Question 1

American courts generally will enforce a gambling agreement if both parties are in agreement on the terms.

Accepted Answer

American courts generally do not enforce gambling agreements as they are often considered illegal or against public policy, unless specifically authorized by state law.

Question 2

Bargains are illegal if they violate a crime or tort but not if they are merely against public policy.

Accepted Answer

Bargains that are against public policy are also considered illegal, not just those that violate a crime or tort. Public policy violations can render a contract void or unenforceable.

Question 3

An agreement for the purchase of an illegal substance will be enforced by the courts if all other elements of the contract are present.

Accepted Answer

Contracts for illegal purposes are void and unenforceable in court, regardless of the presence of all other elements of a valid contract.

Question 4

The law does not provide a remedy for the breach of an unenforceable agreement.

Accepted Answer

An unenforceable agreement is one that cannot be enforced in a court of law, so no legal remedy is available for its breach.

Question 5

A covenant not to compete is a type of restraint of trade that courts today will enforce under certain circumstances.

Accepted Answer

Courts will enforce a covenant not to compete if it is reasonable in scope, duration, and geographic area, and is necessary to protect a legitimate business interest such as trade secrets or customer relationships.

Question 6

Maximum rates of interest that are permitted under usury statutes vary from state to state.

Accepted Answer

Usury statutes, which set the maximum legal interest rates, differ among states, meaning the maximum allowable interest rates can vary depending on the state's specific legislation.

Question 7

Where a stipulation in restraint of trade is part of the sale of a business, it may be valid if the restraint is within reasonable limitations to protect the business's goodwill.

Accepted Answer

Such stipulations are generally considered valid if they are reasonable in scope, duration, and geographic area, as they aim to protect the legitimate interests of the business, such as its goodwill, without imposing undue restrictions on the individual's ability to work or engage in trade.

Question 8

Specific lender usury statutes rather than the general usury statute generally apply to real estate mortgages and small consumer loans.

Accepted Answer

This is because each state has its own specific usury statutes that apply to certain types of loans, such as real estate mortgages and small consumer loans. These specific statutes may have different interest rate limits or other regulations than the general usury statute in that state.

Question 9

The Code and the Restatement both contain definitions of what constitutes "unconscionable" conduct.

Accepted Answer

The answer of The Code and the Restatement both contain...

Question 10

Oswald applied for a loan from Pointe Lenders. Pointe's reasonable cost of checking Oswald's credit will be considered as part of the financing charge when determining whether Pointe's rate of interest exceeds that allowable under the usury statute.

Accepted Answer

The cost of checking credit is typically not included in the finance charge for determining usury, as it is considered a separate administrative fee rather than part of the interest rate.

Question 11

An exculpatory clause may excuse one party from liability for her own tortious conduct.

Accepted Answer

An exculpatory clause is a contract provision that relieves one party from liability for their own negligence or wrongful acts under certain conditions.

Question 12

An agreement to pay a public officer something extra for performing his official duty is enforceable.

Accepted Answer

Such an agreement is considered illegal and unenforceable because it goes against public policy by encouraging corruption and undermining the integrity of public office.

Question 13

Many states impose no limit on the rate of interest that may be charged on loans to corporations.

Accepted Answer

Many states have usury laws that set maximum interest rates for consumer loans, but these laws often exempt loans made to corporations, allowing lenders to charge higher rates on corporate loans without a statutory limit.

Question 14

In some states, a lender who charges a usurious rate forfeits both the principal and interest on the loan.

Accepted Answer

In certain states, laws against usury (charging excessively high interest rates) are strict enough that a lender found to be charging rates above the legal limit can lose the right to collect both the principal amount of the loan and any interest charged.

Question 15

It is legal for a candidate for public office to make a bargain with a supporter to give them a certain appointment following the election in return for support.

Accepted Answer

Such an arrangement would typically be considered a form of corruption or bribery, as it involves exchanging political support for a promise of a specific appointment, which undermines the principles of merit-based public service and fair political processes.

Question 16

Sam, a student, promises to act as a guide on a fishing trip for a group of visiting dignitaries. The dignitaries agree to pay him $200 for his services. Sam guides them, but when they discover that Sam does not have a fishing license, they refuse to pay him. The agreement is an illegal one, which is not enforceable.

Accepted Answer

The answer of Sam, a student, promises to act as...

Question 17

A contract that requires a person to commit a tort will be enforced by the courts.

Accepted Answer

Courts will not enforce contracts that require a party to commit a tort (a wrongful act or an infringement of a right leading to civil legal liability) because it is against public policy to enforce agreements that involve illegal activities or harm to others.

Question 18

The courts readily enforce a covenant not to compete during the period of employment.

Accepted Answer

Courts generally consider a covenant not to compete during employment to be valid and enforceable, as it is seen as protecting the legitimate interests of the employer.

Question 19

Bill is currently enrolled in law school. He expects to graduate and take the bar exam in order to be able to practice law. Before Bill becomes a lawyer, he promises to represent his friend, Tom, in a breach of contract action if Tom will pay him 25% of the settlement. Bill negotiates and the case settles for $50,000. Tom refuses to pay Bill. Bill then graduates and attempts to sue Tom. Bill has a legal right to enforce the agreement.

Accepted Answer

Bill made a promise to perform legal services before he was licensed to practice law, which is a violation of legal ethics rules. Therefore, the agreement between Bill and Tom is unenforceable.

Question 20

An adhesion contract is offered on a "take-it-or-leave-it" basis.

Accepted Answer

An adhesion contract is a contract offered on a "take-it-or-leave-it" basis, meaning that the terms of the contract are non-negotiable and one party has significantly more bargaining power than the other. This is commonly seen in standardized contracts such as those for cell phone service or rental agreements.

Quiz 13: Illegal Bargains