Question 1

Eintz Corp.hired Jose to bribe a foreign government official.Eintz gave Jose $10,000 in cash to make the bribe payment and $2000 for Jose's efforts.Instead of paying the bribe,Jose pocketed all of the money.If Eintz sues Jose,Eintz will:

Accepted Answer

Eintz Corp. cannot recover the money because the contract was for an illegal act (bribery), and courts do not enforce illegal contracts.

Question 2

Suppose that Lenny Lawyer enters into an agreement with Cindy Client that his fees will be a percentage of the recovery Lenny obtains for Cindy in her pending divorce.State law makes such a contingency fee arrangement illegal in divorce actions.What will be the probable outcome if Lenny attempts to enforce the agreement?

Accepted Answer

State law makes contingency fee arrangements illegal in divorce actions, which means that Lenny's agreement with Cindy is in violation of a statute. Therefore, the contract will be void and Lenny will not be able to recover any fees. Option A is incorrect because the fact that Cindy may not be able to afford an attorney does not validate an illegal fee arrangement. Option B is incorrect because the contract is not voidable at Cindy's option, but rather void due to violating the law. Option D is incorrect because the validity of the contract does not depend on whether it was in writing or not.

Question 3

Mike owns a house in a poor area of a large city.Mike is on disability and his total monthly income is $700.A sales representative visits his home,selling a water purification system.Mike buys and signs a contract that calls for monthly payments of $500 for the next 10 years.The water system is worth no more than $1000.Mike did not understand what he was signing and thought it was a permission slip allowing the salesman to conduct a free water test to determine the number of toxins in the water.How would a court most likely describe this contract?

Accepted Answer

The contract is likely to be deemed unconscionable as it takes advantage of a vulnerable person and the terms are grossly unfair. The sales representative took advantage of Mike's lack of understanding and charged him significantly more than the water system was worth, leaving him with very little disposable income to cover his essential living expenses.

Question 4

In bailment cases,exculpatory clauses:

Accepted Answer

Exculpatory clauses in bailment cases are more likely to be enforced than in other types of cases, as long as they are reasonable and not against public policy. These clauses often attempt to limit the bailee's liability for damage to the bailed property. However, they cannot completely absolve the bailee of all liability. Exculpatory clauses are not illegal by statute unless they violate public policy.

Question 5

Public policy means the law that comes from the:

Accepted Answer

The answer of Public policy means the law that comes...

Question 6

Edouardo Restaurant's secret recipe for its tomato onion chutney would be considered:

Accepted Answer

Edouardo Restaurant's tomato onion chutney recipe is considered a trade secret, and as such, an employment noncompete clause would be enforceable to protect it. Trade secrets are confidential information that give the owner a competitive advantage, and employers can use noncompete clauses to prevent employees from sharing or using this information for a limited time after leaving the company.

Question 7

Barb has been a children's day care provider for several years in the small town of Sallton.She has decided to give it all up and move to the big city for excitement and adventure.She sells her business to Ken,agreeing not to open a competing business within five miles of Sallton for a period of nine months.After five months of the big city life,Barb is broke and moves back to Sallton.She opens a small day care business.Ken sues on the noncompete clause.What is the most likely result?

Accepted Answer

Ken is likely to win because the noncompete clause was agreed upon by both parties and was valid for a specific time period. Barb violated the agreement by opening a competing business within five miles of Sallton before the stipulated period was up, and therefore, Ken is within his rights to sue her.

Question 8

An insurance contract is not considered to be a legalized form of gambling because:

Accepted Answer

The answer of An insurance contract is not considered to...

Question 9

To be valid,a noncompete clause must be:

Accepted Answer

All three options listed are important factors in determining the validity of a noncompete clause. It must be ancillary to a legitimate bargain, reasonable in terms of time and geography, and necessary to protect trade secrets or confidential information. If a noncompete clause meets all three of these criteria, it is more likely to be considered valid and enforceable.

Question 10

Wendell,new to the area,selects a doctor from the telephone book and visits that doctor to have a splinter extracted.Unbeknownst to Wendell,the doctor has never passed the state licensing exams.Later,when Wendell discovers the truth,he refuses to pay his bill.If the doctor sues for recovery of the fee,will the court support the doctor's claim?

