Question 1

A restraint that is merely ancillary to a contract may be legal if:

Accepted Answer

Agreements whose sole purpose is to restrain trade are illegal. However, a restraint that is merely ancillary to a contract may be legal if it is designed to protect interests created by the contract and it is no broader than is reasonably necessary to protect those interests.

Question 2

Whether a statute is classed as regulatory or revenue-raising statute depends on the:

Accepted Answer

Whether a statute is classed as regulatory (for the protection of the public) or revenue raising depends on the intent of the legislature. As a general rule, statutes that require proof of character and skill and impose a penalty for violation are considered regulatory. Those that impose a significant license fee and allow anyone who pays the fee to obtain a license are classed as revenue raising.

Question 3

_____ is an example of an illegal wager.

Accepted Answer

When the parties create a new risk for the sole purpose of bearing it, it is an illegal wager. The difference between stock and commodity transactions and wagers lies in the fact that the parties to stock and commodities transactions are legally bound to the purchase agreement. In an illegal wager, such as a bet on the future performance of a stock or commodity, no purchase is involved.

Question 4

Exculpatory clauses are generally unenforceable if they seek to avoid liability for:

Accepted Answer

An exculpatory clause is a provision in a contract that attempts to relieve one party to the contract from liability for the consequences of his or her own negligence. Exculpatory clauses that seek to avoid liability for willful misconduct or fraud, however, are generally unenforceable.

Question 5

Which of the following remedies is used in cases involving illegal wagering contracts?

Accepted Answer

There are no remedies for cases involving illegal wagering contracts. For usury contracts, forfeiture of excess or all interest is recommended.

Question 6

Phil joins Sky-High Designs as a designer.He signs an employee agreement that says he will not engage in design work in the city for six months after termination of his employment with the firm.Phil works with the firm for two years and then resigns to immediately join as a designer in another firm in the same city.Sky-High Designs sues him for breach of contract,and is likely to:

Accepted Answer

Employment contracts often provide that employees will not compete with or work for a competitor of their employer after they have ceased their employment. If such a restriction is reasonably necessary to prevent an employee from disclosing trade secrets or taking away the employer's customers, and it has reasonable geographic and time limitations, it is also likely to be upheld. Hence, Sky-High Designs is most likely to win.

Question 7

Which of the following statements is true of contracts having fiduciaries?

Accepted Answer

Any agreement that tends to induce a fiduciary (a person in a position of trust or confidence like a trustee, agent, or partner) to breach his or her fiduciary duties is illegal. The only way a fiduciary may lawfully enter such an agreement is by fully and fairly disclosing the conflict to his or her principal or beneficiary in advance.

Question 8

Regulatory statutes are designed primarily to:

Accepted Answer

Congress and the state legislatures have passed a variety of statutes regulating numerous kinds of activities. The basic purpose of such statutes is to protect the public from dishonest or unskilled persons.

Question 9

Statutes that require proof of character and skill and impose a penalty for violation are considered:

Accepted Answer

Whether a statute is classed as regulatory (for the protection of the public) or revenue raising depends on the intent of the legislature, which may not always be clearly expressed. As a general rule, statutes that require proof of character and skill and impose a penalty for violation are considered regulatory.

Question 10

If a contract is divisible,the court:

Accepted Answer

A contract may call for the performance of several promises, some legal and some illegal. If the contract is divisible-that is, if the legal parts can be separated from the illegal parts-the courts enforce the legal parts of the contract.

Question 11

Mayor Magnus wants to recruit a Harvard economist,Milton,as the chief developer for the Small Town's economic development division.The legal cap on the job of chief developer is $60,000.Magnus offers Milton $100,000.The contract is:

Accepted Answer

The public interest is best served when public officials fully and faithfully perform their duties. Agreements that induce public servants to deviate from their duties are illegal. For example, agreements to pay public employees more or less than their lawful salary, as Magnus does in this scenario, are unlawful.

Question 12

Which of the following statements is true of exculpatory clauses?

Accepted Answer

An exculpatory clause is a provision in a contract that attempts to relieve one party to the contract from liability for the consequences of his or her own negligence. Public policy generally favors holding people responsible for their own behavior. On the other hand, if no duty to the public is involved and the parties have freely and knowingly agreed, the exculpatory clause may be enforceable.

Question 13

Timothy is a construction worker in one of the leading firms of a city.His employment contract includes a clause which says he cannot work as a construction worker within the city for fifteen years once he leaves the company.This clause is:

Accepted Answer

If the restriction covers a reasonable geographic area and a reasonable time period, it will probably be upheld. Restricting employment in the field for fifteen years is an unreasonable period of time and is therefore illegal.

Question 14

The failure to obtain a license required by a statute for revenue-raising purposes:

Accepted Answer

It is generally held that agreements by unlicensed persons to perform regulated services or engage in regulated businesses are illegal and therefore unenforceable. One major exception to this general rule that must be noted is the case of revenue raising statutes. The failure to obtain a license required by a statute whose sole purpose is to raise revenue does not affect the legality of unlicensed persons' agreements.

Question 15

The legal concept of unconscionability:

Accepted Answer

The legal concept of unconscionability pertains to unequal bargains. Today's courts are responding to the problem by recognizing the idea of unconscionable contracts and contracts of adhesion-contracts in which the only choice for one of the parties is between "adhering" to the terms dictated by the other party or not contracting at all.

Question 16

Which of the following is true of blue laws?

Accepted Answer

Sunday laws (also called "Blue Laws") prohibit the performance of certain work and the transaction of certain business on Sunday. Such laws vary considerably from state to state.

Question 17

Which of the following statements is true of contracts made illegal by statutes?

Accepted Answer

Usury laws prohibit charging more than a stated amount of interest for the use of money. The penalty for violation ranges from forfeiture of excess interest, through forfeiture of all interest, to forfeiture of interest and principal, depending on the state.

Question 18

_____ is a provision in a contract that attempts to relieve one party to the contract from liability for the consequences of his or her negligence.

Accepted Answer