Deck 12: Capacity and Legality

Question 1

When a person is adjudged insane,that person loses the ability to enter into contracts.

Answer 1

True

Question 2

A minor may not affirm one part of a contract and disaffirm another part.

Answer 2

True

Question 3

Generally speaking,a minor must return goods or property he or she has received from the adult in the condition it is in at the time of disaffirmance.

Answer 3

True

Question 4

A minor's ratification of a contract must be express and cannot be implied.

Question 5

The most prevalent age of majority for contractual purposes in the United States is 18 years of age for both males and females.

Question 6

The level of intoxication allowing a party to disaffirm a contract is the same as that considered too intoxicated to legally operate a motor vehicle.

Question 7

The adult party to a contract with a minor has the option of choosing whether to enforce the contract.

Question 8

Parents still owe a legal duty to provide food,clothing,and shelter for their children regardless of emancipation.

Question 9

A minor may not ratify a contract,as any attempt to do so can be disaffirmed by the minor.

Question 10

In most states,if a contract is disaffirmed due to intoxication,both parties must be returned to the status quo.

Question 11

In most states,if a minor misrepresents her age when entering into a contract,that contract cannot be disaffirmed.

Question 12

A minor may still be obligated to pay for tools of trade and education.

Question 13

Under the infancy doctrine,a minor can disaffirm a contract by his actions.

Question 14

Even though a minor returns goods or property received from the adult at the time the minor disaffirms the contract,the adult is under no duty to place the minor in the status quo.

Question 15

What constitutes a necessity for a minor will depend on the particular minor's own individual circumstances.

Question 16

Minors are liable for the contract price of any necessaries of life for which they contract.

Question 17

For a person who has alternating periods of sanity and insanity,any contracts made during a lucid interval are enforceable.

Question 18

If a person is insane at the time of signing a contract,but has not been adjudged insane,that contract is voidable.

Question 19

To disaffirm a contract,a minor must act before reaching the age of majority.

Question 20

Each state has its own list of the items that are considered necessaries and such a list would then apply to all minors in that state.

Question 21

A contract must be found to violate a specific statute in order for the contract to be void due to illegal subject matter.

Question 22

Generally,which of the following statements relating to contractual capacity is correct?

A) Persons with full competence make enforceable contracts.
B) People with limited competence make void contracts.
C) People with no competence make voidable contracts.
D) Minors make void contracts.
E) People who have been adjudicated insane make voidable contracts.

Question 23

A contract to discriminate against somebody on the basis of race is illegal because it usually violates state and or federal statutes; if not,it is illegal as being contrary to public policy.

Question 24

Generally speaking,the contract of a minor:

A) must be in writing
B) is not enforceable by the minor
C) is void
D) is voidable at the minor's option

Question 25

The doctrine of unconscionability is available in most cases when a party has made a bad bargain.

Question 26

An unlicensed contractor who performs services is entitled to payment for his services even if the licensing statute in question is regulatory in nature.

Question 27

The main purpose for making contracts involving minors voidable at the minor's option is:

A) to protect the minor from unscrupulous adults
B) to reduce the amount of litigation in the courts
C) to support the policy of not enforcing gift promises.
D) to punish adults for entering into contracts with minors
E) to prevent minors from entering into contracts

Question 28

A law that sets an upper limit on the interest rate that can be charged is unconscionable.

Question 29

A contract in which one party agrees to get divorced will usually not be enforced even if the contract does not call for the violation of any specific statute.

Question 30

Generally,the courts will not enforce an illegal contract,but will leave the parties where it finds them.

Question 31

A court's only remedy upon finding that a contract is unconscionable is to not enforce it.

Question 32

If a minor buys an item and then disaffirms the contract,and a court orders the minor to merely return the item in its present condition in order to get a refund,this minor has the duty of:

A) restoration
B) resuscitation
C) revocation
D) restitution

Question 33

A minor buys a car and continues to drive the car for a reasonable time after reaching majority.This action would constitute a(n):

A) express disaffirmance
B) implied disaffirmance
C) express ratification
D) implied ratification
E) constructive disaffirmance

Question 34

A noncompete agreement will be found not to violate public policy so long as it meets the required tests for reasonableness.

Question 35

Someone who is not yet a licensed real estate agent can legally collect a fee for real estate services.

Question 36

All states allow gambling contracts to be enforced in the courts.

