Question 1

Which of the following is true if a contract is disaffirmed on the basis of intoxication?

Accepted Answer

A)   Each party to the contract must return the other to the condition he or she was in at the time the contract was entered into.
B)   The intoxicated person must be returned to the condition he or she was in at the time the contract was entered into, but that is not true for any other party.
C)   Any party other than the intoxicated person must be returned to the condition he or she was in at the time the contract was entered into.
D)   So long as the contract was objectively fair, neither party must be returned to the condition he or she was in prior to the time the contract was entered into.
E)   So long as the contract was subjectively fair in the opinion of the intoxicated party, neither party must be returned to the condition he or she was in prior to the time the contract was entered into.F) C) and D)
G) B) and E)

Question 2

"Useless Friend." Charles, who is very gullible, is friends with Bobby. Bobby, who cannot be trusted, decides to try to bind Charles to a contract in Bobby's favor. Bobby has Charles sign a contract promising to wash Bobby's car once a week for a month 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 Charles for one year to cook dinner for Bobby, do his laundry, and clean his apartment. Bobby is also very angry with his former girlfriend, Tessa, and decides to start rumors, that would constitute the tort of defamation, such as that she has a vile disease, cheated on tests, and stole from friends. Bobby wants to enlist the help of Charles in smearing Tessa but knows that Charles would be hesitant to assist in his endeavors. One evening, however, Charles drank too much beer and was clearly intoxicated - a fact apparent to Bobby. Bobby had him sign a contract agreeing to defame Tessa for $50. When he sobers up, Charles tells Bobby that he was drunk and that he has no intention of defaming Tessa, who also happens to be Charles' new girlfriend. He also finally takes a look at the contract involving work for Bobby and tells Bobby that the contract is outrageous.
-Which of the following is true under the Restatement of Contracts, Section 16, regarding the claim of Charles that he should be able to avoid the contract involving Tessa because he was intoxicated?

Accepted Answer

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.F) A) and D)
G) C) and D)

Question 3

In all states parents are responsible for the torts of their minor children.

Accepted Answer

A) True 
 B)False

Question 4

If a person's mental deficiencies have resulted in his being adjudicated insane and a guardian has been appointed for him, he has no capacity to enter into contracts; and any contract he attempts to enter into is void.

Accepted Answer

A) True 
 B)False

Question 5

What did the U.S. Supreme Court rule in Buckeye Check Cashing Inc., v. Cardegnaet, the case in the text involving whether the court or the arbitrator should determine decide the issues of a case when illegality in relation to a contract is claimed?

Accepted Answer

A)   That an arbitrator should address charges of illegality involving either an arbitration provision or a contract as a whole.
B)   That when an arbitration provision in a contract is not specifically challenged, an arbitrator should address a charge of illegality to a contract as a whole.
C)   That when an arbitration provision in a contract is not specifically challenged, a court should address a charge of illegality to a contract as a whole.
D)   That the court should address charges of illegality involving either an arbitration provision or a contract as a whole.
E)   That whether a court or an arbitrator should address charges of illegality involving either an arbitration provision or a contract as a whole depends upon the first to file rule.F) A) and B)
G) All of the above

Question 6

Because their contracts are ____, minors have the right, until a reasonable time after reaching the age of majority, to _____ or void their contracts.

Accepted Answer

A)   Void; disaffirm
B)   Void; affirm
C)   Void; resist
D)   Voidable; disaffirm
E)   Voidable; affirmF) A) and D)
G) C) and E)

Question 7

Bob is hired to do computer sales for an electronics store. He agrees that if he leaves his employment, he will not work for another computer store within 25 miles for a period of two years. That type of agreement is called a[n] ______.

Accepted Answer

A)   Covenant not to compete
B)   Employment covenant
C)   Working covenant
D)   Termination agreement
E)   Public policy agreementF) A) and D)
G) A) and E)

Question 8

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

Accepted Answer

A)   50
B)   47
C)   40
D)   35
E)   10F) C) and D)
G) D) and E)

Question 9

Both a minor and the adult with whom the minor contracted may disaffirm a contract based upon the minor's lack of majority.

Accepted Answer

A) True 
 B)False

Question 10

If a legal contract is formed and the subject of the contract then becomes illegal under a new statute, the contract is ____.

Accepted Answer

A)   Discharged
B)   Enforced
C)   Disregarded
D)   Executed
E)   ExecutoryF) C) and D)
G) D) and E)

Question 11

Define the offense of usury. Identify two legal exceptions identified in the text whereby usury statutes will not be applied.

Accepted Answer

Usury occurs when a party gives a loan a...

Question 12

All exculpatory clauses are unlawful.

