Deck 9: Capacity, Legality, and Enforceability

Question 1

Whether a contract with an unlicensed professional is legal and enforceable depends on the purpose of the licensing statute.

Answer 1

True

Question 2

A contract must be in writing to be enforceable if its performance is impossible within one year.

Answer 2

True

Question 3

In certain circumstances, bargains are so oppressive that the courts relieve innocent parties of part or all of their duties.

Answer 3

True

Question 4

A contract that is void from the outset can be enforced in some circumstances.

Question 5

A contract in which a party assumes a primary obligation normally must be in writing to be enforceable.

Question 6

Misrepresentation cannot occur by silence.

Question 7

Any contract to commit a crime is unenforceable.

Question 8

If there is a statute that prohibits a certain act, a contract to do it is unenforceable.

Question 9

A seller's attempt to conceal a fact that is material to a contract can give rise to an action for fraud.

Question 10

All contracts between adults and minors are void.

Question 11

A contract entered into under undue influence is voidable.

Question 12

A minor who enters into a contract for necessaries may disaffirm the contract but remains liable for the reasonable value of the goods.

Question 13

Ordinarily, a minor can disaffirm a contract even though she has misrepresented her age.

Question 14

When both parties to a contract are mistaken about the same material fact, the contract cannot be rescinded.

Question 15

An exculpatory clause in an employment contract is usually enforceable.

Question 16

Contracts entered into by mentally incompetent persons can be valid.

Question 17

Under the Statute of Frauds, all contracts must be in writing to be enforceable.

Question 18

A contract entered into by a minor is voidable at the option of either of the contracting parties.

Question 19

To be enforceable, a memorandum evidencing an oral contract must include the essential terms.

Question 20

A covenant not to compete is enforceable only if it is reasonable in duration and geographic area.

Question 21

In most illegal contracts, both parties are considered to be equally at fault, and neither party can enforce it.

Question 22

All collateral promises must be in writing to be enforceable.

Question 23

Reliance on a misrepresentation is justified if the misrepresentation is an obviously extravagant statement.

Question 24

To be enforceable, a contract for a sale of goods priced at $500 or more should be in writing.

Question 25

A covenant not to compete included in the sale of an ongoing business is unenforceable.

Question 26

Air Flo, Inc., and Banyan Grove Apartments enter into an oral contract in which Air Flo agrees to provide air-conditioning and heating maintenance for Banyan Grove's facilities for two years. This contract is enforceable by​

A)Air Flo.
B)Banyan Grove.
C)any third party, such as a HVAC supplies provider.
D)none of the choices.

Question 27

Mica, a minor, signs a contract to pay National Health Club a monthly fee for twenty-four months to use its facilities. Six months later, after reaching the age of majority, Mica continues to use the club. This act is​

A)a disaffirmance.
B)an emancipation.
C)a ratification.
D)a restitution.

Question 28

Because fraud actions necessarily involve wrongful conduct, courts may award punitive damages.

Question 29

A statement of opinion is generally subject to a claim of fraud.

Question 30

A contract that exculpates one party for negligence or other wrongdoing will often be viewed as unconscionable.

Question 31

Misrepresentation of law ordinarily entitles a party to relief from a contract.

Question 32

William obtains a loan from a bank at 4.5 percent interest. The state where he obtains the loan has a usury statute that limits interest rates to a 3.5 percent maximum. William's contract with the bank is​

A)enforceable only if William does not attempt to disaffirm it.
B)enforceable only if the bank does not attempt to disaffirm it.
C)enforceable only if both William and the bank knew of the statute when the contract was signed.
D)not enforceable.

Question 33

Parents are always liable for the contracts made by their minor children.

Question 34

A threat to exercise a legal right ordinarily constitutes duress.

Question 35

A contract entered into by an intoxicated person is never valid.

Question 36

To be enforceable, a writing evidencing an oral contract must have been signed by the party who seeks to enforce it.

Question 37

On Victor's eighteenth birthday, he decides that he no longer wants to keep a fishing boat he bought from Water Craft, Inc., when he was seventeen. His right to disaffirm the deal will depend on​​

A)why Victor no longer wants to keep the boat.
B)why Victor entered into the contract to buy the boat.
C)whether Victor acts within a reasonable period of time.
D)whether Water Craft has the right to disaffirm.

Question 38

An innocent party can rescind a fraudulent contract and be restored to his or her original position.

Question 39

Carl and Debra orally agree on the sale of Carl's Electrical Supplies Company to Debra and jot down the terms on the back of one of Carl's blank invoices, which they both sign. A written memorandum evidencing an oral contract that would otherwise be unenforceable must contain​

A)all terms.
B)the essential terms.
C)the preliminary terms.
D)the qualitative terms.

Question 40

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

Question 41

Grant and Hester enter into a contract for a sale of Hester's Pastoral Valley Orchard. This contract​

A)is prohibited.
B)is enforceable whether or not it is in writing.
C)must be in writing to be enforceable.
D)must be oral and in writing to be enforceable.

