Question 1

Which of the following are contracts that contain multiple parts which can each be performed separately and for which separate consideration is offered?
A) Independent contracts
B) Substantive contracts
C) Adhesion contracts
D) Justifiable contracts
E) Severable contracts

Accepted Answer

Severable contracts are those that contain multiple parts, each of which can be performed separately and for which separate consideration is offered. This allows for parts of the contract to be completed and compensated independently of the others.

Question 2

A statement releasing one of the parties to an agreement from all liability, regardless of who is at fault or what the injury suffered is, would be referred to as a[n] ________ agreement.
A) Substantive
B) Adhesion
C) In pari delicto
D) Exculpatory
E) Res Ipsa

Accepted Answer

An exculpatory agreement is a contract or clause that relieves one party of liability if damages are caused during the execution of the contract, regardless of fault.

Question 3

________ refers to when both parties are equally responsible for an illegal agreement.
A) In pari delicto
B) Procedurally unconscionable
C) An adhesion contract
D) A res ipsa contract
E) A stare decisis contract

Accepted Answer

In pari delicto is a legal principle meaning "in equal fault," used when both parties involved in a legal dispute are equally at fault for a wrongdoing or have engaged in illegal agreement.

Question 4

[Useless Friend] Antoine and Tevis are roommates. Antoine has Tevis sign a contract promising to wash Antoine's car once a week for $80 per month in payment. The contract incorporated by reference terms on the back. The terms on the back were in very small print and required Tevis to cook dinner for Antoine, do his laundry, and clean their apartment. Antoine is also very angry with his former girlfriend, Flora, and decides to start rumors that would constitute the tort of defamation. He spreads via SnapChat that Flora cheated on tests and stole from friends. Antoine wants to enlist the help of Tevis in smearing Flora but knows that Tevis would be hesitant to assist in his endeavors. One evening, however, Tevis comes home clearly intoxicated - a fact apparent to Antoine. Antoine has him sign a contract agreeing to defame Flora for $50. When he sobers up, Tevis tells Antoine that he was drunk and that he has no intention of defaming Flora, who also happens to be the best friend of Tevis's new girlfriend. He also finally takes a look at the contract involving work for Antoine and tells Antoine that the contract is outrageous.
-Tevis's assertion that he should be able to avoid the contract involving Flora because he was intoxicated is best supported by which of the following statements under the Restatement of Contracts, Section 16?
A) Contracts of an intoxicated person are voidable if the other party had reason to know that because of the intoxicated person's condition, that person was unable to understand the nature and consequences of the transaction or was unable to act in a reasonable manner in relation to the transaction.
B) Contracts of an intoxicated person are void if the other party had reason to know that because of the intoxicated person's condition, that person was unable to understand the nature and consequences of the transaction or was unable to act in a reasonable manner in relation to the transaction.
C) Contracts of an intoxicated person are enforceable because a person should be bound by his or her actions.
D) Contracts of an intoxicated person are void only if it can be proven that the other party was involved in encouraging the abuse of alcohol by the intoxicated person rendering the intoxicated person unable to understand the nature and consequences of the transaction or unable to act in a reasonable manner in relation to the transaction.
E) Contracts of an intoxicated person are voidable only if it can be proven that the other party was involved in encouraging the abuse of alcohol by the intoxicated person rendering the intoxicated person unable to understand the nature and consequences of the transaction or unable to act in a reasonable manner in relation to the transaction.

Accepted Answer

Contracts of an intoxicated person are voidable under the Restatement of Contracts, Section 16, if the other party had reason to know that the intoxicated person was unable to understand the nature and consequences of the transaction or was unable to act in a reasonable manner in relation to the transaction.

