Deck 16: Capacity and Legality

Question 1

Primarily for ________, most courts or state legislatures have determined that a minor should not have the right to disaffirm certain types of contracts including life insurance, health insurance, counseling, education loans and marriage contracts.

A) competency reasons
B) public policy reasons
C) governmental reasons
D) banking reasons
E) legal reasons

Answer 1

B

Question 2

As a general rule, parents are not liable for contracts entered into by their minor children.

Answer 2

True

Question 3

________ is the third element of a legally binding contract.

A) Promise
B) Acceptance
C) Capacity
D) Intent
E) Affirmation

Answer 3

C

Question 4

In pari delicto is the term for when both parties are equally responsible for an illegal agreement.

Question 5

When a contract is overturned because it is deemed to have illegal subject matter or is illegal to perform, it is generally considered voidable.

Question 6

In Great Britain, a legally binding contract cannot be entered into by a young person until the age of 21.

Question 7

A person who has the mental ability to understand his or her obligations under the contract is presumed to have capacity.

Question 8

If a contract contains an illegal clause or section in the contract, courts will generally sever the illegal clause or section and enforce only the legal portions of the contract.

Question 9

In King v. Riedl, the plaintiffs claimed that the defendant did not have the right to proceed against them for sums allegedly owed, because the contractor was not licensed as a residential home builder (as required by state law). What was the result on appeal?

A) The court ruled in favor of the plaintiffs on the basis that the contractor was statutorily barred from bringing an action to enforce payment because he lacked a residential home builder license and the amount of the contract satisfied statutory requirements.
B) Although recognizing that the contractor's failure to be properly licensed would not in and of itself bar recovery, the court ruled in favor of the plaintiffs because the facts at trial showed that the contractor performed inadequate work.
C) The court ruled that because the contractor lacked the required state license and the amount of the contract satisfied statutory requirements, under common law he could only recover for expenses for materials and labor costs, not the full contract price.
D) The court ruled that the defendant could maintain an action against the plaintiffs and prevail because the proof showed that he was eligible for the required license although he had not yet obtained it.
E) The court ruled that the defendant could maintain an action against the plaintiffs and prevail because the state statute only applied when the cost of a contractual undertaking exceeded $10,000, and because the contractor billed periodically, the plaintiffs were never presented with a bill exceeding $10,000.

Question 10

All exculpatory clauses are unlawful.

Question 11

Food, clothing, shelter, and basic medical services are considered necessaries when discussing contracts with minors.

Question 12

Someone who has been adjudicated insane has no capacity to enter into contracts, and any contract he attempts to enter into is void, even if he has an appointed guardian.

Question 13

For purposes of determining capacity, intoxicated persons include those under the influence of alcohol, but not drugs.

Question 14

In the Case Opener, Apple customers tried to disaffirm purchases of game currency by their children. What was the result?

A) The court dismissed the lawsuit on the basis that the parents were bound by the Terms of Service and notifications of their original contracts with Apple binding them to future purchases of game currency when their passwords were used.
B) The court dismissed the lawsuit on the basis that the parents were bound by the Terms of Service and notifications of their original contracts with Apple binding them to future purchases of game currency regardless of whether passwords were used.
C) The court dismissed the lawsuit on the basis that no contractual agreement was needed in order for the parents to be bound in regard to purchases of game currency so long as their passwords were used.
D) The court refused to dismiss the lawsuit because no case law was provided to prove that Apple's Terms of Service served as a contract for all subsequent transactions.
E) The court refused to dismiss the lawsuit because as a matter of law parents cannot be required to contractually agree to their children's future purchases that are unapproved by the parents.

Question 15

If a minor enters into a contract with an adult, both parties may disaffirm the contract based upon the minor's lack of majority.

Question 16

Once a young person reaches the age of majority and ratifies a contract made as a minor, he or she has a reasonable period of time to void the contract.

Question 17

Minors can disaffirm contracts for necessaries, but they will still be held liable for the reasonable value of the necessary.

Question 18

Parents are always responsible for the torts committed by their minor children in all states except Hawaii and Alaska.

Question 19

In Buckeye Check Cashing, Inc. v. Cardegna et al., the case was heard in front of the U.S. Supreme Court to determine whether the court or the arbitrator should decide the issues of a case when illegality in relation to a contract is claimed. What was the ruling?

