Deck 10: Capacity and Legality: The Final Elements

Question 1

By signing a nondisclosure agreement, an employee can be deprived of employment in the future in certain geographical areas.

Answer 1

False
Explanation: Because the limitation is placed on the use of confidential information rather than actual employment of the worker, such agreements do not deprive people of their employment and therefore, do not constitute an extensive limit on competition.

Question 2

When both parties to an illegal agreement are equally wrong in the knowledge of the operation and effect of their contract, they are said to be in pari delicto.

Answer 2

True
Explanation: Feedback: Pari delicto means equal fault. When both parties to an illegal agreement are equally wrong in the knowledge of the operation and effect of their contract, they are said to be in pari delicto (in equal fault). In such cases, the court will give no aid to either party in an action against the other and will award no damages to either.

Question 3

If a minor makes a contract for necessaries, he or she will be liable for the fair value of those necessaries.

Answer 3

True
Explanation: However, if the necessaries have already been provided to the minor by parents or others, the rule does not apply. In addition, not everything that a party claims as a necessary will actually be a necessary. What may be necessary to one person may be a luxury to another; courts take into account the minor's family status, financial strength, and social standing or station in life.

Question 4

Under the law, capacity is considered a rebuttable presumption.

Question 5

Minors who become emancipated are responsible for their own contracts.

Question 6

Ratification is a minor's willingness to deny contractual obligation.

Question 7

Special statutes allow small loan companies, pawn shops, and other lending agencies that accept high-risk applicants for credit to charge a higher rate of interest.

Question 8

Carl is tall and looks like he is 21 years old. Carl lies about his age to purchase a home entertainment system for $1,000. In most states, Carl may disaffirm his purchase.

Question 9

Assume a minor enters a contract and misrepresents his age and later defrauds the other party. In some states, the other party can sue the minor under tort law, rather than contract law.

Question 10

A restrictive covenant in a contract for the sale of a business will be upheld if it is reasonable in time even if it extends beyond the areas where the business conducts business.

Question 11

When a minor indicates the intention not to live up to a contract, that minor is entitled to a return of everything given to the other party.

Question 12

Courts can uphold an agreement that is partly legal and partly illegal.

Question 13

A person's contractual obligations may be voidable if that person suffers from a mental impairment that prevents him or her from acting in a reasonable manner.

Question 14

Generally, parents are only liable for a contract executed by a minor when they cosign the agreements.

Question 15

Under the UCC, individuals who buy goods from minors have voidable ownership rights, and can transfer valid ownership rights to an innocent third-party purchaser of those goods.

Question 16

A minor may not disaffirm a contract to sell land after becoming an adult.

Question 17

The practice of charging less than the amount of interest allowed by law is called usury.

Question 18

Nondisclosure agreements are usually needed to protect trade secrets.

Question 19

Melody agrees to "sell" title of all of her assets to her cousin, Erin, for $1.00. The reason Melody sold her possessions was to hide them from creditors. The transfer of assets is a valid exercise of Melody's ownership rights.

Question 20

A criminal statute that is obscure may be struck down by the court as void for vagueness.

Question 21

In some jurisdictions, minors who become ____________ cannot void a contract, despite their apparent minority.

A) ratified
B) emancipated
C) abandoned
D) disaffirmed

Question 22

Eve, an experienced automotive engineer, signs a ____________ agreement with her employer, Environmental Auto Co., that she will never work in the auto industry after she leaves employment with Environmental. A court considering this agreement will ____________.

A) noncompete; declare it void as geographical area is not specified
B) restrictive employment; enforce the agreement in any event
C) noncompete; only enforce the agreement if it resulted from a bargained-for exchange
D) noncompete; enforce the agreement only if such agreements are customary in the auto industry

Question 23

When Julie, aged 27, took flu medication, she became very light-headed and confused. Alice, taking advantage of the situation, persuaded Julie to sell her watch that was worth $1,000 to her for $100. Julie later realized what Alice did and decided to take legal action. Which of the following is true as per contract laws?

A) Julie cannot sue Alice since she, as an adult, voluntarily sold the watch.
B) Julie has the right to get her watch back without returning the $100.
C) Alice is allowed to keep the watch and Julie should return the $100.
D) Alice should return the watch and Julie should return the $100.

Question 24

____________ that have not been fully performed by both parties, may be repudiated by a minor at any time.

A) Contracts for necessaries
B) In pari delicto contracts
C) Executed contracts
D) Executory contracts

Question 25

Ron, aged 20 years and 4 months, purchases a car from Slim's Auto Sales for $2,000. However, Ron returns the car to Slim Auto Sales telling them he does not feel this is the right car for him and that he wants his money back. At the time of disaffirmance, Ron was 21, the age at which he is considered an adult in his jurisdiction. Will this disaffirmance be enforceable in the court of law?