Accepted Answer

A) True 
 B)False

Question 13

"Beauty Shop Woes." When Janice went to work as a hair stylist in Rick's beauty shop, she entered into an agreement with Rick whereby if she left she would not work for another beauty shop within 50 miles for 2 years. Rick trained Janice in a number of new techniques. After nine months, Janice was offered a great job down the street at a new beauty shop, she quit Rick, and had a number of customers follow her down the street to her new job. Rick claimed that she had signed a contract and had no right to go to work at the new shop. Janice disagreed and told Rick that no judge in the country would enforce such an agreement. Janice told Rick that she was more worried about a customer who was threatening to sue her because her hair turned green after Janice worked on it. Janice said that she knew that the customer's hair was damaged; but that she told the customer that odd results could result from a dye attempt, and had her sign a contract that she released Janice from all liability and would not sue. The customer, however, sued anyway.

-What type of agreement did Janice have the customer with green hair sign?

Accepted Answer

A)   Adhesion
B)   Exculpatory
C)   Procedural
D)   Substantive
E)   MalfeasanceF) B) and D)
G) B) and C)

Question 14

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.

Accepted Answer

A)   Substantive
B)   Adhesion
C)   In pari delicto
D)   Exculpatory
E)   Res IpsaF) B) and C)
G) D) and E)

Question 15

Which of the following was the result on appeal in Eric Lucier and Karen Haley v. Angela and James Williams, Cambridge Associates LTD., and Al Vasys, the case in the text in which, after finding significant problems with their roof, the plaintiffs claimed that provisions in a home inspection contract illegally limited the liability of the defendants?

Accepted Answer

A)   The court ruled in favor of the plaintiffs on the basis that although the contract was not unconscionable, public policy was violated.
B)   The court ruled in favor of the plaintiffs on the basis that the limitation of liability provision in the contract was unconscionable and violated the public policy of the state.
C)   The court ruled in favor of the defendants on the basis that no contract of adhesion was involved and that, therefore, by definition the contract satisfied public policy.
D)   The court ruled in favor of the defendants on the basis that the plaintiffs freely entered into the contract and should, therefore, be bound to its terms.
E)   The court ruled in favor of the defendants on the basis that while the court would intervene in appropriate cases, a presumption against a finding of unconscionability exists in home inspection contracts; and the plaintiffs failed to rebut that presumption.F) All of the above
G) A) and D)

Question 16

A[n] ______ occurs when a former minor does not specifically state that he affirms a contract entered into as a minor but takes some action that is consistent with intent to ratify the contract.

Accepted Answer

A)   Implied ratification
B)   Express ratification
C)   Express novation
D)   Implied novation
E)   Continued safetyF) A) and E)
G) C) and E)

Question 17

Which of the following is true regarding the ability of persons suffering from a mental illness to enter into a binding contract?

Accepted Answer

A)   Persons suffering from a mental illness have no capacity to enter into a binding contract.
B)   Persons suffering from a mental illness have full capacity to enter into a binding contract so long as they do not present a danger to themselves or others.
C)   Persons suffering from a mental illness have full capacity to enter into a binding contract so long as they inform the other party that they are in treatment.
D)   Persons suffering from a mental illness may have full, limited, or no legal capacity to enter into a binding contract depending on the nature and extent of their mental deficiency.
E)   Persons who suffer from a mental illness always have full capacity to enter into a binding contract.F) All of the above
G) C) and D)

Question 18

Which of the following is some sort of mental or physical defect that prevents a person from being able to enter into a legally binding contract?

Accepted Answer

A)   Immajority
B)   Capacity
C)   Chronic illness
D)   Incapacity
E)   Terminal illnessF) A) and E)
G) B) and D)

Question 19

A[n] ______ contract is one requiring complete performance by both parties, even if it appears as if the contract contains multiple parts.

Accepted Answer

A)   Adhesion
B)   Divisible
C)   Justifiable
D)   Indivisible
E)   IndependentF) All of the above
G) None of the above

Question 20

"Beauty Shop Woes." When Janice went to work as a hair stylist in Rick's beauty shop, she entered into an agreement with Rick whereby if she left she would not work for another beauty shop within 50 miles for 2 years. Rick trained Janice in a number of new techniques. After nine months, Janice was offered a great job down the street at a new beauty shop, she quit Rick, and had a number of customers follow her down the street to her new job. Rick claimed that she had signed a contract and had no right to go to work at the new shop. Janice disagreed and told Rick that no judge in the country would enforce such an agreement. Janice told Rick that she was more worried about a customer who was threatening to sue her because her hair turned green after Janice worked on it. Janice said that she knew that the customer's hair was damaged; but that she told the customer that odd results could result from a dye attempt, and had her sign a contract that she released Janice from all liability and would not sue. The customer, however, sued anyway.

-Which of the following is true regarding Janice's claim that no judge in the country would enforce such an agreement?

