Deck 11: Legality, Consent, and Writing

Question 1

Alice offers to sell her car to Barry for $500, and Barry accepts. Alice's car has a market value of $1,000 but this fact is unknown to Alice. The contract is enforceable.

Answer 1

True

Question 2

A party injured by fraud generally has the choice of suing for damages or rescinding the contract.

Answer 2

True

Question 3

If a salesperson says, "This is a great car and it's really fun to drive," but the car turns out to be a lemon, the salesperson has committed fraud.

Answer 3

False

Question 4

A party to a contract has a duty to investigate the other party's factual statements.

Question 5

The original Statute of Frauds is the English law that began the practice of requiring written evidence of certain kinds of contracts, but now the British government has repealed the writing requirement for most contracts.

Question 6

When Randy, an electrician, accepted a job with Buren Construction, Randy signed the following agreement: "Upon termination of my employment with Buren Construction, I agree never to work for another employer as an electrician." If Randy resigns from Buren Construction, this agreement would be upheld under the theory of freedom of contract.

Question 7

Travis had too many beers at the baseball game. Ed realized Travis was so intoxicated he wouldn't know what he was doing, so he got Travis to sign a promise to sell his motorcycle to Ed for $50. When Travis gets sober, he can attempt to void the contract.

Question 8

Bry, Inc. and Gangl Co. entered into an oral agreement for the sale of 3,000 sweaters. Both parties performed as required under the contract. Bry delivered the sweaters, and Gangl accepted and paid for them. Since the contract is fully executed, it makes no difference that it was an oral agreement.

Question 9

Roger, a minor, buys a stereo from Tuneland, Inc. Roger uses the stereo for a few months, returns it to Tuneland, and demands his money back. Roger may rescind the contract, return the stereo and get his money back.

Question 10

In many states it is illegal to lend money to help someone gamble.

Question 11

In contract law, a minor is someone under the age of 21.

Question 12

If a minor can cancel a contract, it can be done at any time before the minor reaches the age of majority or within a reasonable time after reaching majority age.

Question 13

Courts will not allow the rescission of a contract due to a unilateral mistake.

Question 14

Spencer, age 18 and of sound mind, has the legal capacity to contract.

Question 15

A contract may violate public policy even if the agreement does not violate a statute.

Question 16

To be valid, an agreement not to compete must be ancillary to a legitimate bargain.

Question 17

Mrs. Elsley was an elderly woman who relied on Nancy to visit her every day and prepare her meals. Nancy convinced Mrs. Elsley that she should give Nancy her house so they could live together and Nancy could better care for her, although Nancy really just wanted the house and had no intention of moving in to take care of Mrs. Elsley. Although Mrs. Elsley agreed, she may rescind the contract because of undue influence.

Question 18

Barbara, a skilled welder, was hired at Mainco Enterprises for a welding position. She was asked to sign a non-compete clause limiting future employment if she left Mainco. A court would be very likely to enforce the non-compete clause unless the time or geographic restriction is unreasonable.

Question 19

Roger parked his car at a garage that has a large sign at the entrance saying, "This garage is not liable for items stolen from a car." This type of notice is referred to as an exculpatory clause.

Question 20

Any contract involving a sale of goods of $100 or more must be in writing.

Question 21

Raymond agrees to transfer an easement right to Sandra for $1,000. This contract is within the Statute of Frauds and therefore needs to be in writing to be enforceable.

Question 22

Amanda, a recent university graduate, needed a car to get to her new job. To help Amanda secure a loan for the car, Ted, a friend, agreed to pay the loan should Amanda default. Ted's promise to pay the loan is a collateral promise. His promise must be in writing to be enforceable.

Question 23

Sweet Plantation, Inc. made a written contract with Candy, Inc. whereby Sweet Plantation agreed to supply all of Candy's sugar requirements for the next year at $.25 per pound. A dispute arose as to how much sugar Sweet is to supply. The parol evidence rule will bar Sweet's introduction of evidence concerning the intent of the requirements of Candy.

