Deck 12: Capacity and Legality

Question 1

Disaffirmance is the legal avoidance of a contractual obligation.

Answer 1

True

Question 2

Parents are always liable for the contracts made by their minor children.

Answer 2

False

Question 3

If a minor disaffirms a contract,he or she must disaffirm the entire contract.

Answer 3

True

Question 4

A contract with an unlicensed professional is never enforceable.

Question 5

A minor may accept and validate a contract with an adult.

Question 6

A contract is void if one of the parties was intoxicated at the time of its formation.

Question 7

Parents are required by law to provide necessaries for their minor children.

Question 8

A minor's failure to perform an executory contract within a reasonable time after reaching the age of majority implies disaffirmance.

Question 9

A contract to commit a crime is a contract and therefore enforceable.

Question 10

An adult may disaffirm a contract entered into with a minor.

Question 11

Ordinarily,a minor who affirmatively misrepresents his or her age cannot disaffirm a contract.

Question 12

Food is the only thing that courts have been willing to define as "necessary."

Question 13

A minor who affirmatively misrepresents himself or herself to be an adult will not be able to disaffirm a contract in most states.

Question 14

A person who enters into a contract when he or she is intoxicated can void the contract even if he or she understood the legal consequences.

Question 15

Contractual capacity includes the financial ability to pay for the benefits of a contract.

Question 16

Contractual capacity refers to the size or volume of a contract.

Question 17

A person who enters into a contract when he or she is intoxicated can void the contract if the terms are obviously favorable to the other party.

Question 18

A contract to do something that is prohibited by statutory law is void.

Question 19

A party who uses the benefits of a contract before paying for them commits usury.

Question 20

Only a guardian can enter into legally binding contracts on behalf of a mentally incompetent person.

Question 21

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

Question 22

Jill is fifteen.In most states,Jill would be considered a minor because she is under the age of

A)sixteen.
B)eighteen.
C)twenty.
D)twenty-one.

Question 23

Orin relinquishes the right to his daughter Neko's control,care,custody,and earnings.This act is

A)disaffirmance.
B)emancipation.
C)ratification.
D)severability.

Question 24

Fernando,a seventeen-year-old,signs a contract to sell his car to Gusto Used Autos.Fernando receives a better offer the next day from Hi-Valu Cars & Trucks,Inc.,and accepts the new offer.Fernando is

A)liable to Gusto and must sell it a car of comparable value.
B)liable to Gusto and must sell it his car.
C)not liable to Gusto because he is a minor.
D)not liable to Gusto because the sale of the car disaffirmed their deal.

Question 25

Dante enters into a contract with Rosalinda,who does not have contractual capacity.Dante can enforce the contract if Rosalinda

A)does not choose to avoid the contract.
B)is a minor.
C)can obtain the funds to pay for the benefits of the contract.
D)is intoxicated or men?tally incompetent.

Question 26

An innocent party who has fully performed an illegal contract may sometimes enforce it against a guilty party.

Question 27

A covenant not to compete between ongoing businesses is always enforceable.

Question 28

An exculpatory clause in a residential property lease is always enforceable.

Question 29

A covenant not to compete is never enforceable.

Question 30

The only purpose of a licensing statute is to protect the public from unlicensed practitioners.

Question 31

If an illegal contract is executory,either party can enforce it.

Question 32

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

Question 33

An unconscionable contract is a contract entered into unconsciously.

Question 34

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

Question 35

Portions of a divisible contract may be enforced.

Question 36

An exculpatory clause in an employment contract is always enforceable.

Question 37

Chris,a minor,signs a contract to buy alcoholic beverages for Dine & Drink,his parents' restaurant.The contract is

A)valid but may be disaffirmed.
B)valid but may not be disaffirmed.
C)void as a matter of law.
D)void unless it is also signed by Edie,the manager of Dine & Drink.

Question 38

A contract in which the stronger party dictates the terms is an adhesion contract.

Question 39

A party's lack of understanding of contract terms can deprive him or her of any meaningful choice.

Question 40

An exculpatory clause on a ticket to a ride in an amusement park is never enforceable.

Question 41

On Tad's eighteenth birthday,he decides that he no longer wants to keep a car he bought from U-Pick Autos,Inc.,when he was seventeen.His right to disaffirm the deal will depend on

A)the car's condition when Tad bought it.
B)the car's current condition.
C)whether Tad acts within a reasonable period of time.
D)whether U-Pick has the right to disaffirm.