Question 37

A party who has been induced to enter into an illegal contract because of fraud,duress,or undue influence can sue the other party and recover whatever consideration he has paid.

Question 38

If a court finds that the subject matter of a contract is not legal,the court will undo the contract and place the parties in the status quo.

Question 39

If a minor wishes to be bound to a contract after becoming an adult,she must:

A) ratify the contract
B) disaffirm the contract
C) give back the goods or services received as a minor
D) bring an action to verify the contract

Question 40

Exculpatory clauses often are found illegal because they violate state statutes.

Question 41

The contract of a person who has been adjudicated insane,but enters into a contract during a lucid interval,is:

A) void
B) voidable by the insane person
C) voidable by either party
D) unenforceable
E) valid

Question 42

Which of the following statements is true regarding contracts made without legal capacity?

A) The contracts of people who have been adjudicated insane are voidable.
B) The duties of restoration and restitution are affected by the type of incapacity suffered.
C) The contracts of people who are minors,insane,or intoxicated are treated the same.
D) The contracts of people who are insane,but not adjudicated insane,are void.
E) People who lack capacity due to adjudicated insanity are not even liable for necessaries of life.

Question 43

A computer retailer sells some computer games to a minor.This contract is:

A) unenforceable
B) voidable
C) void
D) enforceable

Question 44

Which of the following statements is true?

A) Restitution is placing the other party back in the position it was in prior to the contract.
B) Restoration is what a minor is entitled to receive upon disaffirming a contract.
C) Revocation refers to a party returning the consideration received in a contract.
D) Rejection can occur only as part of a counteroffer.

Question 45

When the provider of a service provides that service without obtaining a required license,with which kind(s)of license(s)can the service provider collect her fee as provided in a contract?

A) regulatory licenses only
B) revenue-raising licenses only
C) with either kind of license
D) with neither kind of license

Question 46

In most states,where a minor wants to disaffirm a contract and the minor has caused damage to the consideration received by gross negligence,the minor:

A) can disaffirm,and owes a duty of restitution to the competent party
B) can disaffirm,and owes a duty of restoration to the competent party
C) cannot disaffirm
D) must pay the reasonable value at the time the contract was entered into

Question 47

Types of contracts that are commonly invalidated include the following EXCEPT:

A) immoral contracts
B) contracts in restraint of trade
C) contracts that impair family relations
D) contracts to commit a tort
E) contracts which result in competition with a valid preexisting business

Question 48

Generally,the courts will not enforce illegal contracts,but there are some exceptions.Which of the following would be exceptions where the courts would enforce the contract or allow some recovery?

A) An innocent party is excusably ignorant of the fact of illegality.
B) A person who enters into an illegal contract later withdraws before the illegal act is done.
C) A person who used duress to get the other party to sign the contract attempts to enforce the contract.
D) A and C only are true.
E) A and B only are true.

Question 49

If a contract or contract clause is found to be unconscionable,the courts can do which of the following?

A) refuse to enforce the contract
B) refuse to enforce only the unconscionable portion
C) limit the application of the unconscionable portion
D) A,B,and C
E) B and C only

Question 50

In order to be enforceable,a covenant not to compete must be reasonable in each of the following aspects EXCEPT:

A) length of time the restriction is in effect
B) scope (i.e.,activities affected) of the restriction
C) amount paid to the one who gives up the right to compete
D) geographic area of the restriction

Question 51

Which of the following is NOT one of the needed elements of an unconscionable contract?

A) parties possessing severely unequal bargaining power
B) the dominant party's unreasonable use of that bargaining power to obtain oppressive or manifestly unfair terms
C) an unreasonably short period of time for the oppressed party to perform
D) no reasonable alternative for the oppressed party

Question 52

Which of the following is NOT true?

A) A minor can still disaffirm a contract for a reasonable time after reaching majority.
B) An adult cannot disaffirm a contract made with a minor.
C) A minor must pay the agreed price on a contract for necessaries.
D) What constitutes a necessary varies over time and can differ from state to state.

Question 53

Under common law,the parties to an illegal contract were considered to be:

A) in pari delicto
B) victims of the more powerful party
C) in an adhesion contract
D) in an unconscionable contract

Question 54

Usury laws are concerned with:

A) taxes paid
B) interest charged
C) uses of the labor force
D) contract purposes

Question 55

Which of the following is generally true about exculpatory clauses?

A) They are not valid with respect to intentional acts.
B) The test is if they are reasonable in time,scope,and geographic area.
C) They are usually found to be invalid.
D) They are not valid for ordinary negligence.