A) An arbitrator should address charges of illegality involving either an arbitration provision or the contract as a whole.
B) When an arbitration provision in a contract is not specifically challenged, an arbitrator should address a charge of illegality to the contract as a whole.
C) When an arbitration provision in a contract is not specifically challenged, a court should address a charge of illegality to the contract as a whole.
D) The court should address charges of illegality involving either an arbitration provision or the contract as a whole.
E) Whether a court or an arbitrator should address charges of illegality involving either an arbitration provision or the contract as a whole depends upon the first to file rule.

Question 20

Disaffirmance laws have been found to reflect a policy of discouraging adults from contracting with minors.

Question 21

The age of majority regarding the right to contract in Great Britain is:

A) 16
B) 18
C) 21
D) 25
E) There is not a set age of majority

Question 22

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

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.

Question 23

When a minor gets married, she or he is considered ________ in most cases.

A) Emancipated
B) Freed
C) Released
D) Disaffirmed
E) Either freed or disaffirmed depending on the circumstances

Question 24

As a general rule, most states will not allow a minor to disaffirm contracts for which of the following items?

A) Life insurance, health insurance, and psychological counseling
B) Health insurance and psychological counseling, but not life insurance
C) Psychological counseling, but not health insurance or life insurance
D) Health insurance, but not life insurance or psychological counseling
E) Education loan contracts and psychological counseling, but not life insurance or health insurance

Question 25

Which of the following occurs when a person reaches the age of majority and states, either orally or in writing, that he or she intends to be bound by the contract entered into as a minor?

A) Implied ratification
B) Express ratification
C) Express novation
D) Implied novation
E) Express ratification if the statement is in writing but nothing if the statement is only oral

Question 26

________ occurs when a minor's parents or legal guardians give up their right to exercise legal control over the minor.

A) Legal consequence
B) Affirmance
C) Legal release
D) Emancipation
E) Reaffirmance

Question 27

________ is when someone has some sort of mental or physical defect that prevents him or her from being able to enter into a legally binding contract.

A) Immortality
B) Legality
C) Incapacity
D) Majority
E) Mental illness

Question 28

Which of the following is true regarding the obligations of a minor on disaffirmance?

A) In all states, a minor must return any consideration in his control but is entitled to a full refund of any purchase price regardless of the condition of the consideration when returned.
B) In all states, a minor is entitled to a full refund without returning consideration.
C) In all states, a minor must return any consideration in his control, must make restitution, and must pay for any loss in value of the collateral.
D) In all states, a minor only receives a return of half the minor's investment.
E) The obligations of a minor upon disaffirmance vary from state to state.

Question 29

Dorian contracts with Julie to post on several social media accounts unflattering and false information about Julie's competitor to ruin the competitor's reputation which in theory would send all the customers towards Julie's business. This contract would be:

A) valid because it is not illegal.
B) valid if consideration was paid to Dorian.
C) unenforceable because there is no way for Julie to disaffirm the contract.
D) unenforceable because Dorian would be committing the tort of defamation.
E) a court would have to determine whether or not there were enough damages to Julie's competitor to determine if the contract was void or valid.

Question 30

Gordon is 17 years old. He enters into a contract with Constance for a new stereo system. When Gordon turns 18, he moves away to college, taking the stereo system with him. This is a form of:

A) express disaffirmance.
B) implied disaffirmance.
C) a contract for necessities.
D) implied ratification.
E) express ratification.

Question 31

Which of the following is true once a guardian has been appointed for a person who has been adjudicated insane?

A) If a person has been adjudicated insane and has a guardian appointed, that person has no capacity to enter into contracts and any contract he does attempt to enter into is void.
B) If a person has been adjudicated insane and has a guardian appointed, that person has no capacity to enter into contracts and any contract he does attempt to enter into is voidable.
C) If a person has been adjudicated insane and has a guardian appointed, that person retains capacity to enter into contracts so long as the other party to the contract is aware of the guardian's status.
D) If a person has been adjudicated insane and has a guardian appointed, that person retains capacity to enter into contracts so long as the other party to the contract is aware of the insanity issue.
E) If a person has been adjudicated insane and has a guardian appointed, that person retains capacity to enter into contracts so long as the other party to the contract is aware of the guardian's status and also the insanity issue.

Question 32

Tillman entered into a contract with Paul to purchase a stereo. Tillman is 17 when he purchases the stereo and a month after he turns 18 he wants to disaffirm the contract, can he?

A) Yes, as long as it is within 30 day of reaching the age of majority.
B) Yes, as long as it is within 60 days of reaching the age of majority
C) Yes, as long as it is within 6 months of reaching the age of majority.
D) Yes, as long as it is within a reasonable time of reaching the age of majority.
E) No, Tillman cannot disaffirm now that he is 18.

