Question 1

Claudia sells her highly successful hair salon to Carl.In the sales contract,Claudia agrees never to open a hair salon in the state.Which of the following best describes this contract clause?

Accepted Answer

This contract clause is an unenforceable restraint of trade contrary to public policy, as it restricts Claudia's ability to work and earn a living in her chosen profession within the state. Non-compete clauses may be valid if they are reasonable in scope and duration, but this clause appears to be overly broad and restrictive.

Question 2

The usual means of enforcing an agreement prohibiting an employee from competing in a described territory for a stated period of time is by injunction.

Accepted Answer

An injunction is the usual means of enforcing an agreement prohibiting an employee from competing in a described territory for a stated period of time.

Question 3

In cases where one party to an illegal agreement is less at fault than the other,he will be allowed to recover payments made or property transferred.

Accepted Answer

This statement is true. The law recognizes that in some cases, one party may be less aware or less responsible for the illegal nature of an agreement, and allows them to recover any payments or property they gave to the other party. This is known as the "doctrine of superior equities." However, this is not always the case and will depend on the specific circumstances of the agreement.

Question 4

Nell gives Al $50 in return for Al's promise to defame Sara.Nell hopes to ruin Sara's chances at a promotion.Nell finds out that Al did not hold up his end of the agreement.Which of the following statements is true?

Accepted Answer

This is an illegal and unethical agreement, so even if Al did not hold up his end of the bargain, Nell cannot force him to defame Sara or get her money back through litigation. The agreement is void and unenforceable.

Question 5

Don has an employment contract with Dunkirk Ice Cream.He sells ice cream and novelty ice cream products.He has nine children and doesn't make enough money,so he decides to see if another dairy will hire him,too."After all," he reasons,"most stores carry four or five different brands." His employment contract prohibits him from competing.If Don sells for another dairy in addition to Dunkirk,will he be in trouble under his contract?

Accepted Answer

The prohibition against competing is typically enforceable during the period of employment to protect the employer's interests, making it likely that Don would be in trouble under his contract if he sells for another dairy.

Question 6

A number of states have enacted statutes exempting the following types of lenders from their usury laws:

Accepted Answer

The answer of A number of states have enacted statutes...

Question 7

John operates a small repair business and is in desperate need of a certain type of building material.He obtains the material from a large corporation,but is charged a grossly unreasonable price and is forced to buy other material he does not need.In view of the buyer's unequal bargaining power and unreasonable terms of the contract,this may be a case of:

Accepted Answer

Substantive unconscionability refers to a contract that is so one-sided and unfair that it is oppressive to one party. In this scenario, the large corporation is taking advantage of John's unequal bargaining power by charging him a grossly unreasonable price and forcing him to buy additional materials he does not need. Therefore, this may be considered substantive unconscionability.

Question 8

Edmund,an engineer,is working on a new design for some highly technical equipment which Techgo,Inc.hopes to market within the next five years.The employment agreement between Edmund and Techgo,Inc.states that Edmund will not go to work for another company in the same business for a period of two years after termination of his employment with Techgo,Inc.This agreement is void and unenforceable,because it would make it difficult for Edmund to find other employment.

Accepted Answer

Non-compete agreements are enforceable as long as they are reasonable in scope, duration, and geographic area. A two-year restriction is not necessarily considered unreasonable. However, it ultimately depends on the specific circumstances and laws of the jurisdiction the agreement was made in.

Question 9

An agreement to refrain from a particular trade,profession,or business is enforceable if two requirements are met: that it protects a property interest of the promisee and that the restraint is no more extensive than is reasonably necessary to protect that interest.

Accepted Answer

This statement accurately reflects the requirements for enforceability of a covenant not to compete.

Question 10

William recently sold his successful business to Janice.The contract for the sale contained an unreasonable restriction that did not allow William to open a similar business for fifteen years.In this instance,the courts would likely:

Accepted Answer

Courts often have the authority to reform contracts to correct terms that are deemed unreasonable, such as overly broad non-compete clauses, to make them reasonable and enforceable. This ensures that agreements are fair while still upholding the basic principles of contract law.

