Deck 10: Legality

Question 1

A business person paid his influential state senator $25,000 to influence other legislators to pass a bill favorable to his business. This payment would not be illegal if the bill related to prescription drugs.

Answer 1

False

Question 2

An agreement not to compete is legal if time and territory restrictions are reasonable.

Answer 2

True

Question 3

Gaming is an activity that has been legalized and therefore allows participants to make a profit without being subject to criminal penalties.

Answer 3

True

Question 4

To say that an illegal contract is void means that by law, the contract never existed.

Question 5

A contract of adhesion places one party in a superior position because of its unfavorable clauses.

Question 6

An agreement is illegal and void if it violates

A) state usury statutes.
B) state licensing statutes.
C) state criminal statutes.
D) all of these.

Question 7

Any agreement that limits competition by controlling or fixing prices is illegal.

Question 8

If the purpose of a licensing statute is to raise money, an agreement with an unlicensed person is

A) void.
B) valid.
C) unenforceable.
D) voidable.

Question 9

If an agreement contains an illegal part that can be separated, the entire agreement is void.

Question 10

An agreement to create a monopoly is illegal and violates antitrust laws.

Question 11

An unconscionable agreement is one that is grossly unfair.

Question 12

Exculpatory clauses relieve a party in advance for liability for the tort of negligence.

Question 13

A public garage's disclaimer of liability for a car lost or stolen because of the garage owner's negligence is likely to be unenforceable.

Question 14

A state's gaming statute is most likely to be violated by

A) a state-run lottery.
B) an all-night poker game at a private party in which one participant in the game takes a "cut" of the winnings of the other game participants.
C) parimutuel betting at racetracks.
D) all of these.

Question 15

Martinson used his van to deliver illegal drugs to users throughout a particular city. Because the van was old, he decided to trade it in for a new van. The contract that Martinson makes with the car agency to purchase a new van is

A) illegal; therefore, Martinson would not have to pay for the van when it is delivered to him.
B) legal; therefore, Martinson would have to pay for the van when it is delivered to him.
C) illegal; therefore, when Martinson receives the van, he must return it to the car agency.
D) illegal; therefore, Martinson would not have to pay for the van when it is delivered to him, but when Martinson receives the van, he must return it to the car agency.

Question 16

Usury laws protect borrowers from paying excessively high interest rates.

Question 17

If a person unknowingly deals with an unlicensed individual, the courts will usually allow the person to recover any money paid to the unlicensed individual.

Question 18

If both parties to an illegal agreement are in pari delicto, neither party can successfully sue the other to seek enforcement of the agreement.

Question 19

Anderson agreed to pay Dawes for acting as a real estate agent. Dawes was not properly licensed. This agreement was

A) illegal and voidable.
B) legal and valid.
C) illegal and void.
D) permissible.

Question 20

While illegal contracts have civil penalties, the parties involved may also be subject to criminal penalties.

Question 21

A contract may be considered legal although it

A) is specifically prohibited by statute.
B) involves gaming legalized by the state.
C) is contrary to public policy.
D) results in a crime if the person committing the criminal act is given a prison sentence.

Question 22

Courts will allow recovery based on an illegal agreement when

A) the parties to the agreement are not equally at fault.
B) both parties are in pari delicto.
C) a tort is not involved.
D) there is not more than one illegal clause.

Question 23

Billings and Durick, who are competing distributors, made an agreement whereby Billings promised that he would not sell his goods in a specified area, and Durick promised that she would not sell her goods in another specified area. The agreement was made to keep prices high by eliminating competition. This arrangement was

A) legal because it was made in reasonable restraint of trade in order to control prices and territory.
B) legal because a binding contract was made willingly by both parties.
C) illegal because it called for unreasonable restraint of trade by controlling prices and territories.
D) illegal because agreements that allow manufacturers to set prices are voidable.

Question 24

____________________ laws require persons to have permits to practice their occupations.

Question 25

The Harrow Health Club placed a clause in a contract with a patron that relieved the club of liability for intentional wrongdoing by its employees. One evening near closing time, an employee struck and injured a patron for her (the patron's) failure to leave on time. The Harrow Club refused to pay the patron for her injuries because of the disclaimer of liability clause in the contract. Is the Harrow Health Club liable to the patron for injuries she (the patron) suffered?

A) No; it was the patron's fault.
B) No; health clubs generally do not have liability even though they are at fault.
C) Yes; courts will generally not enforce clauses in contracts that attempt to relieve a contracting party such as the Harrow Club from injuries it caused to another party to the contract.
D) Yes; courts are generally not sympathetic to health clubs.