Question 33

In most states, a person is given full legal capacity to enter into contracts when he or she becomes ________ before reaching the age of majority.

A) Emancipated
B) Freed
C) Released
D) Employed
E) Acknowledged

Question 34

A person who has legal capacity to contract is one who has ________ and, therefore, will presumably be able to understand how to comply with the terms of the agreement.

A) the court's permission to contract
B) intent
C) the mental ability to understand his or her rights and obligations under a contract
D) opportunity and ability
E) consideration

Question 35

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

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

Question 36

Since public policy does not favor intoxication, the courts tend to be unsympathetic to intoxicated parties and will ________.

A) void all contracts due to incapacity.
B) fairly liberally interpret behavior that seems like ratification.
C) judge the contract on reasonable person standards in interpreting the contract.
D) disaffirm the portions the court believes are one-sided.
E) invalidate the entire contract.

Question 37

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, which of the following has occurred?

A) Implied ratification
B) Express ratification
C) Express novation
D) Implied novation
E) Continued safety

Question 38

Which of the following is the majority rule regarding a minor's misrepresentation of his or her age?

A) That if a competent party relies on a misrepresentation in good faith, the minor gives up the right to disaffirm the agreement.
B) That the minor must restore the competent party to that party's precontractual position before obtaining the disaffirmance.
C) That the minor may disaffirm but that the competent party has the right to sue the minor in tort and recover damages for fraud.
D) That misrepresentation does not affect the minor's right to disaffirm the contract.
E) That misrepresentation results in the minor receiving a return of only half the consideration he or she supplied.

Question 39

If a contract is disaffirmed due of intoxication, which of the following statements is true?

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.

Question 40

When Phillip and Cynthia entered into their contract, the contract was legal under state statute. However, their state passed a new statute making the subject matter of their contract illegal. This makes their contract ________.

A) discharged
B) still enforceable
C) executed
D) void because it is illegal
E) exempt

Question 41

Which of the following are contracts that contain multiple parts which can each be performed separately and for which separate consideration is offered?

A) Independent contracts
B) Substantive contracts
C) Adhesion contracts
D) Justifiable contracts
E) Severable contracts

Question 42

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.

A) Substantive
B) Adhesion
C) In pari delicto
D) Exculpatory
E) Res Ipsa

Question 43

________ refers to when both parties are equally responsible for an illegal agreement.

A) In pari delicto
B) Procedurally unconscionable
C) An adhesion contract
D) A res ipsa contract
E) A stare decisis contract

Question 44

[Useless Friend] Antoine and Tevis are roommates. Antoine has Tevis sign a contract promising to wash Antoine's car once a week 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 Tevis to cook dinner for Antoine, do his laundry, and clean their apartment. Antoine is also very angry with his former girlfriend, Flora, and decides to start rumors that would constitute the tort of defamation. He spreads via SnapChat that Flora cheated on tests and stole from friends. Antoine wants to enlist the help of Tevis in smearing Flora but knows that Tevis would be hesitant to assist in his endeavors. One evening, however, Tevis comes home clearly intoxicated - a fact apparent to Antoine. Antoine has him sign a contract agreeing to defame Flora for $50. When he sobers up, Tevis tells Antoine that he was drunk and that he has no intention of defaming Flora, who also happens to be the best friend of Tevis's new girlfriend. He also finally takes a look at the contract involving work for Antoine and tells Antoine that the contract is outrageous.
Tevis's assertion that he should be able to avoid the contract involving Flora because he was intoxicated is best supported by which of the following statements under the Restatement of Contracts,

Question 45

[Irresponsible Teen] Rose is 17 in a state where the age of majority is 18. She purchased a prom dress from Your Special Day. She wore it to the prom and then attempted to return it to the store, claiming that she was a minor and that she was entitled to a refund. The dress had clearly been worn and had a purple stain which Rose claimed was from grape juice. Additionally, a few days before she turned 18, Rose purchased a used car from Sal's Car Savings. She had a deal whereby she paid $100 per month on the car. She drove the car and made payments for six months after she turned 18. Rose then returned the car to Sal's Car Savings, informed the owner that she was under 18 when she entered into the contract to purchase the car, and told the owner that she was returning the car for a full refund. Sal's Car Savings claimed the car was a necessary. Rose and her parents disagreed claiming that the parents were ready and willing to provide a car to Rose, and that she only purchased the car from Sal's Car Savings because she liked that particular style and color. When purchases of the dress and car were made, the sellers knew that Rose was under the age of 18.
Which statement about Rose's attempt to return the damaged dress is true?

