered to be equally at fault,and neither party can enforce it or recover damages under it. 

Question 40

If an illegal contract has been executed,either party can recover damages. 

Question 41

Oklahoma charges Dewey,a design engineer and the owner of Windfarm Energy Corporation,a fee to practice his profession in the state.This is​ 

A) ​usurious. 
B) ​unconscionable. 
C) ​a license. 
D) ​an adhesion contract.

Question 42

Jake and John make an illegal contract that unjustly enriches Jake at the expense of John.A court will​ 

A) ​not be concerned with the unjust enrichment of Jake. 
B) ​force Jake to pay damages to John. 
C) ​reform the contract to prevent undue burdens. 
D) ​enforce the contract as it was originally written.

Question 43

At Glamour Mattress Store,Robbie signs a contract to buy a suite of bedroom furniture.The contract sets a schedule of $500 monthly payments,subject to a late fee of 150 percent.Glamour's salesperson hurries Robbie through the deal,giving her no opportunity to read the contract.This is most likely​ 

A) ​an adhesion contract. 
B) ​procedural unconscionability. 
C) ​substantive unconscionability. 
D) ​an enforceable contract.

Question 44

Gloria,the owner of a manufacturing company with declining sales,pays Sandra $10,000 in exchange for her written agreement to murder the president of a competitive company with increasing sales.Sandra keeps the money without doing anything more.Gloria will be able to recover the $10,000​ 

A) ​under no circumstances. 
B) ​if Sandra never intended to carry out the crime. 
C) ​if Gloria fully complied with the terms of the agreement. 
D) ​if Gloria's sales continue to decline.

Question 45

To avoid liability for negligence,Mall Mart Discount Stores can normally obtain a court order to enforce​ 

A) ​a covenant not to compete. 
B) ​an adhesion contract. 
C) ​an exculpatory clause. 
D) ​none of the choices.

Question 46

Duffy and Elbert agree to hijack a truck carrying a load of almonds.If Duffy later refuses to go through with the crime,Elbert can​ 

A) ​enforce the agreement. 
B) ​obtain damages from Duffy in the amount of Duffy's probable share of the illegal profits. 
C) ​recover in quasi contract for the loss of his share of the illegal profits. 
D) ​do nothing.

Question 47

Betty is selling her used clothing shop on Main Street.In the sale agreement,there is a covenant not to compete that prohibits Betty from opening another used clothing shop within 300 miles of the shop she is selling.A court will most likely conclude that this restriction on competition is​ 

A) ​reasonable. 
B) ​unreasonable and order Betty's successor to stop doing business. 
C) ​unreasonable and may reform the covenant . 
D) ​unreasonable and prohibit both parties from opening used clothing shops.

Question 48

Cindy agrees in writing to pay Bob $5,000 to "accidentally" hit and kill her horse,which has a large insurance policy,with his truck.Bob hits but does not kill the horse,and Cindy refuses to pay him.In their suit against each other for breach of contract,the court will consider​ 

A) ​only Bob to be at fault. 
B) ​only Cindy to be at fault. 
C) ​both Bob and Cindy to be at fault, but Bob to be more at fault than Cindy. 
D) ​Bob and Cindy to be equally at fault.

Question 49

Brasilia,a real estate broker licensed only in Connecticut,concludes a land sale in Delaware.She can​ 

A) ​collect the commission if it has not been paid. 
B) ​keep the commission if it has already been paid. 
C) ​foreclose on the property to obtain any unpaid amount. 
D) ​not collect the commission, keep it, or foreclose on the property.

Question 50

A contract between Kim and Larry to lease residential property contains an exculpatory clause.This clause is​ 

A) ​enforceable as a matter of public policy. 
B) ​enforceable if either party is in a business important to the public. 
C) ​enforceable if an event occurs to which the clause applies. 
D) ​generally unenforceable.

Question 51

Bay City Mall requires its tenants to sign a lease that includes a clause releasing Metro from liability in the event of monetary or physical injury no matter who is at fault.Coco's Chocolate Creations signs a lease with Bay City that contains the clause.This is​ 

A) ​a covenant not to compete. 
B) ​an adhesion contract. 
C) ​an exculpatory clause. 
D) ​an illusory promise.

