Question 1

The state of Illinois enacts a usury statute. The purpose is to

Accepted Answer

A)  establish a maximum rate of interest that may be charged for loans. 
B)  establish a minimum rate of interest that may be charged for loans. 
C)  prevent the misuse of money advanced as loans. 
D)  prevent the misuse of money paid back on loans. 
A)  establish a maximum rate of interest that may be charged for loans. 
B)  establish a minimum rate of interest that may be charged for loans. 
C)  prevent the misuse of money advanced as loans. 
D)  prevent the misuse of money paid back on loans. A

Question 2

SuperBumperCars, Inc. requires all customers to sign a release that contains a clause that releases SuperBumperCars from all liability in the event of an injury occurring during a bumper car ride, no matter who is at fault. This is an example of

Accepted Answer

A)  a covenant not to compete. 
B)  an adhesion contract. 
C)  an exculpatory clause. 
D)  an illusory promise. 
A)  a covenant not to compete. 
B)  an adhesion contract. 
C)  an exculpatory clause. 
D)  an illusory promise. C

Question 3

A minor has a reasonable time, after the minor reaches the age of major?ity, to disaffirm a contract.

Accepted Answer

A) True 
 B)False  True

Question 4

It is legal to charge any interest rate for an ordinary loan.

Accepted Answer

A) True 
 B)False

Question 5

Byron agrees to sell to Charity, for $1,500, a remote parcel of land. They be?lieve the land to be worthless, but beneath it is a gold mine. A court would

Accepted Answer

A)  cancel the contract due to Byron's failure to know the land's value. 
B)  cancel the contract due to Charity's failure to know the land's price. 
C)  cancel the contract due to the difference between the contract price and the market price. 
D)  enforce the contract. 
A)  cancel the contract due to Byron's failure to know the land's value. 
B)  cancel the contract due to Charity's failure to know the land's price. 
C)  cancel the contract due to the difference between the contract price and the market price. 
D)  enforce the contract.

Question 6

A seller's failure to disclose a serious defect about a product for sale may give rise to an action for fraud.

Accepted Answer

A) True 
 B)False

Question 7

Frugal Insurance Company sells a policy to Grover Company, in?suring the life of one of Grover's key executives. When the executive dies, Frugal re?fuses to pay, noting that it was not licensed to sell insurance in Grover's state and arguing that thus, its policy cannot be enforced. Grover can recover

Accepted Answer

A)  the amount of the policy from Frugal in full. 
B)  the amount of the premiums that Grover paid to Frugal. 
C)  as much of the amount of the policy from Frugal as will cover Grover's costs. 
D)  nothing. 
A)  the amount of the policy from Frugal in full. 
B)  the amount of the premiums that Grover paid to Frugal. 
C)  as much of the amount of the policy from Frugal as will cover Grover's costs. 
D)  nothing.

Question 8

In some states, misrepresentation of age by a minor is enough to prohibit disaffirmance.

Accepted Answer

A) True 
 B)False

Question 9

A unilateral mistake is a mistake made by both parties to a contract.

Accepted Answer

A) True 
 B)False

Question 10

Jolie signs a contract with Keaton, an unlicensed physician, to perform a medical procedure. This contract is enforceable by

Accepted Answer

A)  Jolie. 
B)  Jolie's medical insurance company. 
C)  Keaton. 
D)  no one. 
A)  Jolie. 
B)  Jolie's medical insurance company. 
C)  Keaton. 
D)  no one.

Question 11

An oral contract may be enforceable if enforcing the promise is the only way to avoid injustice.

Accepted Answer

A) True 
 B)False

Question 12

Wilma, who lives in New York, enters into a contract to buy a painting from Fred, who lives in France. The contract includes all the costs of insuring and shipping the painting from France to New York. The agent that made the shipping estimate makes a mistake when adding up the costs and, as a result, the shipping cost listed in the contract is $1,000 less than the shipping actually costs. A court will most likely

Accepted Answer

A)  allow the parties to rescind the contract. 
B)  award damages to Wilma for the mistakes. 
C)  award damages to Fred for the mistakes. 
D)  enforce the contract without requiring changes. 
A)  allow the parties to rescind the contract. 
B)  award damages to Wilma for the mistakes. 
C)  award damages to Fred for the mistakes. 
D)  enforce the contract without requiring changes.

Question 13

A person who enters into a contract when he or she is intoxicated can void the contract under any circumstances.

Accepted Answer

A) True 
 B)False

Question 14

An innocent party may never rescind a fraudulent con?tract.