Question 56

Where a contract calls for action that violates a statute,in a breach of contract case the court will:

A) impose the appropriate criminal penalty
B) ignore the contract and leave the parties where they are
C) order both parties to return any consideration received
D) order payment so that the parties to the illegal contract share any losses equally
E) order the parties to change the terms of the contract such that it becomes legal

Question 57

Which of the following is correct about contracts entered into by insane persons?

A) Contracts entered into by all insane persons are void.
B) Contracts entered into by all insane persons are voidable.
C) Contracts entered into by persons adjudicated insane are void,and those entered into by nonadjudicated insane persons are voidable.
D) Contracts entered into by persons adjudicated insane are voidable,and those entered into by nonadjudicated insane persons are void.

Question 58

In order for someone to avoid a contract on the grounds of intoxication,the level of intoxication must have been:

A) at or above the legal limit
B) only high enough that he was able to notice it
C) at least as high as that of the other party
D) so great that he didn't comprehend the nature of the agreement he was entering into

Question 59

A contract provision that relieves a party to the contract from liability is known as:

A) an executory clause
B) an exculpatory clause
C) a mitigating clause
D) a disaffirming clause
E) a liquidated damages clause

Question 60

An exculpatory clause releasing a white water adventure rafting company from liability for all injuries it causes is:

A) usually valid
B) usually valid for negligence,not for intentional acts
C) usually against public policy
D) an illusory promise

Question 61

On your first spring break,you go in a bar after reading a large sign outside saying,"Beers $1.00 each all night long.If you can drink 30,they're all free?we'll pay for a taxi." You pay for your beers as you drink,and you manage to drink 30 beers.The bar agrees that you drank 30 beers,but refuses to refund your money.You sue the bar.Which is most likely true?

A) This contract is voidable by the bar if you get so intoxicated while drinking the 30 beers that you don't comprehend the nature of what you are doing.
B) The sign is an offer for a bilateral contract because both you and the bar must do something.
C) A court would ignore this contract on the basis of illegality even if it does not violate a specific statute.
D) There is no consideration on your part if you don't pay for the beer.

Question 62

You and Gary enter a contract where you will receive $1,000 if you tamper with a slot machine in the "Bye-Bye Bucks Casino" in Las Vegas so that Gary can make it pay out a jackpot whenever he wants it to.You perform your part of the contract,but Gary doesn't pay.In your breach of contract suit against Gary,the court will:

A) find you guilty of tampering with a gaming device (assuming it is illegal to do so)
B) make him pay you if he has benefited from making the machine pay out
C) make him pay you regardless of whether he has received any payouts because you have performed your part of the contract
D) ignore the contract and dismiss the case

Question 63

Mary is a bartender at a local pub.The state in which Mary works requires all bartenders to be licensed.No special education or experience is required,but one must pay $25 per year for the license.Mary was not aware of this,so she did not obtain a license.When her boss found out about this,he refused to pay Mary for the two weeks of work that she had done.Mary sues.What results?

A) Because this is an illegal contract,the courts will not enforce it.
B) Because Mary violated a regulatory statute,the contract is illegal.
C) Because this is a revenue raising statute,Mary can collect her wages.
D) Because this is a revenue raising statute,Mary cannot collect her wages.
E) Because this type of licensing is unconstitutional,Mary can collect her wages.

Question 64

Julie buys an auto from John when she is 17.When she turns 21,Julie decides that she does not want the automobile.The age of majority in Julie's state is 18.Can Julie disaffirm this contract?

A) Yes; all contracts made while a minor may be disaffirmed.
B) Yes; Julie has a "reasonable time" after reaching majority to disaffirm this contract,and she acted within a "reasonable time."
C) No; Julie had a "reasonable time" within which to disaffirm the contract,but a "reasonable time" has passed.
D) No; to disaffirm the contract,Julie must have acted before she turned 18. Now it is too late.

Question 65

Bob sells Frank some cocaine,but Frank thinks he received baking soda.In this case:

A) This contract is voidable by either party because it is illegal.
B) The court in this suit could impose a criminal penalty against either party.
C) Frank will win the suit because he is a victim of fraud.
D) The court won't order either party to pay the other,regardless of whether Frank has already paid Bob.