Question 52

Presley agrees to sell his Omni Sports Equipment store to Nola.As part of the sale,Presley promises never to open a similar,competing store anywhere.This promise is most likely​ 

A) ​invalid because it is part of a sale of an ongoing business. 
B) ​invalid because of the unreasonable terms of area and time. 
C) ​valid because it is part of a sale of an ongoing business. 
D) ​valid if Presley and Nola are reasonably intelligent.

Question 53

Nyoko signs a covenant not to compete with her employer,Midstate Distribution,Inc.The covenant will be enforced if it​ 

A) ​does not require either party to obtain a business license. 
B) ​is reasonable with respect to geographic area and time. 
C) ​relieves Midstate from liability for any injury to Nyoko due to simple negligence. 
D) ​none of the choices.

Question 54

Shannon signs a contract with Tevin,an unlicensed contractor,to build a deck and gazebo at the rear of her house.This contract is enforceable by​ 

A) ​Shannon. 
B) ​any third party who is not aware that Tevin is not licensed. 
C) ​Tevin. 
D) ​no one.

Question 55

Volume Sales Corporation directs its marketing of discounted products to less educated consumers.In considering the unconscionability of a Volume contract,a court will NOT likely consider​ 

A) ​a buyer's level of education. 
B) ​the parties' relative bargaining power. 
C) ​the price of the products. 
D) ​the seller's level of education.

Question 56

Which of the following is NOT likely to be required to obtain a professional license?​ 

A) ​A certain education and a passing score on a state-administered exam 
B) ​Good moral character 
C) ​A fee 
D) ​An ongoing business

Question 57

The main problem with contract reformation is that​ 

A) ​judges are notoriously corrupt. 
B) ​it takes a long time. 
C) ​the judge becomes a party to the contract. 
D) ​it requires many additional court fees.

Question 58

Odina signs a covenant not to compete with her employer,Penultimate Sales Corporation.A court decides that the covenant is overly restrictive.The court will likely​ 

A) ​enforce it as written so as not to undercut the freedom of contract. 
B) ​enforce it but evaluate its effects over time. 
C) ​reform its terms to prevent any undue burden. 
D) ​refuse to enforce it unless Penultimate pays additional consideration.

Question 59

Machine Parts Corporation requires its customers to sign contracts with unconscionable terms or the company,which has few competitors,will not do business with them.Machine Parts can normally enforce​ 

A) ​a covenant not to compete. 
B) ​an adhesion contract. 
C) ​a contract to restrain trade. 
D) ​none of the choices.

Question 60

U-Can-Own-It Corporation sells appliances to less educated consumers,including Vi,on installment plans.U-Can-Own-It files a suit against Vi when she stops making payments.Vi claims that the deal is unconscionable.The court will most likely consider 

A) ​the geographic area of the relevant market. 
B) ​the parties' relative bargaining power. 
C) ​the quality of related products in the general market. 
D) ​the relation of this deal to those of other customers.

Question 61

Frugal Insurance Company sells a policy to Grover Company,insuring the life of one of Grover's key executives.When the executive dies,Frugal refuses to pay,noting that it was not licensed to sell insurance in Grover's state and arguing that thus,its policy cannot be enforced.Grover can recover​ 

A) ​the amount of the policy from Frugal in full. 
B) ​the amount of the premiums that Grover paid to Frugal. 
C) ​as much of the amount of the policy from Frugal as will cover Grover's costs. 
D) ​nothing.

Question 62

Jimenez is an emergency medical technician.Medical personnel such as Jimenez are prohibited by state statute from working more than a certain number of consecutive hours.One month,Jimenez works more than the legal limit.Jimenez can recover for​ 

A) ​the hours up to the statutory maximum but not more. 
B) ​the hours up to the statutory maximum and the extra hours. 
C) ​the hours up to the statutory maximum or the extra hours. 
D) ​nothing.

