Question 1

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 2

The difference between a regulatory and revenue-raising statute depends on:

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

Statutes that require proof of character and skill are considered to be:

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.Lawyers,doctors,dentists,and other professionals are required to pass examinations to become licensed to practice.They must also prove that they are of good character before being granted a license.Barbers,beauty operators,building contractors,electricians,plumbers,and others who perform skilled services are usually required to obtain licenses.

Question 4

Max is employed by a large law firm in a city of one million.His employment contract with the firm includes a promise on his part not to practice law within the city for ten years once he leaves the firm.His promise:

Accepted Answer

Only if the restriction covers a reasonable geographic area and a reasonable time period,it will probably be upheld.Ten years is an unreasonable time frame and hence,the above case is illegal.

Question 5

Identify the true statement regarding the idea of public policy.

Accepted Answer

Public policy is a broad concept that is impossible to define precisely.Perhaps the only realistic way to define it is to say that a court's view of public policy is determined by what the court believes is in the best interests of society.Public policy may change with the times; changing social and economic conditions may make behavior that was acceptable in an earlier time unacceptable today,or vice versa.

Question 6

Which of the following statements is true for contracts to influence 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.This is so because such an agreement operates as a fraud on the principal or beneficiary who is entitled to the fiduciary's loyalty.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 7

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

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 8

Exculpatory clauses are generally unenforceable:

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,are however generally unenforceable.

Question 9

____ 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.

Question 10

Identify the remedy used in cases involving wagering statues.

Accepted Answer

All states have statutes that either prohibit or regulate gambling.Agreements in violation of these statutes are illegal.

Question 11

Which of these laws prohibit charging more than a stated amount of interest for the use of money?

Accepted Answer

Many states have passed statutes making certain kinds of agreements void or voidable.One such law is usury law which prohibits charging more than a stated amount of interest for the use of money.

Question 12

Trade agreements are 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 13

Which of the following statements is true about 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 14

Which of the following statements is true for 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 15

Mayor Magnus wants to recruit a Harvard economist,Milton,to be the Chief Developer for the Small Town's economic development division.The legal cap on the job of Chief Developer is $60,000.Mayor 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.It should come as no surprise,then,that agreements that induce public servants to deviate from their duties are illegal.

Question 16

An agreement to restrain trade:

Accepted Answer

Agreements whose sole purpose is to restrain trade are illegal.However,if the restriction covers a reasonable geographic area and a reasonable time period,it will probably be upheld.

Question 17

Failure to pay for a license which is required 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 18

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 19

Harry Hotdog is hired as an accountant by a large Indianapolis-based accounting firm.The firm's attorney drafts an employment contract which contains the following clause: "Employee agrees that he will not engage in the practice of accounting in Indianapolis for one year after termination of his employment with this firm." Hotdog signs the contract,works for six months,and then resigns and opens his own accounting firm in Indianapolis.His former employer 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.

Question 20

If a part of a divisible contract is illegal:

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.

Quiz 15: Illegality