Accepted Answer

Courts generally do not enforce contracts made with unlicensed professionals as it is against public policy to do so, regardless of whether the patient was aware of the unlicensed status of the doctor.

Question 11

Judith is a CPA with an excellent reputation and client base.She sells her tax preparation business to Shawn,and the sales contract includes a noncompete clause restricting Judith from opening a similar business for two years within a 10-mile radius of her former office.If she opens a tax preparation office five miles away after one year,a court would probably:

Accepted Answer

The answer of Judith is a CPA with an excellent...

Question 12

Which of the following relationships will ordinarily not create an insurable interest?

Accepted Answer

The answer of Which of the following relationships will ordinarily...

Question 13

When Michele was hired by Farrington,Inc.,he signed the following agreement,"Upon termination of my employment with Farrington,I agree not to work for a competing company within 30 miles of Farrington's headquarters for a period of one year." This agreement,important to protecting secret information developed in the employer's business,is:

Accepted Answer

This is an enforceable agreement not to compete, also known as a non-compete agreement, which is designed to protect the employer's confidential information and trade secrets. A one-year time limit and a 30-mile radius are reasonable restrictions.

Question 14

Which of the following is an example of an exculpatory clause?

Accepted Answer

An exculpatory clause is a contract provision that tries to release one party from liability if damages or injuries occur during the contract's performance. Choice B is an example of an exculpatory clause because the seller is trying to avoid liability by stating that they are not responsible for any property damage, regardless of the cause of the injury.

Question 15

Johnny has the largest tire selling business in the city.He learns that Hank is thinking of opening a competing tire selling business.Johnny gives Hank $25,000 to not open his proposed business in the same city.Which statement is correct?

Accepted Answer

The contract is an illegal restraint of trade and is therefore void. It goes against public policy to prevent someone from opening a business in the same industry within a specific geographical area. This type of agreement is also known as a noncompete clause, and it is typically unenforceable if it is considered unreasonable or unfair to the person being restricted. In this case, Johnny is paying Hank to not open a business, which violates competition laws and would limit consumer choice.

Question 16

AAA and XXX companies are both major international conglomerates.They are negotiating a contract whereby AAA will install a computer system for XXX.One clause in the contract states that AAA will not be liable for damages caused by the negligent installation of the computer system,except that AAA warrants the system and will fix any problem for a period of two years following installation.AAA completes the installation of the computer system.XXX loads extensive amounts of information on the system,but all of it is destroyed because AAA negligently installed the memory chips.AAA fixes the memory,but XXX incurred significant expenses in recreating the lost information.XXX sues for these expenses.AAA defends with the noted clause in the contract.

Accepted Answer

The clause in the contract specifically limits AAA's liability for damages caused by negligent installation, except for the warranty to fix problems for two years. Since AAA fixed the memory issue, the clause is likely enforceable, protecting AAA from liability for the expenses incurred by XXX.

Question 17

A contract most likely will be declared unconscionable if:

Accepted Answer

A contract may be declared unconscionable if it is oppressive and the weaker party did not fully understand the consequences of the agreement, which can happen when the stronger party takes advantage of the weaker party's lack of bargaining power, knowledge or sophistication. This can manifest in terms of unfair provisions, undue influence or duress. Therefore, choice A, B, and D are not necessarily indicators of unconscionability.

Question 18

The UCC deals with unconscionability in a contract by providing that a court may:

Accepted Answer

The UCC provides that a court may refuse to enforce the entire contract, enforce the remainder of the contract without the unconscionable clause, or limit the application of any unconscionable clause as to avoid any unconscionable result. Therefore, all of the choices are correct.

Question 19

An exculpatory clause is generally unenforceable when:

Accepted Answer

Exculpatory clauses are generally unenforceable when they involve public transportation because such services are considered essential and often subject to public interest and safety regulations, limiting the ability to waive liability.

Question 20

In the case of Worldwide Insurance v.Klopp,the Supreme Court of Delaware found that:

Accepted Answer

The answer of In the case of Worldwide Insurance v.Klopp,the...

Quiz 12: Legality