Question 1

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?
A) No, it is unenforceable as against public policy.
B) Yes, it is likely to be enforceable during employment.
C) No, the prohibition against competing is enforceable only after he quits Dunkirk.
D) A court would have to rule on the enforceability of the covenant not to compete since courts are reluctant to enforce such covenants during a period of employment.

Accepted Answer

Don's employment contract likely includes a covenant not to compete during his employment with Dunkirk. This is a common clause in employment contracts and is usually enforceable, as long as it is reasonable in scope and duration. Don's decision to work for another dairy while still employed by Dunkirk would likely be a violation of this covenant and could result in legal consequences. Option A is incorrect because the enforceability of such covenants is generally upheld as long as they are reasonable. Option C is incorrect because the prohibition against competing is likely to be in effect during his employment. Option D is also incorrect because while courts may scrutinize the reasonableness of the covenant not to compete, it is not their default position to avoid enforcing them during a period of employment.

Question 2

Where parties to a failed agreement are in pari delicto , a court will provide a remedy to the injured party.

Accepted Answer

In pari delicto means "in equal fault" or "in equal wrongdoing." In general, when parties are in pari delicto, a court will not provide a remedy to either party because they are both equally responsible for the failed agreement. However, there may be exceptions to this general rule in certain circumstances, such as when one party is more culpable than the other or when public policy considerations dictate that a remedy should be granted.

Question 3

Divided Parcel (DP) includes the following on its mailing receipts: "We are not responsible for any damages to packages whether or not through the intentional or reckless fault or negligence of our employees.Send packages at your own risk." Mary reads this clause but sends her watch back to the manufacturer to be repaired anyway.The watch is destroyed when the DP driver uses the package for a ball and tosses it to his buddy.Mary is:
A) out of luck because the clause was communicated to her.
B) out of luck because she should have insured the package.
C) likely to collect from DP since exculpatory clauses always violate public policy.
D) likely to collect from DP because it attempted to excuse intentional and reckless behavior.

Accepted Answer

While exculpatory clauses are generally disfavored by courts and may be considered against public policy, there are certain exceptions. One such exception is when attempting to excuse intentional or reckless behavior. In this scenario, the DP driver's actions in using the package as a ball and destroying the watch could be considered reckless, and therefore the exculpatory clause would not be enforceable. Therefore, Mary would likely be able to collect from DP for the damages to her package.

Question 4

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

Accepted Answer

The statement is incorrect. A non-compete agreement may be enforceable if it is narrowly tailored and reasonable in scope, duration, and geographic area. The fact that the agreement may make it difficult for Edward to find other employment does not automatically make it void and unenforceable.

Question 5

Abner 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:
A) in pari delicto .
B) partial illegality.
C) substantive unconscionability.
D) procedural unconscionability.

Accepted Answer

This is a case of substantive unconscionability, which occurs when the terms of a contract are so one-sided and unfair that they shock the conscience. Abner's unequal bargaining power and the unreasonable terms of the contract are evidence of substantive unconscionability.

Question 6

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

Accepted Answer

A restriction for such a long period of time would be considered an unreasonable restraint of trade and therefore unenforceable. Courts generally consider such agreements to be valid only if they are necessary to protect trade secrets or other confidential information.

Question 7

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

Accepted Answer

This statement accurately reflects the general rule governing the enforceability of non-compete agreements. However, the specific requirements for enforceability may vary by jurisdiction and the facts of each case should be carefully analyzed before determining if a non-compete agreement is enforceable.

Question 8

Which of the following is true with regard to an exculpatory clause?
A) An exculpatory clause excuses one party from liability for her own tortious conduct.
B) Where one party has a superior bargaining position that has enabled him to impose an exculpatory clause upon the other, the courts are inclined to nullify the provision.
C) An exculpatory clause may be unenforceable for unconscionability.
D) All of these are true.

Accepted Answer

A) An exculpatory clause excuses one party from liability for her own tortious conduct. This is a true statement.

B) Where one party has a superior bargaining position that has enabled him to impose an exculpatory clause upon the other, the courts are inclined to nullify the provision. This is also a true statement.

C) An exculpatory clause may be unenforceable for unconscionability. This is also true.

Therefore, all of the statements are true and the best choice is D.

Question 9

A(n) __________ is a measure designed to protect the public from unqualified practitioners.
A) exculpatory clause
B) revenue license
C) regulatory license
D) usury statute

Accepted Answer

A regulatory license is a measure designed to protect the public from unqualified practitioners. It sets certain criteria that individuals or businesses must meet in order to legally operate within a specific industry or profession. This helps to ensure that those who are providing services or goods to the public are knowledgeable, skilled, and qualified to do so safely and effectively.

Question 10

Courts will never limit freedom of contract.

Accepted Answer

While courts generally uphold freedom of contract, there are certain situations where they may limit it, such as contracts that are illegal or against public policy. Additionally, courts may also intervene to ensure that a contract is fair and not unconscionable.

Question 11

Some states require the lender to forfeit two or three times the amount of usurious interest charged.