Question 26

Unlicensed workers are generally permitted to recover money they earn if the licensing statute is merely intended to obtain ____________________.

Question 27

____________________ is the fee paid by a borrower for the use of money.

Question 28

Usury statutes apply only to

A) loans of money.
B) pawnbrokers.
C) loans to corporations.
D) real estate mortgage loans.

Question 29

The First National Bank lends Simmons $1,000. Simmons agrees to pay the bank the original loan plus $1,500 interest within a six-month period. This is an example of a(n)

A) revolving loan.
B) usurious loan by the First National Bank.
C) price-fixing agreement.
D) exculpatory clause in a contract involving a loan of money.

Question 30

A provision excusing one party from liability for negligence is

A) an exculpatory clause.
B) a revocation clause.
C) a disaffirmatory clause.
D) forbearance.

Question 31

Maile agrees to sell his retail men's shop in Cleveland, Ohio, to Lunger. Lunger wishes to have a restrictive clause against competition by Maile included in the sales contract. Which restrictive clause against the seller would be enforceable?

A) Never to engage in a similar business in Cleveland
B) Not to engage in a similar business for the next two years anywhere in the state of Ohio
C) Not to engage in any type of business anywhere in Cleveland for the next year
D) Not to engage in a men's shop business within a radius of one mile for the next year

Question 32

Which of the following would be unenforceable because the subject matter is illegal?

A) An employer promises not to press criminal charges for stealing money from the company safe, if the employee agrees to pay back the money
B) A fee paid to an attorney to defend a person in criminal court against an assault charge
C) A restrictive clause in an employment contract prohibiting a former employee from using the employer's trade secrets
D) An arbitration clause appearing in a warranty agreement given to the purchaser of an iPod in a large retail establishment

Question 33

Which of the following would be unenforceable because the subject matter is illegal?

A) An employer promises not to press charges against her employee for embezzlement because the employee agreed to make restitution.
B) An attorney charges a fee to represent a client in a civil court action.
C) A restrictive covenant in an employment contract prohibiting a former employee from using the original employer's trade secrets at his or her new job.
D) An agreement to pay an expert in a particular field to present a case to a legislative body seeking favorable legislation but leaving it up to the legislative body to decide on the issue.

Question 34

If an agreement is partially legal and partially illegal, the

A) legal part of the agreement may be enforced if it can be separated from the illegal part.
B) entire agreement is considered to be illegal.
C) entire agreement is considered to be legal.
D) parties to the agreement have a choice of declaring it legal or illegal.

Question 35

Knebel's parents promised her $3,000 if she would not marry before age twenty-one. Knebel agreed. This agreement is

A) void.
B) valid.
C) unenforceable.
D) illegal.

Question 36

Which contract would ordinarily be considered illegal?

A) Paying a fee for a license in a state where the purpose of the licensing statute was merely to raise revenue for the state.
B) A contract between a minor and an adult for the sale of real estate.
C) A contract made by an intoxicated person.
D) Paying your state senator $10,000 to vote in favor of a bill you have an interest in.

Question 37

An agreement is ____________________ if its performance requires one party to commit a tort or a crime.

Question 38

Covenants not to compete are generally upheld in court if

A) the agreements interfere with the proper administration of justice.
B) goodwill is present.
C) the territory and time restrictions are reasonable.
D) a minor is not part of the business transaction.

Question 39

If two parties enter into an agreement that both know is illegal, the parties are said to be ____________________.

Question 40

A contract is unconscionable if

A) both parties are in pari delicto.
B) one party is in pari delicto and the other party is not.
C) it favors one party over another.
D) both parties to a contract are wealthy.

Question 41

A(n) ____________________ gambler is one who participates in a gambling event socially and for pleasure.

Question 42

A promise not to compete for a specified time in a certain geographic area is called a(n) ____________________.

Question 43

Andrews made a $100 bet with Caruso on the World Series. When he lost, Andrews refused to pay Caruso the $100. What are Caruso's rights?

Question 44

An agreement too harsh or unfair to be upheld in a court of law is considered to be ____________________.

Question 45

____________________ govern the types of transactions that can be performed on Sunday.

Question 46

What makes an exculpatory clause illegal and against public policy?

Question 47

Explain how legal gaming has expanded greatly in the United States.

Question 48

Coyle sold her drugstore, located in a large city, to Rusk. Coyle signed an agreement stating that she would not open a drugstore within one mile of Rusk's for a period of one year. Was Coyle legally bound by this agreement?

Question 49

What happens if a contract whose purpose involves committing a crime is brought to a court of law?

Question 50

An agreement that harms marriage is illegal because it is opposed to ____________________.