A) In all states Rose has the right to keep the dress and get a refund.
B) In all states Rose must return the dress, but she has a right to a full refund.
C) Regardless of what she does with the dress, Rose has no right to a refund in any state.
D) In some states Rose would have an obligation of restitution to the store.
E) In all states Rose would have an obligation of restitution to the store.

Question 46

Payton gets a job as a salesman for a pharmaceutical company. He agrees that if he leaves his employment, he will not work for another pharmaceutical company for a period of two years. That type of agreement is called a[n] ________.

A) Covenant not to compete
B) Necessary covenant
C) Employment completion agreement
D) Covenant of good faith agreement
E) Covenant of favored employment

Question 47

The maximum legal limit for a loan in Walter's state is 5.8%. Keeli charges Walter 23% because she does not trust he can pay back the loan. What is the term for giving a loan at an interest rate that exceeds the legal maximum?

A) Good business practices
B) Loan manipulation
C) Legal loan price inflation
D) Uncustomary
E) Usury

Question 48

A party who claims that he or she could not understand contractual terms because of tiny, hard-to-read print on the back of an agreement and the excessive use of legalese is referring to which of the following?

A) Substantive unconscionability.
B) Adhesion conscionability.
C) Procedural unconscionability.
D) Exculpatory clauses.
E) An in pari delicto agreement.

Question 49

________ is a term for laws that limit the types of business activities in which parties may legally engage on Sundays.

A) Sunday prohibition laws
B) Christian fellowship laws
C) Blue laws
D) Homestead laws
E) Fellowship laws

Question 50

Joey's state has a licensing statute that specifically addresses the requirements for salons. Joey, however, decides not to get a license because it is too expensive. If Margaret enters into a contract with Joey for his salon services, this agreement is ________.

A) void
B) enforceable
C) voidable
D) illegal and unenforceable
E) valid because it is contrary to public policy to limit a professional's right to work

Question 51

Quinton is in desperate need for a new refrigerator but does not have good credit. Hulio indicates that he will sell Quinton a refrigerator, but Quinton will have to make weekly payments at 18% interest and, if he misses one payment, Hulio has the right to repossess the refrigerator. Hulio tells Quinton that those are the final terms and Quinton has 10 minutes to decide whether he wants to take the contract terms or find someone else to contract with. This is an example of a[n] ________.

A) procedurally unconscionable contract
B) expressly oppressive contract
C) outrageously invalid contract
D) adhesion contract
E) enforceable agreement

Question 52

[Useless Friend] Antoine and Tevis are roommates. Antoine has Tevis sign a contract promising to wash Antoine's car once a week 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 Tevis to cook dinner for Antoine, do his laundry, and clean their apartment. Antoine is also very angry with his former girlfriend, Flora, and decides to start rumors that would constitute the tort of defamation. He spreads via SnapChat that Flora cheated on tests and stole from friends. Antoine wants to enlist the help of Tevis in smearing Flora but knows that Tevis would be hesitant to assist in his endeavors. One evening, however, Tevis comes home clearly intoxicated - a fact apparent to Antoine. Antoine has him sign a contract agreeing to defame Flora for $50. When he sobers up, Tevis tells Antoine that he was drunk and that he has no intention of defaming Flora, who also happens to be the best friend of Tevis's new girlfriend. He also finally takes a look at the contract involving work for Antoine and tells Antoine that the contract is outrageous.
Tevis's claim that he had no obligation to defame Flora is supported by which of the following statements?

A) Tevis is correct in that he could not be legally obligated to commit defamation.
B) Tevis is correct only if it can be proven that the defamation would cause Flora money damages.
C) Tevis is correct only if it can be proven that the defamation would cause Flora actual injury.
D) Tevis is correct only if it can be proven that the defamation is undeserved.
E) Tevis is correct only if it can be proven that he had a prior relationship with Flora.

Question 53

Which of the following involves overly harsh or lopsided substance in an agreement?

A) Substantive unconscionability.
B) Adhesion conscionability.
C) Procedural unconscionability.
D) Exculpatory clauses.
E) An in pari delicto agreement.

Question 54

Elise speaks very little English. Herman comes to her house to sell her life insurance. Herman persuades Elise to sign a contract for Elise to buy life insurance that she does not need for a price of $300 a month even though she only brings home $750 a month from her job. Under the contract, if she does not pay the $300 a month, Elise owes Herman $100. A court would find the terms of this contract ________.

A) unconscionable
B) unneeded
C) unrealistic
D) valid
E) unreliable

Question 55

Which of the following is true regarding Rose and her parents asserting that the car was a necessary?