Question 42

Shannon signs a contract with Tevin, an unlicensed contractor, to build a deck and gazebo at the rear of her house. This contract is enforceable by​

A)Shannon.
B)any third party who is not aware that Tevin is not licensed.
C)Tevin.
D)no one.

Question 43

Metro City Mall requires its tenants to sign a lease that includes a clause releasing Metro from liability in the event of monetary or physical injury no matter who is at fault. Coco's Chocolate Creations signs a lease with the mall that contains the clause. This is​

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

Question 44

Abner tells a representative of Brass & Woodwind Musical Instruments, Inc., that he will pay for Claudia's trumpet if she does not. Abner does not secure any personal benefit for this promise. This promise is enforceable as a contract​

A)under any circumstances.
B)only if Claudia agrees to it.
C)only if the value of the trumpet is more than $500.
D)only if it is in writing.

Question 45

Morris threatens physical harm to force Barb to contract to pay him for protecting her store-Barb's Baubles-against vandalism and destruction. Barb may​

A)rescind the contract or refuse to comply with its terms.
B)do nothing once she has agreed to pay.
C)recover from her insurer for the cost.
D)recover from the local police for their failure to protect her store.

Question 46

Felicity, a minor, obtains fruits and other foodstuff on credit from Growers' Market. Later, Felicity disaffirms the purchase. Felicity owes Growers' Market​

A)the reasonable value of the goods.
B)the retail value of the goods.
C)the wholesale value of the goods.
D)nothing.

Question 47

Hal's True Hardware Stores and Ideal Tools, Inc., sign a written contract for a sale of goods. To be enforceable, this written contract must include​

A)a correct title, such as "Purchase Order" or "Sales Invoice."
B)a date, such as "October 2014" or "10/2014."
C)a quantity term, such as "50 hammers" or "100 boxes of assorted nails."​
D)the parties' contact information.

Question 48

Drake enters into a contract with Eve, who claims to have access to a stock-trading algorithm that will multiply an investment many times over. When the results do not match this promise, Drake learns that Eve does not have access to any unique software and files a suit against her, alleging fraud. Proof of an injury is required to​

A)recover damages.
B)rescind the contract.
C)undo Eve's influence.
D)punish the defendant.

Question 49

Edward and First Star Company enter into an oral contract under which Edward agrees to provide delivery service for First Star for nine months. This contract is enforceable by​

A)none of the choices.
B)either Edward or First Star.
C)any interested third party, such as a First Star customer.
D)First Star only.

Question 50

Sharon agrees to assume a debt owed by Tom's Guitars Inc. to United Funds Bank. The agreement is not in writing. To be enforceable under the "main purpose" rule, the promise must be for the benefit of​

A)any third party, such as a Tom's customer.
B)Sharon.
C)Tom's.
D)the bank.

Question 51

Dumont threatens physical harm to force Eddie to sell his business, Citywide Vending, Inc., to Dumont for a below-market price. This is​

A)duress.
B)fraud.
C)none of the choices.
D)undue influence.

Question 52

Vijay enters into a contract to sell his laptop to Winnie. Winnie takes possession of the laptop as a minor and continues to use it well after reaching the age of majority. Winnie has​

A)expressly ratified the contract.
B)impliedly ratified the contract.
C)disaffirmed the contract.
D)none of the choices.

Question 53

Guardian Security, Inc., and Hedge Fund Corporation enter into an oral contract under which Guardian Security agrees to provide security services for Hedge Fund's offices for as long as Hedge Fund needs them. This contract may be enforceable by​

A)none of the choices.
B)Hedge Fund only.
C)any interested third party, such as a Hedge Fund shareholder.
D)either Guardian Security or Hedge Fund.

Question 54

The chief executive officers of Chemico, Inc., and Petro Products Corporation orally agree that Chemico will sell a refinery and the land on which it is situated to Petro. Under the Statute of Frauds, this deal is enforceable by​

A)Chemico.
B)Petro.
C)any interested third party, such as a shareholder.
D)none of the choices.

Question 55

Intoxicated and not aware of the consequences, Umberto agrees to a two-year cell-phone service contract with Wander Talk, Inc., at more than the average market price. This contract is​

A)enforceable.
B)not enforceable because contracting parties can change their minds.
C)not enforceable because the contract clearly favors Wander Talk.
D)not enforceable because Umberto was intoxicated enough to lack mental capacity when he agreed to it.

Question 56

Phoebe enters into a contract with Everest for a guided tour of Whitewater Canyon. Everest represents that he is an experienced, knowledgeable guide, when in reality he has never been in the canyon. Phoebe is most likely a victim of​

A)undue influence.
B)fraud.
C)mistake.
D)nothing.

Question 57

Creighton applies to BigData Corporation for a position as a software engineer. Creighton's resume lists training in computers or programming and background as an engineer when in fact he has neither. After Creighton is hired, BigData learns the truth. BigData can​

A)not rescind the contract.
B)rescind the contract on the basis of fraud.
C)rescind the contract on the basis of mistake.
D)rescind the contract on the basis of undue influence.