A) No, since Ron did not give Slim a signed disaffirmance.
B) Yes, since Ron disaffirmed during the year he reached his adulthood.
C) No, since the disaffirmance must be written when the price exceeds $500.
D) Yes, since the courts and laws always rule in the favor of minors.

Question 26

Which of the following contracts are not voidable by minors at their option?

A) Executory contracts
B) Contracts for necessaries
C) Contracts with banks for educational loans
D) Contract to purchase land

Question 27

Lizzie works as an entertainment journalist for a tabloid newspaper. The editor of a competing tabloid tells her that if she produces a story defaming a television celebrity, she will be given a job at the competing tabloid. After Lizzie produces the article and publishes it in the tabloid she works for, the competing tabloid refuses to hire her. Lizzie wants to bring a breach of contract lawsuit against the competing tabloid for not hiring her. Which of the following is true of this case?

A) Lizzie has committed a crime and hence, cannot file a lawsuit.
B) Lizzie can bring forth a lawsuit, as her contract with the competing tabloid contained all five elements.
C) Lizzie's contract has been executed; hence, the court is likely to award her damages for breach of contract.
D) Lizzie has committed a tort and her contract with the competing tabloid will not be upheld in the court.

Question 28

Brandon, a recent law school graduate, says he will provide affordable legal services to anyone who needs help. Although his bar exam results are not out yet, Brandon is certain that he has passed. Legally, are his clients required to pay for his legal services before he has received his license?

A) Yes, a court will require that his clients pay in full for any legal services they receive from him.
B) Yes, but if Brandon fails the exam, he must return all consideration to the appropriate clients.
C) No, since it is against the law for anyone without the required state license to offer legal advice.
D) No, because Brandon has acted incompetently.

Question 29

Maria, aged 16, from a wealthy family, purchases designer jeans on credit for $300. The true fair market value for the jeans is $75. Which of the following is true of this case?

A) Maria can disaffirm the purchase because designer jeans are not a necessary.
B) She cannot disaffirm, because her family is wealthy.
C) She is liable to pay $300, as per contract.
D) She may not disaffirm and is liable for $75.

Question 30

The illegal practice of charging more than the amount of interest allowed by law is called:

A) libel.
B) in pari delicto.
C) slander.
D) usury.

Question 31

When both parties to an illegal agreement are equally wrong in the knowledge of the operation and effect of their contract, they have formed a(n) ____________ contract.

A) restrictive
B) in pari delicto
C) usurious
D) nondisclosure

Question 32

Which of the following is a rule recognized by the Restatement of Contracts?

A) The incompetent party must return all consideration even if the other party knew about the person's impairment.
B) If a contract is executed, the impaired party can void the contract without returning the other party to the place he/she was in before.
C) A person's contractual obligations are partially voidable depending upon the severity of his/her mental and physical health.
D) A person's contractual obligations may be voidable if that person suffers from a mental impairment that prevents him or her from acting in a reasonable manner.

Question 33

Which of the following is true of a nondisclosure agreement?

A) It requires employees to promise not to reveal any confidential trade secrets, should they leave their present employment.
B) It limits a worker's employment options after leaving his or her present job in order to protect the present employer's confidential matter.
C) It restricts the seller of a business to enter the same type of business during a reasonable time and within a reasonable geographical area.
D) It states that the party who wrote the contract will not be liable for any economic loss or physical injury, even if that party caused the loss or injury.

Question 34

Rodney parks his car at Car Stack Parking Lot, Inc. On the back of the parking stub provided to Rodney, there is a statement typed in large letters: "NOT RESPONSIBLE FOR DAMAGE TO CARS." When Rodney returns, his car has been dented by the Car Stack attendant who was attempting to park more cars on the lot. According to law, the statement on the stub is an exculpatory agreement that is:

A) enforceable against Rodney regardless of circumstances.
B) enforceable against Rodney only if he had the opportunity to park elsewhere.
C) not enforceable against Rodney because he instructed the attendant to be careful around his car.
D) not enforceable against Rodney because it is contrary to public policy.

Question 35

In a locality that restricts business on Sunday, which of the following is usually true regarding these restrictive laws?

A) They invalidate all agreements made on Sunday.
B) They validate agreements made on Sunday for delivery of goods on a business day.
C) They validate agreements made on Sunday if the business in question has closed on Sunday.
D) They validate agreements made on Sunday requiring performance on a Sunday.

Question 36

The willingness of an emancipated minor to abide by contractual obligations is:

A) ratification.
B) emancipation.
C) rescission.
D) devolution.

Question 37

Which of the following is true about the legality of an agreement?

A) An agreement is not divisible if the legal part of a contract can be removed from the illegal part without changing the nature of the contract.
B) The court will not enforce any agreement or contract that is either fully or partially illegal.
C) An agreement can sometimes be partly legal and partly illegal.
D) A court has to enforce both the illegal and the legal parts of the contract.

Question 38

Jeanie, a prosecutor, agrees with Martin not to prosecute Martin's son for drunk driving in exchange for Martin employing her in his law firm two years after the drunken driving charge is dismissed. This is a(n) ____________ that is ____________.