Question 11

A(n)____ is a measure designed to protect the public from unqualified practitioners.

Accepted Answer

A regulatory license is a type of license that is designed to protect the public from unqualified practitioners. This type of license establishes standards of practice and requires individuals to meet certain qualifications before they are allowed to perform certain tasks or offer certain services.

Question 12

An agreement in connection with the sale of a business that prohibits the seller from engaging in the same or a similar business for a period of twenty-five years would be unreasonable.

Accepted Answer

A non-compete agreement that prohibits a seller from engaging in the same or similar business for a period of twenty-five years would be considered too long and unreasonable. Generally, non-compete agreements are valid if they are reasonable in scope, duration, and geographical area. A period of twenty-five years would be considered too long and likely not enforceable.

Question 13

Which of the following is true with regard to an exculpatory clause?

Accepted Answer

A) An exculpatory clause can excuse one party from liability for their own tortious conduct, such as releasing a company from liability if a customer is injured while using their product.
B) Courts may nullify an exculpatory clause if one party has a superior bargaining position that enabled them to impose the clause upon the other. This is because the weaker party may not have had the opportunity to negotiate or fully understand the consequences of signing the contract.
C) An exculpatory clause may also be unenforceable for unconscionability, which means that the clause is so one-sided or unfair that it shocks the conscience of the court.

Question 14

"Blue laws" usually apply to contracts of necessity and charity.

Accepted Answer

"Blue laws" historically referred to laws that restricted certain activities on Sundays, related to religious observances. While some of these laws may have included restrictions on commercial activities, they did not specifically apply only to contracts of necessity and charity.

Question 15

One type of restraint of trade is a covenant not to compete.

Accepted Answer

A covenant not to compete is a type of restraint of trade. It is a contractual agreement in which one party agrees not to compete with another party in a certain geographic area or industry for a certain period of time. It is often used in the context of employment contracts to prevent former employees from using their knowledge, skills, and connections to compete with their former employer.

Question 16

Courts require that for a contract to be unenforceable based on unconscionability,both substantive and procedural unconscionability must be equally present.

Accepted Answer

Courts generally require some degree of both substantive and procedural unconscionability to render a contract unenforceable due to unconscionability, but they do not have to be equally present. The balance between the two can vary, and a significant degree of one may compensate for a lesser degree of the other.

Question 17

Before granting an injunction enjoining a former employee from competing in a described territory,the courts insist that the employer demonstrate that the restriction is:

Accepted Answer

The court will only grant an injunction enjoining a former employee from competing in a described territory if the employer can demonstrate that the restriction is necessary to protect their legitimate interest. This means that the employer must show that they have a valid reason for imposing such a restriction, and that the restriction is narrowly tailored to protect that interest.

Question 18

Andrew owns a store in Polk County.His trade extends throughout River City,but not beyond the county limits.He sells his store to Betty and,as part of the transaction,agrees not to engage in the same business anywhere within the state for a period of three years.The agreement:

Accepted Answer

The agreement unduly interferes with the interests of the public as it limits competition within the state, which is not beneficial for consumers. Such agreements are generally deemed to be anticompetitive and against public policy. Therefore, the agreement is unenforceable.

Question 19

The courts will enforce an agreement declared illegal by statute.

Accepted Answer

The courts will not enforce an agreement that is illegal or against public policy, regardless of whether it is declared illegal by statute or not.

Question 20

Deanna,an attorney,has a personal injury case which is set for trial next week.She needs a good doctor to testify on behalf of her client,so she contacts Dr.Dogood who agrees to testify on behalf of Deanna's client at the trial.In return for Dr.Dogood's testimony,Deanna agrees to pay Dr.Dogood $10,000 if they win the case,and $5,000 if they lose.Dr.Dogood agrees.The agreement between Deanna and Dr.Dogood is unenforceable.

Accepted Answer

The agreement is unenforceable because it is contingent upon the outcome of the case, which could potentially influence the testimony of Dr. Dogood, compromising the integrity of the trial. This type of agreement could be seen as unethical and against public policy.

Quiz 13: Illegal Bargains