Question 24

A contract most likely will be declared unconscionable if

A)it allows for an extremely high rate of interest to be charged.
B)it contains a cancellation clause.
C)it is oppressive and one-sided.
D)it is signed by a minor for an item of luxury.

Question 25

An unconscionable contract is one that a court refuses to enforce because of

A)fundamental unfairness.
B)illegality.
C)its limit to free trade.
D)overt vagueness.

Question 26

What are the two most common settings for legitimate non-compete agreements?

A)real estate purchase and employment relationship
B)sale of a business and real estate purchase
C)real estate purchase and insurance purchase
D)sale of a business and employment relationship

Question 27

Barb has been a children's day care provider for several years in the small town of Sallton. She has decided to give it all up and move to the big city for excitement and adventure. She sells her business to Ken, agreeing not to open a competing business within five miles of Sallton for a period of nine months. After five months of the big city life, Barb is broke and moves back to Sallton. She opens a small day care business. Ken sues on the non-compete clause. What is the most likely result?

A)Ken wins. The agreement is enforceable.
B)Barb wins. The agreement is denying her the right to do the only thing she knows how to do.
C)Barb wins. The agreement is not enforceable because it is not ancillary to a legitimate bargain.
D)Barb wins. The agreement is not reasonable as to time.

Question 28

E-mation, Inc. hires Marvin to steal trade secrets from one of its competitors for $10,000. Marvin demands half of the money up front. E-mation pays Marvin $5,000, but Marvin decides not to pursue theft of the trade secrets. E-mation sues Marvin for the return of the $5,000. What will the court do with this contract?

A)The court will order Marvin to return the $5,000.
B)The court will order Marvin to return the $5,000 with interest.
C)The court will order Marvin to obtain the trade secrets.
D)The court will not do anything to help E-mation get its money back.

Question 29

E-mation entered into a contract with a consumer, Ezra, a recent immigrant to the United States who spoke very little English and had no formal education. The contract provided for Ezra to pay $2,500 for a computer system. The system was worth $400. If E-mation sued Ezra for enforcement of the contract, what is the most likely result?

A)The contract is enforceable because of usury statutes.
B)The contract is unenforceable because it is ancillary to a legitimate bargain.
C)The contract is enforceable because of the exculpatory clause.
D)The contract is unenforceable because it is unconscionable.

Question 30

Rest Well Hotel orally ordered 1,000 blankets monogrammed with its initials, RWH, from TriColor Textiles. TriColor had just finished monogramming the blankets when Rest Well called and canceled the order. TriColor will be able to enforce the agreement even though there was no writing.

Question 31

Which of the following can be characterized as an exculpatory clause?

A)Contractor is not liable for damage caused by its employees.
B)Buyer agrees to pay $5,000 for a used cell phone.
C)Creditor charges 45% interest on a loan.
D)All of these are correct.

Question 32

The Uniform Commercial Code provides that, under certain circumstances, a merchant may be liable on a written contract, even though that merchant has NOT signed it.

Question 33

Mike owns a house in a low-income area of a large city. Mike is on disability, and his total monthly income is $700. A sales representative visits his home to sell him a water purification system. Mike signs a contract that calls for monthly payments of $500 for the next 10 years. The water system is worth no more than $1,000. Mike thought he was signing a permission slip allowing the salesman to conduct a free water test to determine the toxins in the water. How would a court most likely describe this contract?

A)The contract is fully enforceable as written.
B)The contract is unenforceable because it is unconscionable.
C)The contract is enforceable, but only up to the value of the water system.
D)The contract is unenforceable because it is exculpatory.

Question 34

Larry has the largest pizza business in the city. He learns that Henry is thinking of opening a competing pizza and pasta delivery business. Larry gives Henry $25,000 to not open his proposed business in the same city. Which statement is correct?

A)The contract is voidable at Larry's option.
B)The contract is void for lack of consideration.
C)The contract is illegal and void.
D)The contract is enforceable.

Question 35

Patrick owned an acre of land which was being divided into building lots. Nancy was interested in purchasing the corner lot. In a signed writing, Patrick stated, "I will sell Nancy Grimes a lot on Route 70 for $5,500 cash, payable on April 30, 2012." This writing is sufficient under the Statute of Frauds to make the contract enforceable.