Question 42

Jacquie signs a contract to buy a car just before reaching the age of majority.After reaching the age of majority,Jacquie does not take possession or make payments.Most courts would hold,with respect to the contract,that this is

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

Question 43

A court adjudicates Holly mentally incompetent and appoints a guardian.Holly subsequently signs a contract to sell her house.The contract is

A)enforceable if Holly comprehended the consequences.
B)enforceable if Holly knew she was entering into a contract.
C)enforceable if the house was entirely paid for.
D)void.

Question 44

Desiree and Eduardo decide to wager,in violation of a state statute,on the outcome of a soccer game.They each deposit money with Felipe,who agrees to pay the winner of the bet.Before the game begins,Eduardo tells Felipe that he has changed his mind about the bet.Eduardo can recover

A)the amount of his bet and the amount of Desiree's bet.
B)the amount of his bet minus Felipe's expenses.
C)the amount of his bet only.
D)nothing.

Question 45

Nick represents himself as a contractor in Ohio,but he is not licensed in that state.A contract between Pat and Nick by which Nick agrees to build a warehouse for Pat in Ohio is

A)enforceable only if Pat does not object after learning of Nick's status.
B)enforceable only if Pat knows that Nick is unlicensed.
C)enforceable only if the outcome is successful.
D)not enforceable.

Question 46

Dudley,a minor who is under his parents' care and control,signs a contract to rent an apartment from Ewan for one year.Before the end of the term,Dudley moves out.Ewan sues for the rent for the rest of the term.Dudley can

A)avoid liability for the rent but not disaffirm the contract.
B)disaffirm the contract and avoid liability for the rent.
C)disaffirm the contract but not avoid liability for the rent.
D)not disaffirm the contract nor avoid liability for the rent.

Question 47

Ruth,a minor,charges groceries at Sam's Mart.Two days later,Ruth disaffirms the purchase.Ruth owes Sam's Mart

A)the reasonable value of the groceries.
B)the retail value of the groceries.
C)the wholesale value of the groceries.
D)nothing.

Question 48

Intoxicated,Clio agrees to sell her restaurant,Diners Café,to Evan for half of its real market value.This deal is most likely voidable if Clio

A)appears intoxicated to Evan.
B)disaffirms the contract after becoming sober.
C)is so intoxicated as to have no memory of the deal.
D)is so intoxicated as to lack comprehension of the legal consequences.

Question 49

Jack,a minor,takes out an automobile insurance policy and pays a $1,000 premium.If Jack disaffirms the contract,he can most likely recover

A)$500.
B)$1,000.
C)$1,500.
D)nothing.

Question 50

Mica,a minor,signs a contract to pay National Fitness Club a monthly fee for twenty-four months to use its facilities.Six months later,after reaching the age of majority,Mica continues to use the club.This act is

A)disaffirmance.
B)emancipation.
C)ratification.
D)unconscionable.

Question 51

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

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

Question 52

Opie enters into a contract with Belle.Later,Opie is adjudged mentally incompetent.Raye,Opie's daughter,attempts to void Opie's contract with Belle on the ground of Opie's incompetency.The contract is

A)enforceable if Opie had capacity at the time the contract was formed.
B)enforceable if Belle is also incompetent.
C)enforceable if Raye knew of the contract when it was formed.
D)void.

Question 53

Delia enters into,and fails to disaffirm soon after reaching the age of majority,a contract with Electronics Stores,Inc.(ESI).Later Delia attempts to disaffirm the contract.ESI files a suit against her.The court will most likely consider the contract ratified if it is

A)executed.
B)exculpatory.
C)disaffirmed.
D)rescinded.

Question 54

Fernando obtains a consumer loan from Greater Regional Credit Union at an interest rate that exceeds the state's maximum.Greater Regional 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 55

Elle,a minor acting on her own,signs a contract to buy a horse from Field Equine Ranch.Later,Elle disaffirms the deal.Liability most likely rests with

A)Elle and her parents.
B)Elle only.
C)Elle's parents only.
D)neither Elle nor her parents.

Question 56

Clay,a minor,signs a contract to buy a car from Delta Motors by misrepresenting his age as twenty-one.Clay fails to make the payments.Delta sues.In most states,Clay can

A)not return the car nor avoid further liability.
B)not return the car but can avoid further liability.
C)return the car and avoid further liability.
D)return the car but cannot avoid further liability.