Accepted Answer

A) True 
 B)False

Question 15

Doug agrees with Elinor to sell methamphetamine to patrons of Elinor's nightclub Garden of Eden for 25 percent of the take. Doug sells the drugs but keeps all of the money. Elinor can

Accepted Answer

A)  recover her share of the money only if she did not aid in the crime. 
B)  not enforce the deal. 
C)  recover the total amount of the sales. 
D)  recover her costs but none of the illegal profit. 
A)  recover her share of the money only if she did not aid in the crime. 
B)  not enforce the deal. 
C)  recover the total amount of the sales. 
D)  recover her costs but none of the illegal profit.

Question 16

Joy and Karl contract for the sale of Joy's prize-winning show dog for $1,000. Unknown to either party, the dog has died. Karl is

Accepted Answer

A)  entitled to another dog of equivalent value. 
B)  not required to pay due to the bilateral mistake. 
C)  not required to pay due to the unilateral mistake. 
D)  required to pay because he assumed the risk the dog might die. 
A)  entitled to another dog of equivalent value. 
B)  not required to pay due to the bilateral mistake. 
C)  not required to pay due to the unilateral mistake. 
D)  required to pay because he assumed the risk the dog might die.

Question 17

Gambling involves the distribution of property by chance among persons who have paid valuable consideration for the opportunity to receive it.

Accepted Answer

A) True 
 B)False

Question 18

Ruthie, a minor, charges the cost of an expensive leather jacket at a Girl's Trend store. Two nights later, Ruthie loses the jacket at Minors Only Club. She disaf?firms the jacket's purchase. Ruthie owes Girl's Trend the reasonable value of the jacket

Accepted Answer

A)  if it is deemed a "necessary." 
B)  if it is deemed unnecessary. 
C)  under any circumstances. 
D)  under no circumstances. 
A)  if it is deemed a "necessary." 
B)  if it is deemed unnecessary. 
C)  under any circumstances. 
D)  under no circumstances.

Question 19

An oral contract for a sale of goods for more than $5,000 is not enforceable even if the parties to it admit to its existence in court.

Accepted Answer

A) True 
 B)False

Question 20

Rolf is an emergency medical technician. Medical personnel such as Rolf are pro?hibited by state statute from working more than a certain num?ber of consecutive hours. One month, Rolf works more than the legal limit. Rolf can recover for

Accepted Answer

A)  the hours up to the statutory maximum but not more. 
B)  the hours up to the statutory maximum and the extra hours. 
C)  the hours up to the statutory maximum or the extra hours. 
D)  nothing. 
A)  the hours up to the statutory maximum but not more. 
B)  the hours up to the statutory maximum and the extra hours. 
C)  the hours up to the statutory maximum or the extra hours. 
D)  nothing.

Exam 8: Capacity, Legality, and Enforceability

The state of Illinois enacts a usury statute. The purpose is to

SuperBumperCars, Inc. requires all customers to sign a release that contains a clause that releases SuperBumperCars from all liability in the event of an injury occurring during a bumper car ride, no matter who is at fault. This is an example of

A minor has a reasonable time, after the minor reaches the age of major?ity, to disaffirm a contract.

It is legal to charge any interest rate for an ordinary loan.

Byron agrees to sell to Charity, for $1,500, a remote parcel of land. They be?lieve the land to be worthless, but beneath it is a gold mine. A court would

A seller's failure to disclose a serious defect about a product for sale may give rise to an action for fraud.

In some states, misrepresentation of age by a minor is enough to prohibit disaffirmance.

A unilateral mistake is a mistake made by both parties to a contract.

Jolie signs a contract with Keaton, an unlicensed physician, to perform a medical procedure. This contract is enforceable by

An oral contract may be enforceable if enforcing the promise is the only way to avoid injustice.

A person who enters into a contract when he or she is intoxicated can void the contract under any circumstances.

An innocent party may never rescind a fraudulent con?tract.

Doug agrees with Elinor to sell methamphetamine to patrons of Elinor's nightclub Garden of Eden for 25 percent of the take. Doug sells the drugs but keeps all of the money. Elinor can

Joy and Karl contract for the sale of Joy's prize-winning show dog for $1,000. Unknown to either party, the dog has died. Karl is

Gambling involves the distribution of property by chance among persons who have paid valuable consideration for the opportunity to receive it.

Ruthie, a minor, charges the cost of an expensive leather jacket at a Girl's Trend store. Two nights later, Ruthie loses the jacket at Minors Only Club. She disaf?firms the jacket's purchase. Ruthie owes Girl's Trend the reasonable value of the jacket

An oral contract for a sale of goods for more than $5,000 is not enforceable even if the parties to it admit to its existence in court.

Rolf is an emergency medical technician. Medical personnel such as Rolf are pro?hibited by state statute from working more than a certain num?ber of consecutive hours. One month, Rolf works more than the legal limit. Rolf can recover for

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