Question 36

Under the Statute of Frauds, the writing must: be signed by the defendant; and must state with reasonable certainty the name of each party, the subject matter of the agreement, and all of the essential terms and promises.

Question 37

Parol evidence refers to anything (other than the written contract itself)that was said, done, or written before or as the parties signed the contract.

Question 38

Ramona, age 42, orally agreed to work for Brahma, Inc. for the rest of her life for $50,000 per year. This agreement would not be enforceable since it violates the one-year rule of the Statute of Frauds.

Question 39

Suppose that Lenny Lawyer enters into an agreement with Cindy Client that his fee will be a percentage of the recovery Lenny obtains for Cindy in her pending divorce. State law makes such a contingency fee arrangement illegal in divorce actions. What will be the probable outcome if Lenny attempts to enforce the agreement?

A)The contract will be valid. Cindy would not have been able to afford an attorney otherwise and therefore Lenny was doing a public service.
B)The contract will be voidable at Cindy's option.
C)The contract will be void as violating a statute. Lenny will not be able to recover anything.
D)The contract will be unenforceable if Lenny did not get the agreement in writing.

Question 40

E-signatures are valid in all 50 states.

Question 41

When courts consider economic duress, they consider all the following factors EXCEPT

A)relative bargaining power.
B)financial distress.
C)legitimate business purpose.
D)relative size of the contract.

Question 42

Larson entered Forrester's Auto Mart to purchase a used car. Larson found a vehicle with a sales price of $11,000. After Forrester answered all of Larson's questions, Forrester and Larson agreed to a sale. As Larson was leaving to get the money to pay for the car, Forrester told Larson that he thought Robert Redford formerly owned the car. Larson later learned that Robert Redford had never owned the car. If Larson seeks to rescind the deal based on Forrester's statement, Larson will

A)win because he relied on the misrepresentation.
B)win because there was a misrepresentation of a material fact.
C)lose because he will not be able to prove reliance on the misrepresentation.
D)lose because Forrester made a unilateral mistake.

Question 43

Peter, a minor, purchased a car from ACME Motors. Using a fake ID, he misrepresented his age to be 18. The contract is fully executed. Which of the following is correct?

A)Peter cannot disaffirm the contract because a car is a necessary.
B)Peter cannot disaffirm the contract because of his misrepresentation.
C)Peter can disaffirm the contract, because a minor must be saved from his own poor judgment, including his lie.
D)Either b or c may be applicable depending on the law of the jurisdiction in which the contract was formed.

Question 44

Mark's home had burned to the ground. When he met with his insurance adjuster, she accused him of burning down the house and said she would have him criminally prosecuted if he didn't settle the claim for much less than the house was worth. Mark agreed to the settlement. If he changes his mind, he can probably rescind the settlement on the basis of

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

Question 45

Judith is a CPA with an excellent reputation and client base. She sells her tax preparation business to Shawn, and the sales contract includes a non-compete clause restricting Judith from opening a similar business for one year within a 10-mile radius of her former office. If she opens a tax preparation office five miles away after one year, a court would probably

A)grant an injunction barring her from operating the new office.
B)order confiscation of all of her new client files and turn them over to Shawn.
C)refuse to become involved, as the non-compete clause was illegal.
D)refuse to enforce the non-compete clause, as it is unreasonable regarding time and geographic area.

Question 46

Which scenario is an example of puffery?

A)Martina purchases a ring from Alison. Both genuinely believe the stone in the ring is an emerald, but Martina later finds out the stone is just cut glass.
B)A salesperson tells Jinxing that the shiny, chrome-covered motorcycle he is looking at is "the hottest ride on the road."
C)Simon threatens to smash the windshield out of Clara's vintage Pontiac GTO unless she agrees to sell it to him.
D)The clerk at the candy store tells Billy the "Jug 'o Jellybeans" contains 1,000 jellybeans. When Billy takes the jug home and counts, he finds that the jug contains only 995 jellybeans.

Question 47

Which of the following is NOT a true statement about fraud?