Question 5

[Irresponsible Teen] Rose is 17 in a state where the age of majority is 18. She purchased a prom dress from Your Special Day. She wore it to the prom and then attempted to return it to the store, claiming that she was a minor and that she was entitled to a refund. The dress had clearly been worn and had a purple stain which Rose claimed was from grape juice. Additionally, a few days before she turned 18, Rose purchased a used car from Sal's Car Savings. She had a deal whereby she paid $100 per month on the car. She drove the car and made payments for six months after she turned 18. Rose then returned the car to Sal's Car Savings, informed the owner that she was under 18 when she entered into the contract to purchase the car, and told the owner that she was returning the car for a full refund. Sal's Car Savings claimed the car was a necessary. Rose and her parents disagreed claiming that the parents were ready and willing to provide a car to Rose, and that she only purchased the car from Sal's Car Savings because she liked that particular style and color. When purchases of the dress and car were made, the sellers knew that Rose was under the age of 18.
-Which statement about Rose's attempt to return the damaged dress is true?
A) In all states Rose has the right to keep the dress and get a refund.
B) In all states Rose must return the dress, but she has a right to a full refund.
C) Regardless of what she does with the dress, Rose has no right to a refund in any state.
D) In some states Rose would have an obligation of restitution to the store.
E) In all states Rose would have an obligation of restitution to the store.

Accepted Answer

Rose's attempt to return the dress after wearing it and staining it involves the principle of restitution in contract law for minors. The obligation of restitution varies by state, meaning in some states, minors who have used, damaged, or otherwise diminished the value of purchased goods may need to compensate the seller upon disaffirming the contract. This does not automatically grant her a right to a full refund without considering the condition of the returned item.

Question 6

Payton gets a job as a salesman for a pharmaceutical company. He agrees that if he leaves his employment, he will not work for another pharmaceutical company for a period of two years. That type of agreement is called a[n] ________.
A) Covenant not to compete
B) Necessary covenant
C) Employment completion agreement
D) Covenant of good faith agreement
E) Covenant of favored employment

Accepted Answer

A covenant not to compete, also known as a non-compete clause, is an agreement where one party agrees not to enter into or start a similar profession or trade in competition against another party. In this scenario, Payton agrees not to work for another pharmaceutical company for two years if he leaves his job, which is a classic example of a covenant not to compete.

Question 7

The maximum legal limit for a loan in Walter's state is 5.8%. Keeli charges Walter 23% because she does not trust he can pay back the loan. What is the term for giving a loan at an interest rate that exceeds the legal maximum?
A) Good business practices
B) Loan manipulation
C) Legal loan price inflation
D) Uncustomary
E) Usury

Accepted Answer

The term for giving a loan at an interest rate that exceeds the legal maximum is "usury." This practice involves charging an excessively high interest rate beyond what is permitted by law.

Question 8

A party who claims that he or she could not understand contractual terms because of tiny, hard-to-read print on the back of an agreement and the excessive use of legalese is referring to which of the following?
A) Substantive unconscionability.
B) Adhesion conscionability.
C) Procedural unconscionability.
D) Exculpatory clauses.
E) An in pari delicto agreement.

Accepted Answer

Procedural unconscionability refers to issues with how a contract was formed, including conditions that might prevent one party from fully understanding the terms, such as small print or complex legal language.

Question 9

________ is a term for laws that limit the types of business activities in which parties may legally engage on Sundays.
A) Sunday prohibition laws
B) Christian fellowship laws
C) Blue laws
D) Homestead laws
E) Fellowship laws

Accepted Answer

Blue laws are regulations designed to restrict or ban some or all Sunday activities for religious reasons, particularly to promote the observance of a day of worship or rest.

Question 10

Joey's state has a licensing statute that specifically addresses the requirements for salons. Joey, however, decides not to get a license because it is too expensive. If Margaret enters into a contract with Joey for his salon services, this agreement is ________.
A) void
B) enforceable
C) voidable
D) illegal and unenforceable
E) valid because it is contrary to public policy to limit a professional's right to work

Accepted Answer

Contracts that involve the provision of services that require a license by law, but where one party is unlicensed, are typically considered illegal and unenforceable. This is because the contract involves an activity that violates licensing statutes designed to protect public health, safety, or welfare.