Question 66

John hires Jane to steal a particular type of car for him.Jane demands $2,000 payment in advance,which John pays.Jane does not deliver the stolen car at the appointed time.John sues Jane.Which of the following is most likely?

A) The courts will order Jane to return the $2,000.
B) The courts will order Jane to deliver a car like she promised to steal for John.
C) The courts will order Jane to pay John back the $2,000.
D) John has his choice of either B or C.
E) The courts will not do anything.

Question 67

Bob,a 16-year-old minor,buys a snowmobile from Sam,an adult,for $2,000.Bob uses it for 2 months and then advertises the snowmobile for sale for $3,000 but has not yet sold it.At this point,which of the following is true?

A) Bob can still disaffirm the contract.
B) Either Bob or Sam can disaffirm the contract.
C) Bob has ratified the contract by trying to sell the snowmobile.
D) Bob has ratified the contract by using the snowmobile for 2 months.

Question 68

Lisa has been a dentist in Elmville for several years.She is now ready to retire and she sells her practice to Angie.As part of the sales agreement,Lisa agrees not to practice dentistry within 20 miles of Elmville for a period of three years.After 2 years,Lisa is bored,so she opens up a dental practice in her home.This practice is very small and Lisa wants to keep it that way.Angie sues on the noncompete agreement.What is the most likely result?

A) This agreement is fully enforceable.
B) This agreement is not enforceable because agreements in restraint of trade are never enforceable.
C) This agreement is not enforceable because it is not ancillary to an employment agreement.
D) This agreement is not enforceable because it is unreasonable as to area.
E) This agreement is not enforceable because it is unreasonable as to time.

Question 69

Andrea is a real estate agent; however,she does not have a license as required by statue.Andrea sells a piece of property for George,but George refuses to pay her the agreed commission.Andrea sues George.What results?

A) If the licensing statute is a regulatory statute,Andrea cannot collect her commission.
B) If the licensing statute is a revenue-raising statute,Andrea cannot collect her commission.
C) No matter what kind of statute,Andrea cannot collect her commission.
D) No matter what kind of statute,Andrea can collect her commission.

Question 70

Arthur had been adjudicated insane.During his period of insanity,Arthur sold some unimproved real estate to Katrina for $5,000,its fair value.Katrina did not know that Arthur was insane.In fact,he acted perfectly normal in every way.Arthur spends this $5,000.Arthur's guardian learns of this transaction and sues to void the contract and recover the land.What results?

A) Because Arthur was acting normally,and because Katrina did not know of his insanity,the contract is valid.
B) The guardian can get the land back,but Arthur must pay Katrina the $5,000.
C) The guardian can get the land back,but since Arthur has spent the $5,000,Arthur does not need to give anything back to Katrina.
D) Because Arthur received the fair value for his land,the contract cannot be voided.

Question 71

A computer that is the subject of a contract has the capability to be programmed to embezzle funds in a way that no other computer is able to do.The contract to sell such a computer:

A) Might be considered an illegal contract that is void as against public policy even if there is no statute prohibiting the sale of such a computer.
B) Is voidable if the court determines that this contract is illegal.
C) Must be in writing,regardless of the cost of the computer.
D) Will result in embezzlement charges against the seller.

Question 72

Marsha bought a car from Indy Auto Sales when she was 16.Marsha's parents had given their consent for Marsha to purchase the car.However,in order to buy the car,Marsha lied about her age.A few months later,Marsha was intoxicated,driving too fast,and caused an accident with Mr.Jones.Marsha's car was totally destroyed,and Mr.Jones' car was badly damaged.Marsha wishes to minimize her liability for this accident.Which of the following best describes this situation?

A) Marsha can disaffirm the auto sales contract,get back all her money,and disaffirm any damage done to Mr. Jones because she is a minor.
B) Marsha can disaffirm the auto sales contract and get back all her money,but she is still liable to Mr. Jones for damages.
C) Because Marsha's parents consented to Marsha buying the car,Marsha cannot disaffirm the contract.
D) Because Marsha's parents consented to Marsha buying the car,they are liable to both Indy Auto Sales and Mr. Jones.

Question 73

Mary,age 16,buys a car from Friendly Auto Dealers.She pays $1,500 for the car.It turns out that the car is really worth $2,500.Friendly wants to disaffirm the contract and get the car back.Which of the following best describes this situation?