A)The plaintiff must prove that the defendant has knowledge of the falsity of his or her statement.
B)It is necessary for the plaintiff to show that he or she has suffered some type of detriment or injury because of his or her reasonable reliance on the defendant's false statement.
C)The defendant made the statement with the intent to induce the plaintiff to enter into the contract.
D)The plaintiff must show that although the defendant acted in good faith, the statement was material because the defendant expected the plaintiff to rely on it and enter into the contract.

Question 48

The Tavern's secret recipe for its pizza sauce would be considered

A)a trade secret, and an employment non-compete clause would be enforceable to protect it.
B)a trade secret, but an employment non-compete clause would NOT be enforceable to protect it.
C)just a secret recipe and not something the Tavern could protect in a non-compete clause.
D)an exculpatory clause and not enforceable.

Question 49

A person who is mentally impaired generally can create only __________ contracts.

A)fraudulent
B)void
C)unconscionable
D)voidable

Question 50

Marty, a 16-year-old, contracts with Cream-of-the-Crop Cycles to buy an $8,000 motorcycle. Marty agrees to make monthly payments until the purchase price plus interest is paid in full. Which of the following is correct?

A)The contract is voidable by Marty.
B)The contract is void as soon as it is made.
C)The contract is voidable by Cream-of-the-Crop Cycles.
D)The contract is voidable by either Marty or Cream-of-the-Crop Cycles.

Question 51

An exculpatory clause is generally unenforceable when

A)it attempts to release a party from liability for ordinarily negligent behavior.
B)it involves public transportation.
C)it is written clearly and in bold, large print.
D)the affected activity is a recreational activity.

Question 52

In contract law, capacity is best defined as

A)a benefit which must be bargained for between the parties.
B)one person's compliance with the offer made by another.
C)a promise in exchange for performance by another party.
D)the legal ability of a party to enter into a contract.

Question 53

A(n)_______ contract is illegal from the beginning and may not be enforced by either party; a(n)_______ contract is legal but permits one party to escape, if he or she so wishes.

A)disaffirmed; affirmed
B)void; voidable
C)affirmed; disaffirmed
D)voidable; void

Question 54

In a non-compete agreement, the term "ancillary" means that

A)both parties must have a stake in the outcome.
B)the agreement is harmless to the general public.
C)the non-compete agreement must be part of a larger agreement.
D)the non-compete agreement is unfair to the employee, but not the employer.

Question 55

Duress occurs when

A)the enforcement of a contract results in unconscionability.
B)an improper threat is made to force another party to enter into a contract.
C)both parties contract based on the same factual error.
D)a party gives notice of refusal to be bound by an agreement.

Question 56

Which of the following is the MOST accurate statement regarding economic duress?

A)It is never grounds for rescission.
B)It is always grounds for rescission.
C)It is a UCC concept only.
D)It may be grounds for rescission.

Question 57

Jeff was a subcontractor, bidding on a contract for ACE Corp., the general contractor. When adding up the total of materials and labor, Jeff's secretary mistakenly moved the decimal point one place, ending up with a bid of $3,500 rather than $35,000. ACE Corp. accepted Jeff's bid, mostly because all the other bids were over $30,000. When Jeff learns of the mistake, he tells ACE Corp. that he cannot do the job for $3,500. If ACE Corp. sues to enforce this contract, what is the most likely result?

A)The contract is enforceable, since there was an offer, acceptance, and consideration.
B)This is a bilateral mistake, so the contract can be rescinded by either party.
C)This is a unilateral mistake, so the contract cannot be rescinded by Jeff.
D)This is a unilateral mistake, but one where ACE Corp. knew that a mistake had been made. Jeff should be able to rescind the contract.

Question 58

Sasha, who is mentally infirmed, contracts to purchase a piano for $2,500 in 60 monthly installment payments. Six months later she tries to void the contract on grounds of mental impairment. A court will

A)normally void the contract without requiring anything further on Sasha's part.
B)normally void the contract but will require Sasha to return the piano.
C)ordinarily not void the contract unless Sasha had a court-appointed guardian at the time she entered into the contract.
D)not void the contract unless Sasha agrees to have the court appoint a guardian for her.

