Deck 12: The Legality of Agreements

Question 1

All forms of gambling are legal in all states.

Answer 1

False

Question 2

If the purpose of a licensing statute is to protect the public from unlicensed practitioners,a contract with an unlicensed professional is illegal.

Answer 2

True

Question 3

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

Answer 3

False

Question 4

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

Question 5

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

Question 6

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

Question 7

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

Question 8

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

Question 9

A contract with an licensed professional is never enforceable.

Question 10

A covenant not to compete that is part of an employment contract will generally be upheld.

Question 11

All states require physicians to be licensed.

Question 12

As long as both parties agree,it is legal to charge any interest rate for an ordinary loan.

Question 13

A contract that calls for the performance of a legal act is enforceable.

Question 14

Only someone with an insurable interest can enter into an insurance contract.

Question 15

Any contract entered into with an unlicensed party is unenforceable.

Question 16

Gambling involves the distribution of property by chance.

Question 17

Statutes often prescribe the terms of contracts.

Question 18

All states require that members of certain professions obtain licenses al?lowing them to practice.

Question 19

The maximum rate of interest is same in every state.

Question 20

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

Question 21

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

Question 22

An adhesion contract is a contract drafted by one party and presented to another on a take-it-or-leave-it basis.

Question 23

Unconscionable means unethical or unfair.

Question 24

If a contract is illegal,a court will not enforce it.

Question 25

Adhesion contracts are usually not held to be contrary to public policy.

Question 26

An illegal contract is valid if the parties to it were unaware of the illegality.

Question 27

William obtains a loan from a bank at 4.5% interest.The state where he obtains the loan has a usury statute that limits interest rates to a 3.5% 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 28

An electrical company can avoid liability for negligent maintenance of its lines if it has an exculpatory clause in its contract.

Question 29

When a statute protects a certain class of people,a member of that class cannot enforce an illegal contract.

Question 30

An exculpatory clause in an employment contract is not enforceable if the clause is against public policy.

Question 31

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 32

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

Question 33

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 34

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 35

Exculpatory means serving to clear of blame.

Question 36

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 37

Blue sky laws are state laws that regulate and supervise investment companies for the protection of the public.

Question 38

A covenant not to compete is never enforceable.

Question 39

Gregory obtains a consumer loan from Finance Bank at an interest rate that exceeds the state's maximum.Finance has

A)calculated the optimum rate that the market will bear. b engaged in a restraint of trade.
C)underestimated the risk of the loan's nonpayment.
D)violated the usury laws.

Question 40

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

Question 41

End-Run Energy Company (ERE) is a public utility.To avoid liability for negli?gence,ERE 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 42

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 43

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)The sale of an ongoing business

Question 44

A contract between Kim and Larry to lease residential property contains an ex?cul?patory clause.This clause is

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

Question 45

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 46

SuperBumperCars,Inc.requires all customers to sign a release that contains a clause that releases SuperBumperCars from all liability in the event of an injury occurring during a bumper car ride,no matter who is at fault.This is an example of

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

Question 47

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 48

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 49

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 50

Dissembly Corporation requires consumers to sign contracts with uncon?scionable terms or Dissembly,which has few competitors,will not do busi?ness with them.Dissembly 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 51

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 52

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 53

Nyoko signs a covenant not to compete with her employer,Midstate Distribu?tion,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

Jolie signs a contract with Keaton,an unlicensed physician,to perform a medical procedure.This contract is enforceable by

A)Jolie.
B)Jolie's medical insurance company.
C)Keaton.
D)no one.

Question 55

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 56

Duffy and Elbert agree to hijack a truck carrying a load of pecans. 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 57

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 competi?tive company with increasing sales. Sandra keeps the money without doing any?thing more. Gloria will be able to recover the $10,000

A)under no circumstances.
B)if Sandra never in?tended 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 58

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 59

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

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

Question 60

Brasilia,a real estate broker licensed only in Connecticut,con?cludes 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 61

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 62

Best Products,Inc.,hires Cole to develop and implement an e-commerce strategy for marketing Best's products. Cole signs a contract that in?cludes a clause prohibiting him from competing with Best during and af?ter 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 63

Frugal Insurance Company sells a policy to Grover Company,in?suring the life of one of Grover's key executives. When the executive dies,Frugal re?fuses 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 64

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 com?mercial establishments be licensed.The only requirement for obtaining a yearly license is that the person be at least eighteen years old.Moffitt,aged thirty-five,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 or?ders four rounds of drinks,and the bar bill exceeds $200.When Bekins learns that Moffitt has failed to renew his bartender's license,Bekins re?fuses to pay,claiming the contract is unenforceable.Is Bekins correct? Explain.

Question 65

Rolf is an emergency medical technician. Medical personnel such as Rolf are pro?hibited by state statute from working more than a certain num?ber of consecutive hours. One month,Rolf works more than the legal limit. Rolf

A)must resign from his job.
B)
B)can recover for the extra hours of service.
C)both a and
D)none of the choices.

Question 66

A contract between Lou and Mike requires a transfer of stolen goods for counterfeit currency.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 67

Derrick is forced,under duress,to enter into an illegal bargain.Derrick

A)can enforce the contract only.
B)can recover for the value of the contract only.
C)can enforce the contract or recover for the value of the contract.
D)cannot enforce the contract or recover for the value of the contract.

Question 68

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 69

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 70

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 71

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.

Question 72

Smitty enters into an illegal bargain with Taylor.Smitty can enforce the con?tract or re?cover its value if he has been induced to enter into the bar?gain as a result of

A)duress.
B)his desire to obtain the object of the deal.
C)a persuasive "sell" by Taylor.
D)his belief that Taylor would do right by him.