A) The claim will have no effect because the law does not recognize the concept of necessaries when minors are involved.
B) Social status is irrelevant as a matter of law in addressing a claim that an item was a necessary.
C) Whether or not parents would buy the item at issue is irrelevant in addressing a claim that an item was a necessary.
D) A minor may not disaffirm a contract for a frivolous matter that is clearly not required.
E) Even if a minor disaffirms a contract for a necessary, the minor will still be held liable for the reasonable value of the necessary.

Question 56

Which statement applies in the dispute between Rose and Sal's Car Savings, considering that she waited to turn 18 before attempting to disaffirm the contract?

A) So long as, after reaching the age of majority, Rose did not state orally or in writing that she intended to be bound by the contract, then she did not commit an express ratification.
B) Rose was required to expressly ratify the contract before she could be bound to it.
C) An implied ratification occurs when parents agree to accept the debt entered into by a minor.
D) If Rose caused any damage whatsoever to the car, she was said to have impliedly ratified the contract.
E) Rose was required to expressly ratify the contract before she could be bound to it so long as no damage was done; but if she did any damage to the car, as a matter of law, she is said to have impliedly ratified it.

Question 57

All 50 states have statutes requiring that people working in certain professions obtain ________ before practicing their craft.

A) a court's permission
B) 4 years of college
C) a license
D) the state's permission
E) a union's permission

Question 58

What is the maximum interest rate in the United States?

A) 20%
B) 15%
C) 12%
D) 10%
E) It varies depending on the state involved.

Question 59

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

A) 50
B) 47
C) 40
D) 35
E) 10

Question 60

A severable contract, also known as a(n) ________ contract, contains multiple parts that can each be performed separately.

A) adhesion
B) divisible
C) separate
D) indivisible
E) indisputable

Question 61

What was the ruling in Lopez v. Kmart Corporation, the case in the text regarding whether a minor could disaffirm an arbitration clause in an employment contract?

A) Plaintiff did not enter into a valid arbitration agreement with his employer because he was a minor, and therefore the agreement was a nullity.
B) Plaintiff entered into a valid arbitration agreement with his employer, but the employer properly exercised its right to void the contract.
C) Plaintiff entered into a valid arbitration agreement with his employer, but the employer failed to exercise its right to void the contract.
D) Plaintiff entered into a valid arbitration agreement with his employer, but properly exercised his statutory right of disaffirmance, thereby rescinding the arbitration contract and rending it a nullity.
E) Plaintiff entered into a valid arbitration agreement with his employer, but did not properly exercise his statutory right of disaffirmance, thereby he was required to arbitrate.

Question 62

[Motorcycle crash] Cassandra, who would be turning 18 in two weeks, wanted to purchase a motorcycle at Hal's Cycles. Hal explained she could pay monthly installments through a financing agreement, and that he needed an ID to verify she was at least 18 years old. Cassandra, who strongly resembled her older sister Alana, handed Alana's drivers' license to Hal, but Hal did not notice the license had the wrong name. The next day, when cruising in her new motorcycle, Cassandra crashed into Jonah, who was injured in the collision. The next month, Cassandra received a bill for the first installment of the motorcycle. Her parents also received a notice that they were being sued by Jonah because of Cassandra's collision. Realizing her parents would be upset that she purchased a motorcycle, Cassandra went to Hal to return the broken motorcycle and tell him she was a minor and she's not responsible for any payments under the financing agreement.
If, after her eighteenth birthday, Cassandra had paid the monthly payment on the financing agreement, would she still have the right to disaffirm the contract?

A) Yes, as long as the disaffirmance is within a reasonable time after she reached the age of majority.
B) Yes, although making the payment constitutes an implied ratification of the contract, she may still void the contract as long as the disaffirmance is within a reasonable time after she reached the age of majority.
C) Yes, because courts recognize a public policy to protect minors who are naïve against others who may take advantage of them.
D) No, because making the payment constitutes an implied ratification of the contract, and once a contract is ratified, it is no longer voidable.
E) No, because her actions do not constitute a valid ratification.

Question 63

[Zaltar Zeb] Zeb suffers from delusions that he is from the planet Zaltar. Zeb's contract with DigiTV, his digital television service provider, has expired. After comparing his past payments to the potential savings from satellite television provider SatTV, Zeb decides to sign a two-year contract with SatTV. After six months with SatTV, Zeb realizes he paid less with DigiTV and he now wants to be released from his contract with SatTV.
Is the SatTV contract legally binding on Zeb?