Question 59

A court is unlikely to enforce the non-compete agreement Kelly and Amber signed because of which of the following clauses?

A)Kelly agrees not to work for a competitor for two years.
B)Kelly agrees not to work for a competitor within a 10-mile radius of Amber's business.
C)Kelly agrees to go into a completely different line of work than Amber.
D)All of these are correct.

Question 60

Which of the following statements, if made by a seller who knows the statement to be untruthful, would NOT be misrepresentation of material fact resulting in a cause of action for fraud?

A)"This horse is only six years old."
B)"There is no better car in the world."
C)"The tires have less than 5,000 miles on them."
D)"This car gets 28 miles per gallon."

Question 61

Marcy and Elliot are both sophisticated merchants who deal in diamonds. Marcy contracted to purchase a diamond for $20,000. The day after the purchase, Marcy took the diamond to a jeweler's show but the highest offer for the diamond was only $10,000. Is Marcy's contract for purchase of the diamond for $20,000 unconscionable?

Question 62

Which of the following promises ordinarily must be fully executed in writing to be enforceable?

A)any sale of goods to a minor
B)an agreement between two parties to sell a piece of jewelry for $350
C)a six-month lease on an apartment beginning in 30 days
D)a promise made by an executor of an estate to pay a debt of the estate

Question 63

Vicki entered into a written contract to buy a car from Valley Motors. During the negotiations, the sales representative said that the car had a two-year full warranty. The written contract included a provision that stated, "This writing is the full and final expression of the parties' agreement; anything said before signing or while signing is irrelevant." The written contract did not include a warranty. Two months after Vicki took delivery of the car, she discovered that the transmission needed to be replaced. Vicki claimed that it was covered by the full warranty. Will Vicki be able to present evidence as to the sales representative's statements concerning the warranty?

A)No. The parol evidence rule will most likely exclude any evidence of the discussion of the warranty.
B)Yes. The leading object rule will allow evidence as to the discussion of the warranty.
C)Yes. The evidence is needed because the contract is ambiguous.
D)No, because the contract was fully executed.

Question 64

Brahma entered into an oral agreement to sell 50 jet skis to Summer Sports. Brahma delivered 20 of the skis on May 1. On June 1, Summer Sports notified Brahma that it would not honor the agreement. Which statement is correct?

A)The contract is void since it was oral.
B)The contract is enforceable for 20 jet skis.
C)The contract is enforceable for the 50 jet skis.
D)The contract is obsolete.

Question 65

Many states will not accept an e-signature on

A)a will.
B)a foreclosure notice.
C)a court order.
D)All of these are correct.

Question 66

When one person agrees to pay the debt of another as a favor to that debtor, it is called

A)promissory representation.
B)a mutual promise.
C)promissory estoppel.
D)a collateral promise.

Question 67

Abby hires a contractor to make repairs on her house. Before the repairs are finished, Abby dies. Her good friend Clay is appointed executor of Abby's estate. Clay orally promised that if the estate could not pay the repair bill, he would pay it even though he does not live in the house and has no entitlement under Abby's estate. If the contractor's bill does not get paid, who can the contractor collect from, if anyone?

A)The contractor can collect from either the estate or Clay.
B)The contractor can collect from the estate only.
C)The contractor can collect from Clay only.
D)The contractor must collect from the estate first, and then collect any deficiency from Clay.

Question 68

Which of the following oral contracts may be enforceable?

A)Nathan owes $1,000 in back rent to his landlord. Miranda tells Nathan not to worry about it, she'll pay his debt for him.
B)Kenny orally agrees to purchase 5,000 pencils that the ABC Pencil Company stamps with the words "Kenny is the Greatest!"
C)Mrs. Washington calls the corner grocery and places an order for a loaf of bread, a gallon of milk, and a pound of hamburger to be delivered to her. Ten minutes later, before the store has a chance to put together her items, she calls to cancel the order.
D)All of these are correct.

Question 69

The Uniform Electronic Transmission Act (UETA)

A)declares that a contract or signature may not be denied enforceability just because it is in electronic form.
B)declares that e-signatures are invalid.
C)creates a safe cyberspace environment in which business communications cannot be intercepted or fraudulently altered.
D)has only been adopted in a handful of states.