Question 58

On Monday, Merlin buys a tablet for $500 from a Pads & Pods store. On Tuesday, he returns to the store and buys a GPS device for $200. On Wednesday, he downloads $100 worth of tunes from singsong.com. To be enforceable as a contract, a writing is required for the purchase of​

A)the tunes, the GPS device, and the tablet.
B)the GPS device and the tablet only.
C)the tablet only.
D)the tunes only.

Question 59

Sofia signs a covenant not to compete with her employer, Topmost Sales Corporation. A court decides that the covenant is overly restrictive. The court will likely​

A)enforce it as written so as not to undercut the freedom of contract.
B)enforce it but evaluate its effects over time.
C)reform its terms to prevent any undue burden.
D)refuse to enforce it unless Topmost pays additional consideration.

Question 60

Fay is mentally incompetent but has not been so adjudged by a court. Any contract Fay enters into is​

A)voidable if Fay has a lucid interval at the time of contracting.
B)voidable if Fay lacks the capacity to comprehend the consequences.
C)voidable if the other party does not realize that Fay is incompetent.
D)unavoidable.

Question 61

eBuy, Inc., hires Ferris to develop and implement a marketing strategy for eBuy's new online auction site. Ferris signs a contract that includes a clause prohibiting him from competing with eBuy during and after the employment. Before the strategy is implemented, Ferris resigns from eBuy's employ to market his own auction site to compete with eBuy. In eBuy's suit against Ferris, what is the most important factor the court should consider in determining whether Ferris should be allowed to compete with eBuy?​

Question 62

Neil, a minor, attempts to return to its former owner, a set of skis that he recently bought, used, and wrecked, in a state in which a duty of restitution is imposed. Neil

A)can return the skis "as is" and avoid further liability.
B)is not required to return the skis due to his or her minority.
C)must return the skis and pay for the damage.
D)cannot return the skis unless they can be fully restored.

Question 63

Gene, an accountant, convinces his client Hazel to sign a contract to invest her savings in 2Gether, a nonexistent social-networking Web site. There is clear and convincing evidence that Hazel did not act out of her free will. This is​

A)duress.
B)fraud.
C)mistake.
D)undue influence.

Question 64

In Simone's selling a 300-acre farm to Rural Investments, Inc., she tells the buyer that the land "will be worth twice as much by next year." This is​

A)adhesion.
B)fraud.
C)a mistake.
D)an opinion.

Question 65

Through fraudulent means, Finlay induces Ethel to sign a contract to invest with him the profits from her business. When Ethel learns the truth, she may​

A)only enforce the contract.
B)only recover what she invested with Finlay.
C)enforce the contract or recover what she invested with Finlay.
D)do nothing.

Question 66

Country Trucking Company contracts with Baldwin to transport crated goods to a certain destination for $5,000. Country delivers the crates, but Baldwin does not pay. Country learns that the crates contained stolen goods. Country can​

A)do nothing with respect to the contract.
B)recover $5,000 from Baldwin.
C)recover the goods but not the $5,000 from Baldwin.
D)recover the goods and the $5,000 from Baldwin.

Question 67

Health Source, Inc., offers to buy Medico Equipment & Supplies Corporation. On June 1, Medico gives Health Source copies of Medico's financial statements for the previous year. The statements show an inventory of $10 million. On June 15, Medico discovers that the previous year's inventory is overstated by $500,000, but does not inform Health Source. On July 1, Health Source, relying on the financial statements, buys Medico. On July 10, Health Source discovers the inventory overstatement. Can Health Source succeed in a suit against Medico? On what basis?​

Question 68

Rosalind, a seventeen-year-old, signs a contract to sell her car to Street Fleet Used Cars. The next day, Rosalind tells Street Fleet that she's decided not to sell the car. Rosalind is liable to Street Fleet for​

A)the cost of a car of comparable value.
B)the value of her performance under the contract.
C)the amount of its profit on the deal.
D)nothing.

Question 69

U-Can-Own-It Corporation sells appliances to less educated consumers, including Viv, on installment plans. U-Can-Own-It files a suit against Viv when she stops making payments. Viv claims that the deal is unconscionable. The court will most likely consider​

A)the geographic area of the relevant market.
B)the parties' relative bargaining power.
C)the quality of related products in the general market.
D)the relation of this deal to those of other customers.

Question 70

Ranchland Properties and Prairie State Investments sign a written contract for a sale of land. In some states, to be enforceable, this contract must include​

A)a correct title, such as "Land Transfer" or "Real Estate Agreement."
B)a declaration of the contract's purpose.
C)a statement of the source of financing.
D)a description of the land.

Question 71

Nyoko signs a covenant not to compete with her employer, Midstates Distribution, Inc. The covenant will be enforced if it​

A)does not require either party to obtain a business license.
B)is reasonable with respect to geographic area and duration.
C)relieves Midstates from liability for any injury to Nyoko due to simple negligence.
D)none of the choices.

Question 72

​Fletcher signs a contract to buy a new electric guitar and amplifier just before reaching the age of majority. After reaching the age of majority, Fletcher does not take possession or make payments. With respect to the contract, most courts would hold that this is

A)disaffirmance.
B)emancipation.
C)ratification.
D)rescission.