Exam 12: Legality

When Randy accepted a job with Buren Construction,Randy signed the following agreement,"Upon termination of my employment with Buren Construction,I agree never to work for another employer as an electrician." If Randy resigns from Buren Construction,this agreement would be upheld under the theory of freedom of contract.

Mabel,an 85-year-old widow who is in poor health,signs a contract with the only nursing home in Anytown (the nearest alternative facility is 75 miles away).The contract obligates Mabel to pay $4,000 per month for the rest of her life and for her estate to pay the same amount for the period of time that the unit sits empty upon her death.Mabel's daughter believes this agreement amounts to an adhesion contract.What is an adhesion contract? What factors will a court look at in determining whether an adhesion contract exists?

A contract most likely will be declared unconscionable if:

Roger parked his car at a garage that has a large sign at the entrance saying,"This garage is not liable for items stolen from a car." This type of notice is referred to as an exculpatory clause.

In bailment cases,exculpatory clauses:

Suppose that Lenny Lawyer enters into an agreement with Cindy Client that his fee will be a percentage of the recovery Lenny obtains for Cindy in her pending divorce.State law makes such a contingency fee arrangement illegal in divorce actions.What will be the probable outcome if Lenny attempts to enforce the agreement?

Alpha and Xenon companies are both major international conglomerates.They are negotiating a contract whereby Alpha will install a computer system for Xenon.One clause in the contract states that Alpha will not be liable for damages caused by the negligent installation of the computer system,except that Alpha warrants the system and will fix any problem for a period of two years following installation.Alpha completes the installation of the computer system.Xenon loads extensive amounts of information on the system,but all of it is destroyed because Alpha negligently installed the memory chips.Alpha fixes the memory,but Xenon incurred significant expenses in recreating the lost information.Xenon sues for these expenses.Alpha defends with the noted clause in the contract.

In many states it is illegal to lend money to help someone gamble.

L & M loaned Joan $400 so that she could buy her textbooks for the current semester.L & M's terms for repayment of the loan (including interest)are,$200 in two months,$200 in four months,and another $100 at the end of the fifth month.The legal maximum rate of interest on this type of loan is six percent per annum.L & M's loan is usurious.

An insurance contract is not considered to be a legalized form of gambling because:

Discuss the pros and cons of gambling and whether there might be any reason for a court or legislature to treat gambling on credit any differently from gambling itself.

Marcy and Elliot are both sophisticated merchants who deal in diamonds.Marcy contracted to purchase a diamond for $20,000.The day after the purchase,Marcy took the diamond to a jeweler's show but the highest offer for the diamond was only $10,000.Is Marcy's contract for purchase of the diamond for $20,000 unconscionable?

A gambling contract is legal unless it is specifically prohibited by state statute.

Cynthia and Brian were friends.Brian was a dare devil.Because of his antics,Cynthia thought that Brian wasn't long for this life.Cynthia purchased a life insurance policy on Brian's life.Subsequently,Brian was killed in a car accident.Since Cynthia and Brian were friends,Cynthia had an insurable interest in his life and will be entitled to the insurance proceeds.

The UCC deals with unconscionability in a contract by providing that a court may:

Which of the following relationships will ordinarily not create an insurable interest?

Which of the following exculpatory clauses will most likely be enforceable?

E-mation entered into a contract with a consumer,Ezra,a recent immigrant to the United States,who spoke very little English,and had no formal education.The contract provided for Ezra to pay $2500 for a computer system.The system was worth $400.If E-mation sued Ezra for enforcement the contract,what is the most likely result?

The Tavern's secret recipe for its pizza sauce would be considered:

Mike owns a house in a poor area of a large city.Mike is on disability and his total monthly income is $700.A sales representative visits his home,selling a water purification system.Mike signs a contract that calls for monthly payments of $500 for the next 10 years.The water system is worth no more than $1000.Mike thought he was signing a permission slip allowing the salesman to conduct a free water test to determine the toxins in the water.How would a court most likely describe this contract?