Question 70

When a contract falls within the Statute of Frauds but is not in writing, the contract is

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

Question 71

If Jane persuades Linda to buy her horse by telling Linda that the horse runs "like the wind," then Jane's statement is

A)fraud.
B)reckless misrepresentation.
C)a unilateral mistake.
D)puffery.

Question 72

Vince has begun forgetting things and is becoming very difficult to get along with. He is 85, has been ill, and is very fond of his housekeeper Annie. He gives a deed to Annie for all of his real property. At Vince's death, his children, who got only his photograph albums according to the will, ask that the deed be set aside and the land be put back in the estate for purposes of division among all the children. What will be the probable result in this case?

A)Since Vince was 85 he was probably incompetent and the court would rule for the children.
B)Clearly Annie used her position of dominance to persuade Vince to deed her the property, and it will be set aside.
C)Unless the children can prove that Vince was unable to understand what he was doing, or that Annie used her position to improperly influence Vince, Annie can keep the property.
D)Annie will not be able to keep the property since she is not a family member.

Question 73

Which of the following would suffice for a signature on a writing under the Statute of Frauds?

A)a stamped signature
B)a handwritten signature
C)a name keyed at the bottom of an e-mail
D)Any of these would suffice. Judges define "signature" very broadly.

Question 74

An example of the type of relationship required to find undue influence would be

A)a salesperson-purchaser relationship.
B)a bartender-customer relationship.
C)a doctor-patient relationship.
D)a neighbor-neighbor relationship.

Question 75

Which of the following types of contracts cannot be either contradicted or supplemented by evidence of prior agreements or expressions?

A)integrated contracts
B)incomplete contracts
C)ambiguous contracts
D)implied contracts

Question 76

Vicki entered into a written contract to buy a car from Valley Motors. The written contract included a provision that stated, "This writing is the full and final expression of the parties' agreement; anything said before signing or while signing is irrelevant." This is

A)an integration clause.
B)a Statute of Frauds clause.
C)parol evidence.
D)an exculpatory clause.

Question 77

Christine agrees to marry Barry after he tells her he will buy her a brand-new Rolls Royce within a year of their marriage. After they are wed, Barry refuses to give her the car. What will happen if Christine sues Barry?

A)She will win because of the "one-year rule."
B)She will lose because a promise made in consideration of marriage must be in writing.
C)She will win because a spouse is legally required to keep the promises made to his/her partner.
D)She will lose because Barry's promise of a car is a collateral promise, which must be in writing.

Question 78

Derek and Abyan were discussing business over lunch when they agreed on the sale of a five-acre parcel of land. Since neither of them had any paper with them, Derek wrote the following on a napkin: "Abyan agrees to purchase from Derek a 5-acre parcel located at the local address of 123 105th Street, St. Joseph, Minnesota, U.S.A. for the price of $4,500 per acre. Transfer of title, payment, and possession to take place on May 1, 2011." Abyan signed the napkin. On May 1, 2011, Derek was ready to close the deal and transfer title but Abyan refused to pay the purchase price. If Derek sues Abyan for the price of the land, the most likely result will be

A)Abyan will win because the writing is not sufficient under the Statute of Frauds.
B)Derek will win because the writing is sufficient under the Statute of Frauds.
C)Abyan will win because Derek did not sign the writing.
D)Derek will win because the Statute of Frauds does not apply to this situation.

Question 79

Contracts that cannot be performed within __________ are unenforceable unless they are in writing.

A)one month
B)six months
C)one year
D)two years

Question 80

Does the statement "The sale of goods will not be enforceable unless there is some writing, signed by the defendant, indicating that the parties reached an agreement" accurately reflect the UCC's basic rule?

A)No. It should also state that the contract must be signed by both parties, not just the defendant.
B)No. It should state that the contract must require all of the terms of the agreement to be in writing.
C)No. It should state that the contract must be for the sale of goods of $500 or more.
D)Yes. The wording accurately reflects the UCC's basic rule.