A) This is a valid,enforceable contract because a car is a necessity.
B) Because Mary is a minor,this contract is void and Friendly can get back the car by paying Mary $1,500.
C) Because Mary is a minor,this contract is voidable and Friendly can get the car back by paying Mary $1,500.
D) Because Mary is a minor,this contract is voidable,but only at the option of Mary,not at the option of Friendly.
E) Because Mary has driven the car,the contract cannot be disaffirmed.

Question 74

At age 16,Phil bought a car from Acme Auto Co.for $2,500.Phil drove the car for about six months,and then he had an accident.The damage to the auto was $1,500.In addition,the value of the auto before the accident was only $2,000.The accident was not Phil's fault.Phil wishes to disaffirm the contract.Which of the following best describes this situation?

A) Because the car was damaged,Phil cannot disaffirm the contract.
B) Phil can disaffirm the contract,but he can recover only $500 of his money.
C) Phil can disaffirm the contract,but he can recover only $2,000 of his money.
D) Phil can disaffirm the contract and recover the entire $2,500.
E) Phil can disaffirm the contract,but he must first have the car repaired.

Question 75

Mike,who is 16 years old,buys a motorcycle from Cycle Sellers,Inc.Assume that Mike pays $5,000 and that the fair value of the motorcycle at the time of purchase is $4,500.Which of the following is true?

A) This is an illegal contract because Mike is a minor.
B) This contract is void because Mike is a minor.
C) Even if Mike signs a statement as part of the contract that states,"I agree not to disaffirm this contract," Mike may nonetheless disaffirm when he is 17 years old.
D) There was probably undue influence involved with this contract since Mike is a minor and the price charged was greater than the fair market value.
E) If a court decides that the motorcycle is a necessary,Mike will be obligated to pay the $5,000.

Question 76

When Harry met Sally last month,he fell in love.Unfortunately Sally did not.He has appeared at her door twice daily since then to ask her to go on a sailing vacation.Sally has repeatedly told Harry to leave her alone,but he ignores that.Finally,Sally said,"I'll give you $100 if you never come here again." Harry left Sally alone for two months and then demanded the $100,which Sally refuses to pay.Which is true?

A) This is an illegal contract because it requires the parties to violate a statute.
B) Sally is obligated to pay because Harry has lived up to his end of the deal.
C) To be paid,Harry must prove beyond a reasonable doubt that he has left Sally alone.
D) A court would likely find that no contract exists between Harry and Sally.
E) Harry cannot collect from Sally because they said "never" and only 2 months have passed.

Question 77

A minor,unable to live at home,contracts to rent an apartment for one year at $600 per month.After living there for three months,he disaffirms the contract.The reasonable value of that apartment was only $500 per month.Assuming no rent has been paid,the minor must pay which of the following?

A) Nothing; the contract has been disaffirmed.
B) $1,800; the contract rate for three months.
C) $1,500; the reasonable value for three months.
D) $7,200; the contract rate for one year.
E) $6,000; the reasonable rate for one year.

Question 78

Juan owns a house in a poor area of a large city.A salesman visits his home,selling aluminum siding.Juan buys and signs a contract,which calls for a price of $25,000 to be paid in monthly installments of $500 for 20 years.Juan only earns $700 per month.In addition,Juan's home is only worth about $35,000.The aluminum siding put on is worth no more than $1,500.Juan speaks and reads very little English and Juan thought he was signing a receipt for a free gift.Which of the following best describes this contract?

A) The contract is fully enforceable as written.
B) The contract is unenforceable because it is unconscionable.
C) The contract is unenforceable because it is illusory.
D) The contract is unenforceable because it is exculpatory.

Question 79

The courts have very broad powers to enforce or not enforce certain types of contracts.Which of the following statements best describes this power?

A) Contracts that are contrary to public policy are well defined by statutes.
B) The determination of what is unconscionable is very well established and follows very clear standards.
C) Exculpatory clauses and noncompete agreements sometimes violate public policy and sometimes do not.
D) To be contrary to public policy,the contract must violate a statute.

Question 80

Sid is a 15-year-old sophomore at East High School.He purchases a computer at a local store for a computer class,but wants to return it after using it for a couple of weeks because his classmates have nicer computers than his and he wants to get one of the better models.Sid can:

A) not return the computer because he ratified the contract by using the computer
B) not return the computer but only be liable for its fair value if the computer is considered to be a necessary
C) not return the computer because Sid should not have entered a contract as a minor,and because he did,he will be treated as an adult
D) be required to return the computer whether he wants to or not because minors cannot enter into contracts