Question 57

Betty,a minor,signs a contract to buy an SUV by misrepresenting her age to be twenty-one.In most states,Betty may

A)disaffirm the contract.
B)disaffirm the contract only if she first makes full payment.
C)disaffirm the contract only if she returns the SUV in orig?inal condition.
D)not disaffirm the contract.

Question 58

Bree is a real estate broker licensed only in Minnesota.She concludes a sale in North Dakota on O'Reilly's behalf.Bree's contract with O'Reilly to be paid a certain commission for the sale is

A)enforceable if O'Reilly comprehended the consequences.
B)enforceable if O'Reilly knew Bree was not licensed in North Dakota.
C)enforceable if the amount of her commission is reasonable.
D)unenforceable.

Question 59

Gina,a minor,enters into a contract to buy a tractor from Herb,an adult.If the deal is set aside,restoring Gina and Herb to the positions they held before the contract is required in

A)all states.
B)most states.
C)no states.
D)some states.

Question 60

Curt,a doctor,renders medical care to Dora,a minor.Happy for a successful outcome,Dora buys and sends a gift to Curt,and hires the band Elation to perform at her next birthday celebration.Most likely to be considered a necessary is

A)the medical care.
B)the thank-you gift.
C)the band.
D)none of the choices.

Question 61

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

Question 62

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

A)enforceable only if either party is in a business important to the pub?lic interest.
B)enforceable only if the lease involves residential property.
C)generally enforceable as a matter of public policy.
D)generally unenforceable.

Question 63

First National Bank signs an agreement not to compete with City Bank that will bar City Bank from continuing to operate in the state in which both banks do almost all of their business.The agreement is likely

A)an unreasonable restraint of trade.
B)enforceable.
C)enforceable if it is ancillary to an agreement by the First National Bank to purchase all of the assets of the City Bank.
D)none of the choices.

Question 64

Lora 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)is supported by consideration.
D)none of the choices.

Question 65

Sam signs a covenant not to compete with his employer,Topp Sales Company.A court decides that the covenant is overly restrictive.The court will likely

A)enforce it as written so as not to interfere with the parties' freedom of contract.
B)enforce it but evaluate its effects over time.
C)reform its terms to prevent any undue burdens.
D)refuse to enforce it unless Topp pays additional consideration.

Question 66

Airway International,Inc.,is a commercial passenger airline.Airway includes on its tickets a clause that states the airline is not liable for any injury to,or the death of,any passenger caused by its,or its employees',negligence.An Airway flight from Boston to New York crashes into Long Island sound,resulting in the deaths of all passengers.The cause of the accident is found to be due to Airway's negligence.Based on the clause on its tickets,can Airway avoid liability

Question 67

Bret runs an illegal business and pays Cal,a law enforcement officer,not to interfere.The payments are discovered.Bret and Cal are sent to prison.Bret can successfully sue Cal for the return of

A)all of the money paid to Cal.
B)only the money paid to Cal that has been spent.
C)only the money paid to Cal that has not been spent.
D)none of the choices.

Question 68

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 69

Through fraudulent means,Roy induces Sal to sign a contract to invest with him her profits from Tasty Café.When Sal learns the truth,she may

A)do nothing with respect to the contract.
B)enforce the contract only.
C)enforce the contract or recover the money paid.
D)recover the money paid only.

Question 70

John agrees to sell his sports equipment store to Kay and,as part of the sale,promises not to open a similar store in the United States for twenty years.John's promise is

A)an unreasonable restraint of trade like all covenants not to compete.
B)unreasonable in terms of geographic area and time.
C)unreasonable in terms of Kay's "goodwill" and "reputation."
D)valid and enforceable.

Question 71

As part of a sale of a business,Lee signs a covenant not to compete that is unreasonable in its essential terms.To prevent undue hardship,a court will most likely

A)enforce the covenant as written.
B)enforce the covenant but evaluate its effects over time.
C)reform the covenant's terms.
D)refuse to enforce the covenant without additional consideration.

Question 72

Regular Insurance Company violates a state statute when selling an insurance policy to Simone.As a member of the class of persons protected by the state statute,Simone can

A)do nothing with respect to the contract.
B)enforce the contract or recover the payment.
C)only enforce the contract.
D)only recover the payment.