Accepted Answer

Some states have usury laws that not only prohibit lenders from charging excessive interest rates, but also impose penalties for violations. In some cases, the penalty may require the lender to forfeit multiple times the amount of usurious interest charged.

Question 12

Andria, 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.Wood who agrees to testify on behalf of Andria's client at the trial.In return for Dr.Wood's testimony, Andria agrees to pay Dr.Wood $10,000 if they win the case, and $5,000 if they lose.Dr.Wood agrees.The agreement between Andria and Dr.Wood 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. Wood, compromising the integrity of the trial and violating ethical standards.

Question 13

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 a court order that prohibits a party from doing a certain action, such as competing in a particular territory for a specified duration. It is a typical way of enforcing a covenant not to compete included in an employment contract or agreement.

Question 14

The legal effect of a usurious loan varies from state to state.

Accepted Answer

Each state has its own laws regarding usury and the legal consequences of a usurious loan. Some states may invalidate the loan agreement, while others may allow for the borrower to recover excessive interest paid. It is important to consult state laws when dealing with usurious loans.

Question 15

Permissible lender's expenses, which would not be considered in determining the rate of interest under usury statutes, include all but which of the following?
A) Cost of title examination.
B) Reasonable cost of drawing up the necessary documents.
C) A charge to the borrower of $500 to investigate the borrower's credit, when it actually cost the lender $75.
D) All of these charges would be considered in determining the rate of interest under usury statutes.

Accepted Answer

Permissible lender's expenses include the cost of title examination and reasonable cost of drawing up necessary documents. However, charging the borrower an amount that is significantly higher than the actual cost of investigating their credit would be considered a form of interest and would be subject to usury statutes. Therefore, option C is not a permissible expense and would be included in determining the rate of interest under usury statutes.

Question 16

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 __________ to protect the employer's legitimate interest.
A) exculpatory
B) unconscionable
C) necessary
D) usurious

Accepted Answer

Before granting an injunction, the courts insist that the employer demonstrate that the restriction is necessary to protect the employer's legitimate interest. This means that the restriction must be essential to safeguard the employer's interests, such as preventing the former employee from using confidential information or trade secrets to compete unfairly. In contrast, choices A, B, and D are not relevant to the issue at hand.

Question 17

Nell gives Big 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?
A) Nell can get the money back from Al through litigation.
B) Nell can get the money back and force Al to do as he promised.
C) Legally, Nell can neither get the money back nor force Al to do as he promised.
D) Nell can force Al to act through an appeal to the courts, but Al gets to keep the $50.

Accepted Answer

Nell made an illegal agreement with Big Al and therefore, the contract is void and unenforceable. Nell cannot legally get the money back nor force Al to defame Sara.

Question 18

A contract of adhesion:
A) is automatically unenforceable.
B) consists largely of boilerplate provisions, such as a standard-form insurance policy.
C) is a contract that exhibits either procedural or substantive unconscionability.
D) is a contract containing multiple exculpatory clauses.

Accepted Answer

A contract of adhesion is typically a standardized contract with non-negotiable terms offered on a "take-it-or-leave-it" basis by a party who has a stronger bargaining position. They often contain preprinted, boilerplate provisions that favor the party with greater bargaining power. However, being a contract of adhesion does not automatically make a contract unenforceable or demonstrate unconscionability.

Question 19

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?
A) Void as an illegal violation of a statute.
B) Valid as a reasonable restraint on trade.
C) Unenforceable as a violation of public policy.
D) Binding as fair protection.

Accepted Answer

The clause in the contract is likely unenforceable because it violates the public policy of free enterprise and competition. Non-compete agreements are generally disfavored by courts, and there must be a legitimate reason for such a restraint on trade. However, in this case, Claudia cannot open a hair salon in the entire state, which is likely overly broad and restrictive. Therefore, the clause may not hold up in court if challenged.

Question 20

B& B, Inc.pays an attorney to draft and lobby for a bill which will greatly lessen B & B's tax liability to the state and federal governments.B&B gives the attorney $20,000 in cash to pay legislators for taking the time to listen to him.This is an agreement which is a violation of public policy.

Accepted Answer

This agreement involves bribing legislators, which is against public policy and the law.

Quiz 13: Illegal Bargains

Where parties to a failed agreement are in pari delicto , a court will provide a remedy to the injured party.

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

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

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

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

Courts will never limit freedom of contract.

Some states require the lender to forfeit two or three times the amount of usurious interest charged.

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.

The legal effect of a usurious loan varies from state to state.

Permissible lender's expenses, which would not be considered in determining the rate of interest under usury statutes, include all but which of the following?

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 __________ to protect the employer's legitimate interest.

Nell gives Big 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?

A contract of adhesion:

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?

B& B, Inc.pays an attorney to draft and lobby for a bill which will greatly lessen B & B's tax liability to the state and federal governments.B&B gives the attorney $20,000 in cash to pay legislators for taking the time to listen to him.This is an agreement which is a violation of public policy.