Question 11

Quinton is in desperate need for a new refrigerator but does not have good credit. Hulio indicates that he will sell Quinton a refrigerator, but Quinton will have to make weekly payments at 18% interest and, if he misses one payment, Hulio has the right to repossess the refrigerator. Hulio tells Quinton that those are the final terms and Quinton has 10 minutes to decide whether he wants to take the contract terms or find someone else to contract with. This is an example of a[n] ________.
A) procedurally unconscionable contract
B) expressly oppressive contract
C) outrageously invalid contract
D) adhesion contract
E) enforceable agreement

Accepted Answer

An adhesion contract is a contract in which one party has all the bargaining power and the other party has no choice but to accept the terms. In this case, Hulio has all the bargaining power because Quinton is in desperate need of a refrigerator and does not have good credit. Hulio is able to dictate the terms of the contract, including the high interest rate and the right to repossess the refrigerator if Quinton misses one payment. Quinton has no choice but to accept these terms if he wants to get a refrigerator.

Question 12

[Useless Friend] Antoine and Tevis are roommates. Antoine has Tevis sign a contract promising to wash Antoine's car once a week for $80 per month in payment. The contract incorporated by reference terms on the back. The terms on the back were in very small print and required Tevis to cook dinner for Antoine, do his laundry, and clean their apartment. Antoine is also very angry with his former girlfriend, Flora, and decides to start rumors that would constitute the tort of defamation. He spreads via SnapChat that Flora cheated on tests and stole from friends. Antoine wants to enlist the help of Tevis in smearing Flora but knows that Tevis would be hesitant to assist in his endeavors. One evening, however, Tevis comes home clearly intoxicated - a fact apparent to Antoine. Antoine has him sign a contract agreeing to defame Flora for $50. When he sobers up, Tevis tells Antoine that he was drunk and that he has no intention of defaming Flora, who also happens to be the best friend of Tevis's new girlfriend. He also finally takes a look at the contract involving work for Antoine and tells Antoine that the contract is outrageous.
-Tevis's claim that he had no obligation to defame Flora is supported by which of the following statements?
A) Tevis is correct in that he could not be legally obligated to commit defamation.
B) Tevis is correct only if it can be proven that the defamation would cause Flora money damages.
C) Tevis is correct only if it can be proven that the defamation would cause Flora actual injury.
D) Tevis is correct only if it can be proven that the defamation is undeserved.
E) Tevis is correct only if it can be proven that he had a prior relationship with Flora.

Accepted Answer

Contracts that require a party to commit an illegal act, such as defamation, are void and unenforceable. Therefore, Tevis cannot be legally obligated to commit defamation.

Question 13

Which of the following involves overly harsh or lopsided substance in an agreement?
A) Substantive unconscionability.
B) Adhesion conscionability.
C) Procedural unconscionability.
D) Exculpatory clauses.
E) An in pari delicto agreement.

Accepted Answer

Substantive unconscionability involves contracts or agreements that contain terms that are overly harsh or one-sided in favor of the party with more power or leverage.

Question 14

Elise speaks very little English. Herman comes to her house to sell her life insurance. Herman persuades Elise to sign a contract for Elise to buy life insurance that she does not need for a price of $300 a month even though she only brings home $750 a month from her job. Under the contract, if she does not pay the $300 a month, Elise owes Herman $100. A court would find the terms of this contract ________.
A) unconscionable
B) unneeded
C) unrealistic
D) valid
E) unreliable

Accepted Answer

The contract is likely to be found unconscionable because it is excessively unfair to Elise. She was persuaded to buy something she doesn't need for a high price relative to her income, with additional penalties for non-payment.

Question 15

Which of the following is true regarding Rose and her parents asserting that the car was a necessary?
A) The claim will have no effect because the law does not recognize the concept of necessaries when minors are involved.
B) Social status is irrelevant as a matter of law in addressing a claim that an item was a necessary.
C) Whether or not parents would buy the item at issue is irrelevant in addressing a claim that an item was a necessary.
D) A minor may not disaffirm a contract for a frivolous matter that is clearly not required.
E) Even if a minor disaffirms a contract for a necessary, the minor will still be held liable for the reasonable value of the necessary.