A) No, because he did not ratify the contract.
B) Yes, because, even though Zeb understands the nature of the contract and the obligations it imposes, Zeb did not disaffirm the contract within a reasonable period of time.
C) No, because contracts with mentally incapacitated persons are void, unless expressly ratified.
D) No, because contracts with mentally incapacitated persons are void.
E) Yes, although Zeb may suffer from mental problems, Zeb appears to still understand the nature of the contract and the obligations it imposes.

Question 64

[Beauty Shop Woes] When Giuseppe hired Ines to work in his beauty shop as a hair stylist, she entered into an agreement with Giuseppe whereby if she left his employment she would not work for another beauty shop within 50 miles for 2 years. Giuseppe trained Ines in a number of new techniques. After nine months, Ines was offered a great job down the street at a new beauty shop. She quit Giuseppe's shop and a number of customers followed her down the street to her new job. Giuseppe claimed that she had signed a contract and had no right to go to work at the new shop. Ines disagreed and told Giuseppe that no judge in the country would enforce such an agreement. Ines then told Giuseppe that she was more worried about a customer who was threatening to sue her because her hair turned green after Ines worked on it. Ines 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 the customer sign a contract that released Ines from all liability and that she would not sue. The customer, however, sued anyway.
Which is the correct term for the agreement Giuseppe and Ines entered?

A) A competition agreement
B) A prohibited competition agreement
C) A covenant not to misappropriate
D) A policy agreement
E) A covenant not to compete

Question 65

[Zaltar Zeb] Zeb suffers from delusions that he is from the planet Zaltar. Zeb's contract with DigiTV, his digital television service provider, has expired. After comparing his past payments to the potential savings from satellite television provider SatTV, Zeb decides to sign a two-year contract with SatTV. After six months with SatTV, Zeb realizes he paid less with DigiTV and he now wants to be released from his contract with SatTV.
LouAnn has spent the past 15 years building a bakery business and her reputation in her small community shows by her high volume of sales and her customer loyalty. Dillon contracts with LouAnn to purchase her bakery. What type of agreement would a court allow Dillion and LouAnn to enter into in the sale of this business?

A) A restrictive covenant
B) A restrictive adhesion contract
C) An exculpatory agreement
D) A usury agreement
E) A performance based agreement

Question 66

[Zaltar Zeb] Zeb suffers from delusions that he is from the planet Zaltar. Zeb's contract with DigiTV, his digital television service provider, has expired. After comparing his past payments to the potential savings from satellite television provider SatTV, Zeb decides to sign a two-year contract with SatTV. After six months with SatTV, Zeb realizes he paid less with DigiTV and he now wants to be released from his contract with SatTV.
Trina lists her convertible for sale on Facebook for $12,000, the fair market value. Dion e-mails Trina and offers to buy the car for the price Trina listed. Trina is not aware that Dion had been drinking for the past few hours. Is the contract to buy Trina's car likely to be valid?

A) Yes, but the only relevant question is whether Trina knew Dion was intoxicated; the price is not relevant.
B) Yes, because Trina did not know Dion was intoxicated and the agreement is fair.
C) Yes, because the level of intoxication is the primary factor in determining whether the contract is likely to be valid.
D) No, because intoxicated persons lack capacity to determine fair market value.
E) No, because it is irrelevant that Trina did not know of Dion's intoxication.

Question 67

[Beauty Shop Woes] When Giuseppe hired Ines to work in his beauty shop as a hair stylist, she entered into an agreement with Giuseppe whereby if she left his employment she would not work for another beauty shop within 50 miles for 2 years. Giuseppe trained Ines in a number of new techniques. After nine months, Ines was offered a great job down the street at a new beauty shop. She quit Giuseppe's shop and a number of customers followed her down the street to her new job. Giuseppe claimed that she had signed a contract and had no right to go to work at the new shop. Ines disagreed and told Giuseppe that no judge in the country would enforce such an agreement. Ines then told Giuseppe that she was more worried about a customer who was threatening to sue her because her hair turned green after Ines worked on it. Ines 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 the customer sign a contract that released Ines from all liability and that she would not sue. The customer, however, sued anyway.
Is Ines correct in claiming that no judge in the country would enforce such an agreement?

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.

Question 68

[Zaltar Zeb] Zeb suffers from delusions that he is from the planet Zaltar. Zeb's contract with DigiTV, his digital television service provider, has expired. After comparing his past payments to the potential savings from satellite television provider SatTV, Zeb decides to sign a two-year contract with SatTV. After six months with SatTV, Zeb realizes he paid less with DigiTV and he now wants to be released from his contract with SatTV.
Under which of the following scenarios might Zeb's contract with SatTV be voidable?