Question 63

Cross-Country Trucking Company contracts with Baldwin to transport crated goods to a certain destination for $5,000.Cross-Country delivers the crates,but Baldwin does not pay.Cross-Country learns that the crates contained stolen goods.Cross-Country can​ 

A) ​do nothing with respect to the contract. 
B) ​recover $5,000 from Baldwin. 
C) ​recover the goods but not the $5,000 from Baldwin. 
D) ​recover the goods and the $5,000 from Baldwin.

Question 64

Doug agrees with Elinor to sell methamphetamine to patrons of Elinor's nightclub Garden of Eden for 25 percent of the take.Doug sells the drugs but keeps all of the money.Elinor can​ 

A) ​recover her share of the money only if she did not aid in the crime. 
B) ​not enforce the deal. 
C) ​recover the total amount of the sales. 
D) ​recover her costs but none of the illegal profit.

Question 65

Best Products,Inc.,hires Cole to develop and implement an e-commerce strategy for marketing Best's products.Cole signs a contract that includes a clause prohibiting him from competing with Best during and after the employment.Before the strategy is implemented,Cole resigns from Best's employ and opens a business to compete with Best.In Best's suit against Cole,to determine whether Cole may compete with Best,what is the most important factor the court should consider?​

Question 66

Omni Insurance Company violates a state licensing statute when selling an insurance policy to Petra,in whose state Omni is not licensed to sell insurance.As a member of the class of persons protected by the statute,Petra can​ 

A) ​do nothing with respect to the policy. 
B) ​enforce the policy or recover the amount of the premiums paid. 
C) ​only enforce the policy. 
D) ​only recover the amount of the premiums paid.

Question 67

Lou and Mike negotiate a deal to transfer stolen body building equipment for counterfeit currency that Mike will attempt to spend at Now! Discount Mart.This contract is​ 

A) ​enforceable. 
B) ​void. 
C) ​voidable at the option of either party. 
D) ​voidable at the option of the party having less bargaining power.

Question 68

Through fraudulent means,Finlay induces Ethel to sign a contract to in-vest with him the profits from her business.When Ethel learns the truth,she may​ 

A) ​only enforce the contract. 
B) ​only recover what she invested with Finlay. 
C) ​enforce the contract or recover what she invested with Finlay. 
D) ​do nothing.

Question 69

In State X,persons must be at least eighteen years old before they can purchase alcoholic beverages.The state also has passed a law requiring that persons who prepare and serve liquor in the form of drinks in commercial establishments be licensed.The only requirement for obtaining a yearly license is that the person be at least eighteen years old.Moffitt,aged thirtyfive,is hired as a bartender for Lone Star Restaurant.Bekins,an alumnus of State X University,brings twenty of his friends to the restaurant to celebrate State X U's football victory.Bekins orders four rounds of drinks,and the bar bill exceeds $200.When Bekins learns that Moffitt has failed to renew his bartender's license,Bekins refuses to pay,claiming the contract is unenforceable.Is Bekins correct? Explain.

Question 70

Oscar owns Payroll Company,a bookkeeping service losing market share to Quik Bookwork,Inc.Oscar pays Remy $5,000 to steal a list of Quik's clients,to whom Oscar will aggressively market Payroll's services.This deal is​ 

A) ​enforceable. 
B) ​void. 
C) ​voidable at the option of either party. 
D) ​voidable at the option of the party having less bargaining power.

Question 71

Jack and Jill bet illegally on the outcome of a sporting event.Before the event is held,Jack changes his mind about the wager.Jack can​ 

A) ​not withdraw from the deal without Jill's consent. 
B) ​not withdraw from the deal under any circumstances. 
C) ​withdraw from the deal by giving notice. 
D) ​not withdraw from the deal without paying Jill's expenses.

Question 72

Boz runs an illegal gambling business and pays Colin,a police officer,not to interfere.The payments are discovered.Boz and Colin are sent to prison.With respect to the amount of the payments,Boz can recover​ 

A) ​all of it. 
B) ​none of it. 
C) ​only as much as Colin has not spent. 
D) ​only as much as Colin has spent.