Accepted Answer

A)   She is correct because such agreements are considered in restraint of trade in every state.
B)   She is incorrect because such agreements are criminally illegal in every state.
C)   She is incorrect because while no court would approve a geographical restriction, some courts recognize time restrictions as being valid.
D)   She is incorrect because all courts approve such agreements so long as it can be shown the employee gained a benefit other than pay from the employment.
E)   She is incorrect because courts across the country vary in regards to the enforceability of such agreements.F) A) and C)
G) B) and E)

Exam 16: Capacity and Legality

Which of the following is some sort of mental or physical defect that prevents a person from being able to enter into a legally binding contract?

Correct Answer
verified

Correct Answer
verified

Define the offense of usury. Identify two legal exceptions identified in the text whereby usury statutes will not be applied.

Correct Answer
verified
Usury occurs when a party gives a loan a...
View Answer

If a person's mental deficiencies have resulted in his being adjudicated insane and a guardian has been appointed for him, he has no capacity to enter into contracts; and any contract he attempts to enter into is void.

Correct Answer
verified

Both a minor and the adult with whom the minor contracted may disaffirm a contract based upon the minor's lack of majority.

Correct Answer
verified

A[n] ______ contract is one requiring complete performance by both parties, even if it appears as if the contract contains multiple parts.

Correct Answer
verified

If a legal contract is formed and the subject of the contract then becomes illegal under a new statute, the contract is ____.

Correct Answer
verified

What did the U.S. Supreme Court rule in Buckeye Check Cashing Inc., v. Cardegnaet, the case in the text involving whether the court or the arbitrator should determine decide the issues of a case when illegality in relation to a contract is claimed?

Correct Answer
verified

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.

Correct Answer
verified

In all states parents are responsible for the torts of their minor children.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Because their contracts are , minors have the right, until a reasonable time after reaching the age of majority, to _ or void their contracts.

Correct Answer
verified

A[n] ______ occurs when a former minor does not specifically state that he affirms a contract entered into as a minor but takes some action that is consistent with intent to ratify the contract.

Correct Answer
verified

All exculpatory clauses are unlawful.

Correct Answer
verified

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

Correct Answer
verified

Bob is hired to do computer sales for an electronics store. He agrees that if he leaves his employment, he will not work for another computer store within 25 miles for a period of two years. That type of agreement is called a[n] ______.

Correct Answer
verified

Correct Answer
verified

Which of the following is true regarding the ability of persons suffering from a mental illness to enter into a binding contract?

Correct Answer
verified

Which of the following is true if a contract is disaffirmed on the basis of intoxication?

Correct Answer
verified

Exam 16: Capacity and Legality

Which of the following is some sort of mental or physical defect that prevents a person from being able to enter into a legally binding contract?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Define the offense of usury. Identify two legal exceptions identified in the text whereby usury statutes will not be applied.

Correct AnswerverifiedUsury occurs when a party gives a loan a...View AnswerShow Answer

If a person's mental deficiencies have resulted in his being adjudicated insane and a guardian has been appointed for him, he has no capacity to enter into contracts; and any contract he attempts to enter into is void.

Correct AnswerverifiedShow Answer

Both a minor and the adult with whom the minor contracted may disaffirm a contract based upon the minor's lack of majority.

Correct AnswerverifiedShow Answer

A[n] ______ contract is one requiring complete performance by both parties, even if it appears as if the contract contains multiple parts.

Correct AnswerverifiedShow Answer

If a legal contract is formed and the subject of the contract then becomes illegal under a new statute, the contract is ____.

Correct AnswerverifiedShow Answer

What did the U.S. Supreme Court rule in Buckeye Check Cashing Inc., v. Cardegnaet, the case in the text involving whether the court or the arbitrator should determine decide the issues of a case when illegality in relation to a contract is claimed?

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

In all states parents are responsible for the torts of their minor children.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Because their contracts are ____, minors have the right, until a reasonable time after reaching the age of majority, to _____ or void their contracts.

Correct AnswerverifiedShow Answer

A[n] ______ occurs when a former minor does not specifically state that he affirms a contract entered into as a minor but takes some action that is consistent with intent to ratify the contract.

Correct AnswerverifiedShow Answer

All exculpatory clauses are unlawful.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Bob is hired to do computer sales for an electronics store. He agrees that if he leaves his employment, he will not work for another computer store within 25 miles for a period of two years. That type of agreement is called a[n] ______.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is true regarding the ability of persons suffering from a mental illness to enter into a binding contract?

Correct AnswerverifiedShow Answer

Which of the following is true if a contract is disaffirmed on the basis of intoxication?

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
verified

Correct Answer
verified
Usury occurs when a party gives a loan a...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Because their contracts are , minors have the right, until a reasonable time after reaching the age of majority, to _ or void their contracts.

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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