A) If Zeb provides a spreadsheet of his payments with DigiTV.
B) Zeb's contract with SatTV is voidable because it is a contract with a mentally incapacitated person.
C) If Zeb's delusions persuaded him to sign the contract with SatTV so he could contact the planet Zaltar and return home.
D) If Zeb shows that he no longer believes he is from the planet Zaltar.
E) If Zeb shows that he miscalculated his savings with SatTV.

Question 69

[Poker dealer] Roland and Parna sign a contract for Parna to work as a poker dealer for a minimum of one year in Roland's casino. The contract includes a requirement for Roland to pay for a training program for Parna for the software system used throughout the casino. Parna completes the program and obtains a certificate. The week before Parna begins work at Roland's casino, their state passes a law that all poker dealers must be 21 years old. Parna, however, is only nineteen.
Roland wants to avoid paying for the training program and claims the contract is indivisible and thus unenforceable. Is he correct?

A) Yes, if Roland could show that the main purpose of the contract was for Parna to work as a poker dealer, then declaring parts of the contract as void would substantially alter the contract.
B) No, because courts are likely to enforce a contract regardless of whether severing the contract would substantially alter it.
C) No, because even if the legal parts were separated from the contract, the main purpose of the contract (employing Parna as a poker dealer) can be met after she turns 21.
D) Yes, because Parna would be unjustifiably enriched if Roland paid for the program.
E) No, because almost every contract is divisible.

Question 70

The harsh and lopsided terms of Antoine's contract could be claimed as which of the following?

A) Substantive unconscionability
B) Unclear drafting
C) Procedural unconscionability
D) Outrageous wording
E) Adhesion conscionability

Question 71

[Poker dealer] Roland and Parna sign a contract for Parna to work as a poker dealer for a minimum of one year in Roland's casino. The contract includes a requirement for Roland to pay for a training program for Parna for the software system used throughout the casino. Parna completes the program and obtains a certificate. The week before Parna begins work at Roland's casino, their state passes a law that all poker dealers must be 21 years old. Parna, however, is only nineteen.
Is Roland required to employ Parna?

A) Yes, because the contract was legal when formed.
B) Yes, because the contract was ratified when Parna completed the training program.
C) No, because the subject matter of the contract is illegal, thus it is void.
D) Although the contract was legal when formed, its subject later became illegal under a new statute, thus both parties are discharged from their obligations under the contract.
E) Although the contract was legal when formed, its subject later became illegal under a new statute, thus it is voidable by either party.

Question 72

Lillian is a minor from an upper-income family. Which of the following is least likely to be considered a "necessary" for her due to her social status?

A) Rent.
B) Psychologist
C) Monthly credit card bill for electricity.
D) Credit card bill for monthly gym membership.
E) Winter boots.

Question 73

Depending on the size of the print on the back of the contract, which of the following could Tevis possibly use as a defense?

A) Substantive unconscionability
B) Unclear drafting
C) Procedural unconscionability
D) Outrageous wording
E) Adhesion conscionability

Question 74

[Zaltar Zeb] Zeb suffers from delusions that he is from the planet Zaltar. Zeb's contract with DigiTV, his digital television service provider, has expired. After comparing his past payments to the potential savings from satellite television provider SatTV, Zeb decides to sign a two-year contract with SatTV. After six months with SatTV, Zeb realizes he paid less with DigiTV and he now wants to be released from his contract with SatTV.
According to Exhibit 16-4 regarding contracts that violate state or federal statutes, which of the following types of contracts would violate a statute in all states?

A) An agreement regarding gambling.
B) An agreement for an unlicensed attorney to perform legal work.
C) An employment contract that requires employees to work on the Sabbath.
D) An agreement regarding a usurious loan.
E) An agreement to publish a defamatory article about one's boss.

Question 75

The type of agreement Ines asked the customer with green hair to sign is called a(n) ________.

A) contract of adhesion
B) exculpatory clause
C) procedural misrepresentation
D) substantive clause
E) malfeasance directive

Question 76

[Zaltar Zeb] Zeb suffers from delusions that he is from the planet Zaltar. Zeb's contract with DigiTV, his digital television service provider, has expired. After comparing his past payments to the potential savings from satellite television provider SatTV, Zeb decides to sign a two-year contract with SatTV. After six months with SatTV, Zeb realizes he paid less with DigiTV and he now wants to be released from his contract with SatTV.
If a court has declared Zeb insane and his sister is appointed guardian, which of the following statements would be true?