Accepted Answer

The concept of "necessaries" in contract law allows for minors to be held liable for the reasonable value of essential items or services (like food, clothing, shelter, and sometimes education or medical care) that they contract for, even if they disaffirm the contract. This is because these items are considered necessary for their survival or welfare. The assertion that a car was a necessary would fall under this concept, where if it was deemed a necessary, Rose could be held liable for its reasonable value despite being a minor.

Question 16

Which statement applies in the dispute between Rose and Sal's Car Savings, considering that she waited to turn 18 before attempting to disaffirm the contract?
A) So long as, after reaching the age of majority, Rose did not state orally or in writing that she intended to be bound by the contract, then she did not commit an express ratification.
B) Rose was required to expressly ratify the contract before she could be bound to it.
C) An implied ratification occurs when parents agree to accept the debt entered into by a minor.
D) If Rose caused any damage whatsoever to the car, she was said to have impliedly ratified the contract.
E) Rose was required to expressly ratify the contract before she could be bound to it so long as no damage was done; but if she did any damage to the car, as a matter of law, she is said to have impliedly ratified it.

Accepted Answer

Rose did not commit an express ratification if she did not state orally or in writing that she intended to be bound by the contract after reaching the age of majority.

Question 17

All 50 states have statutes requiring that people working in certain professions obtain ________ before practicing their craft.
A) a court's permission
B) 4 years of college
C) a license
D) the state's permission
E) a union's permission

Accepted Answer

Professionals in certain fields are required to obtain a license to ensure they meet specific standards and qualifications before they can legally practice their profession. This is a common requirement across all states for professions such as medicine, law, and many others.

Question 18

What is the maximum interest rate in the United States?
A) 20%
B) 15%
C) 12%
D) 10%
E) It varies depending on the state involved.

Accepted Answer

The maximum interest rate in the United States varies by state as each state has its own laws and regulations regarding usury, which is the charging of excessive interest on loans.

Question 19

How many states engage in at least some regulation of gambling?
A) 50
B) 47
C) 40
D) 35
E) 10

Accepted Answer

All 50 states engage in at least some form of gambling regulation, whether it be through state-run lotteries, casino gambling, or other forms of wagering.

Question 20

A severable contract, also known as a(n) ________ contract, contains multiple parts that can each be performed separately.
A) adhesion
B) divisible
C) separate
D) indivisible
E) indisputable

Accepted Answer

A severable contract, also known as a divisible contract, is characterized by containing multiple parts that can each be performed separately, allowing for the division of obligations and benefits.

Quiz 16: Capacity and Legality

Which of the following are contracts that contain multiple parts which can each be performed separately and for which separate consideration is offered?

A statement releasing one of the parties to an agreement from all liability, regardless of who is at fault or what the injury suffered is, would be referred to as a[n] ________ agreement.

________ refers to when both parties are equally responsible for an illegal agreement.

Payton gets a job as a salesman for a pharmaceutical company. He agrees that if he leaves his employment, he will not work for another pharmaceutical company for a period of two years. That type of agreement is called a[n] ________.

The maximum legal limit for a loan in Walter's state is 5.8%. Keeli charges Walter 23% because she does not trust he can pay back the loan. What is the term for giving a loan at an interest rate that exceeds the legal maximum?

A party who claims that he or she could not understand contractual terms because of tiny, hard-to-read print on the back of an agreement and the excessive use of legalese is referring to which of the following?

________ is a term for laws that limit the types of business activities in which parties may legally engage on Sundays.

Joey's state has a licensing statute that specifically addresses the requirements for salons. Joey, however, decides not to get a license because it is too expensive. If Margaret enters into a contract with Joey for his salon services, this agreement is ________.

Which of the following involves overly harsh or lopsided substance in an agreement?

Which of the following is true regarding Rose and her parents asserting that the car was a necessary?

Which statement applies in the dispute between Rose and Sal's Car Savings, considering that she waited to turn 18 before attempting to disaffirm the contract?

All 50 states have statutes requiring that people working in certain professions obtain ________ before practicing their craft.

What is the maximum interest rate in the United States?

How many states engage in at least some regulation of gambling?

A severable contract, also known as a(n) ________ contract, contains multiple parts that can each be performed separately.