A) nondisclosure agreement; void
B) usurious agreement; voidable
C) agreement to escape liability; voidable
D) agreement to obstruct justice; void

Question 39

All lawn maintenance businesses must pay the state a $200 annual license fee with no other legal regulations. ABC Yards, Inc. fails to pay the license fee. Which of the following is true in case ABC Yards has failed to acquire a license because of the failure to pay the $200?

A) The lack of a license will not necessarily make a contract void.
B) The lack of a license makes the contracts void under contract laws.
C) All contracts of ABC are voidable, due to their failure to obey the regulation.
D) Only executory contracts by ABC will be voidable.

Question 40

After betting $4 million on the outcome of a professional baseball game, Jake wants to make sure that he does not lose his money. He enters an agreement with a team's starting pitcher. The pitcher agrees to throw "fat" home run balls to the other team's batters in exchange for $75,000 from Jake. The pitcher gives up 10 home runs in the first three innings and his team loses the game. Jake refuses to pay him the $75,000 they agreed upon in the contract. If the pitcher sues Jake for breach of contract, which of the following is most likely to be the court's ruling?

A) The contract is divisible and the court will award the pitcher damages for the legal sections of the agreement.
B) The parties are in pari delicto and the court will refuse to award the pitcher any damages.
C) The pitcher can be declared less guilty of premeditation and will be awarded the damages.
D) The pitcher maintained his promise as per the contract and hence, Jake will have to award the consideration.

Question 41

Amanda agrees to pay a county official $20,000 personally in exchange for his using public funds to build a public one-half-mile all-weather road into her farm, so that she can attract buyers for her farm. The county official takes the $20,000, but never builds the road. Discuss the enforceability of this agreement.

Question 42

Alex, aged 30, appeared to be normal, but suffered from the secret delusion that he was a spy for the U.S. government on the trail of terrorists. Alex purchased a new car from Marvel Motors, Inc. and drove it so recklessly "chasing terrorists" that the engine burned up. Alex, not under medical treatment, seeks to rescind the car purchase and have his money returned. Analyze the appropriate solution to this case.

Question 43

Larry, 17 years old, bought a moped from the RU-Ready-2-Drive Used Moped lot. The next day, he accidentally ran the moped into a telephone pole and seriously damaged the vehicle. Larry transported the damaged vehicle to RU-Ready-2-Drive and demanded a return on his money. Must RU-Ready-2-Drive comply with his request? Explain.

Question 44

Reed needed expensive medical treatment for the injuries he suffered in a fire that ravaged his home. Lacking medical insurance and unable to obtain a bank loan, Reed turned to Lance, a local person known for his gambling prowess. Lance offered Reed $15,000 if Reed would repay him $23,000 in 36 monthly installments of $521 each. According to the laws in Reed's state, the maximum amount of annual interest that can be charged on loans is 20%. Explain whether Lancet's loan was legal.

Question 45

Susan, aged 16, owns a rare violin. Eric knows Susan is 16 and contracts with Susan that she will sell him the violin for $1,000 with delivery to take place when Susan is an adult. When Susan seeks to disaffirm this contract, Erin asserts that since delivery is to occur after Susan becomes an adult, she may not disaffirm. Analyze the case.

Question 46

Suds, Inc., a local self-service laundry, has a large sign on the inside wall reading: "NOT RESPONSIBLE FOR ANY DAMAGE TO OR LOSS OF CLOTHING." Georgia puts her damp clothes in a drier and within three minutes, the clothes are burning due to an excessively hot drier. Suds had failed to perform maintenance on the drier according to the manufacturer's instructions. Discuss in detail Georgia's ability to recover from Suds for her burnt clothing.

Question 47

Before Kramer entered a detoxification center for his alcoholism, he went to an electronics store and spent $500 on a new, nonrefundable television. He had several drinks before he went into the store, but was not intoxicated. After he was released from the costly center three months later, Kramer decided to return the television. He believed he could disaffirm the contract because he was drinking when he made the purchase. Analyze the case.

Question 48

Gail buys a car at the age of 17 and makes regular monthly payments until six months after her 18^th birthday, when the car is totaled in a wreck. Gail wants to disaffirm the car purchase. The age of adulthood in Gail's state is 18. Discuss.

Question 49

Ron, a fast-talking, used car salesperson, convinced Maureen, an elderly semi-invalid, to purchase an automobile worth $500 for $12,000. When Maureen later refused to pick up the car or pay the bill, the used car dealer sued her. Discuss the case.

Question 50

Irene buys Shawn's second hand furniture, and they sign a contract on a Sunday. However, the contract mentions that Irene will collect the furniture on Tuesday and will pay the consideration to Shawn at that time. Analyze the legality of the contract, considering that the state where Irene and Shawn live is not very restrictive about prohibiting all business activity on Sundays.