A) Zeb's sister has the sole legal capacity to enter into contracts on Zeb's behalf and any contract Zeb enters into is void.
B) Zeb's sister may enter into contracts on Zeb's behalf, but only with Zeb's affirmance.
C) Both Zeb and his sister have capacity to enter into contracts, however, any contract Zeb enters into may be disaffirmed by Zeb.
D) Zeb may enter into contracts, but they may be disaffirmed by his sister.
E) Zeb may enter into contracts, but they are voidable by his sister.

Question 77

[Motorcycle crash] Cassandra, who would be turning 18 in two weeks, wanted to purchase a motorcycle at Hal's Cycles. Hal explained she could pay monthly installments through a financing agreement, and that he needed an ID to verify she was at least 18 years old. Cassandra, who strongly resembled her older sister Alana, handed Alana's drivers' license to Hal, but Hal did not notice the license had the wrong name. The next day, when cruising in her new motorcycle, Cassandra crashed into Jonah, who was injured in the collision. The next month, Cassandra received a bill for the first installment of the motorcycle. Her parents also received a notice that they were being sued by Jonah because of Cassandra's collision. Realizing her parents would be upset that she purchased a motorcycle, Cassandra went to Hal to return the broken motorcycle and tell him she was a minor and she's not responsible for any payments under the financing agreement.
According to the majority rule, would Cassandra have the right to disaffirm the financing agreement?

A) Yes, but only because Hal did not notice the name on the ID was not Cassandra's name.
B) Yes, under the majority rule, her misrepresentation of age does not affect her right to disaffirm the contract.
C) No, because under the majority rule, a minor's misrepresentation of age voids the minor's right to disaffirm the contract.
D) No, under the majority rule, a minor's misrepresentation of age is a misdemeanor.
E) No, under the majority rule, if a minor misrepresents his or her age, the right to disaffirm a contract transfers to the other party .

Question 78

In Lopez v. Kmart Corporation, the case in the text regarding disaffirmance, did the court find the minor plaintiff's disaffirmance of an employment contract to be reasonable?

A) Yes, because the disaffirmance occurred within one month of reaching the age of majority.
B) Yes, because the disaffirmance occurred within six months of reaching the age of majority.
C) The court did not find the disaffirmance to be reasonable.
D) No, because the plaintiff could have disaffirmed the contract when he was under the age of majority but chose not to do so.
E) Yes, because the type of contract at issue was an arbitration agreement.

Question 79

[Poker dealer] Roland and Parna sign a contract for Parna to work as a poker dealer for a minimum of one year in Roland's casino. The contract includes a requirement for Roland to pay for a training program for Parna for the software system used throughout the casino. Parna completes the program and obtains a certificate. The week before Parna begins work at Roland's casino, their state passes a law that all poker dealers must be 21 years old. Parna, however, is only nineteen.
Is Roland required to pay for the training program?

A) Yes, the training program was legal and the legal part of the contract can be severed from the illegal part.
B) No, although the training program was legal, the contract contains an illegal subject and is void.
C) Yes, only Parna has the right to void the contract.
D) Although the contract was legal when formed, its subject later became illegal under a new statute, thus both parties are discharged from their obligations under the contract.
E) Although the contract was legal when formed, its subject later became illegal under a new statute, thus it is voidable by either party.

Question 80

[Motorcycle crash] Cassandra, who would be turning 18 in two weeks, wanted to purchase a motorcycle at Hal's Cycles. Hal explained she could pay monthly installments through a financing agreement, and that he needed an ID to verify she was at least 18 years old. Cassandra, who strongly resembled her older sister Alana, handed Alana's drivers' license to Hal, but Hal did not notice the license had the wrong name. The next day, when cruising in her new motorcycle, Cassandra crashed into Jonah, who was injured in the collision. The next month, Cassandra received a bill for the first installment of the motorcycle. Her parents also received a notice that they were being sued by Jonah because of Cassandra's collision. Realizing her parents would be upset that she purchased a motorcycle, Cassandra went to Hal to return the broken motorcycle and tell him she was a minor and she's not responsible for any payments under the financing agreement.
Are Cassandra's parents liable for Jonah's injuries from the motorcycle crash?

A) Yes, because parents are usually liable for a minor's personal torts.
B) No, but only because they were not aware of any misappropriation.
C) No, because in most states, minors, not their parents, are liable for a minor's personal torts.
D) No, even if there is evidence that her parents failed to properly supervise Cassandra, parents cannot be held liable for a minor's personal torts.
E) Yes, because all states recognize parental liability, regardless of proper supervision.