Deck 12: Is the Contract Legal

Question 1

A clause in a contract which provides that the courts may not be used to resolve any disputes between the parties is:

A)void at common law.
B)illegal at common law.
C)referred to as a 'restraint of trade' clause.
D)by its very nature incapable of being enforced by the courts.

Answer 1

A

Question 2

The decision in Forster & Sons Ltd v Suggett (1918)35 TLR 87 was based on the fact that:

A)the restraint of trade clause was an unreasonable exercise of the employer's superior bargaining power.
B)the restraint of trade clause was a reasonable protection of the employer's proprietary interest.
C)the restraint of trade clause was imposed merely to restrict competition.
D)arms length bargaining with legal advice on both sides meant there was no inequality of bargaining power.

Answer 2

B

Question 3

At common law,contracts in restraint of trade are generally unenforceable because they:

A)discourage industry and enterprise and reduce competition.
B)injure one of the parties by reducing their means of earning a livelihood.
C)deprive the public of the services of one of the parties.
D)all of the above.

Answer 3

D

Question 4

A contract that is legal when it is formed but performed in an illegal manner may be:

A)valid but unenforceable.
B)valid and enforceable.
C)valid but voidable.
D)void and unenforceable.

Question 5

When a contract is legal at its creation but subsequently becomes illegal:

A)remedies are never available to the guilty party.
B)remedies are available to the guilty party as long as the innocent party receives their remedies first.
C)remedies are sometimes available to the guilty party.
D)remedies are always available to the guilty party.

Question 6

The intention of a statute will determine whether a contract is illegal and unenforceable.

Question 7

A term in a contract that attempts to exclude the implied terms of the Australian Consumer Law is void and unenforceable.

Question 8

Which of the following is NOT a factor to consider in determining the validity of a restraint of trade clause?

A)The type of business involved.
B)The geographic extent of the restraint.
C)The relative bargaining powers of the parties.
D)The amount of consideration paid.

Question 9

In which of the following cases did the court decide that the contract was valid but illegal as performed?

A)St John Shipping Corporation v Joseph Rank Ltd [1957] 1 QB 267.
B)Pham v.Doan [2005] NSWSC 201.
C)Anderson Ltd v Daniel [1924] 1 KB 138.
D)Yango Pastoral Company Pty Ltd v First Chicago Australia Ltd [1978] HCA 42.

Question 10

In which of the following cases did the court decide that an agreement not to report the commission of an indictable offence was illegal at common law and therefore void?

A)Yango Pastoral Company Pty Ltd v First Chicago Australia Ltd [1978] HCA 42.
B)Public Service Employees Credit Union Cooperative Ltd v Campion (1984)56 ACTR 39.
C)St John Shipping Corporation v Joseph Rank Ltd [1957] 1 QB 267.
D)Nordenfelt v Maxim Nordenfelt Guns and Ammunition Company Ltd [1894] AC 535.

Question 11

It is important to understand the differences between illegal and void contracts because:

A)they may have different statutory and common law consequences.
B)they form legal contracts.
C)they belong to identical contract categories.
D)all of the above.

Question 12

A lawful contract may be rendered illegal if it is performed in a prescribed manner.

Question 13

Why were the contracts enforced by the court in the case of: Yango Pastoral Company Pty Ltd v First Chicago Australia Ltd [1978] HCA 42?

A)The prohibition was in the public interest.
B)The prohibition related to the operation of the business rather than formation of the contract.
C)The plaintiffs were responsible for the breach.
D)The illegal behaviour was only incidental to performance of the contract.

Question 14

In St John Shipping Corporation v Joseph Rank Ltd [1957] 1 QB 267,the court deemed the contract enforceable because:

A)the prohibition was in the public interest.
B)the plaintiffs were responsible for the breach.
C)the prohibition related to the operation of the business rather than formation of the contract.
D)the illegal behaviour was only incidental to performance of the contract.

Question 15

The primary distinction made between a 'void' contract and an 'illegal' contract is that:

A)money paid or property transferred under a void contract may be irrecoverable.
B)money paid or property transferred under an illegal contract may be irrecoverable.
C)illegal contracts carry penalties for violation.
D)a void contract will not be enforced by the courts.

Question 16

Which of the following cases is authority for the principle that a restraint of trade clause will be valid if it is reasonable?

A)Anderson Ltd v Daniel [1924] 1 KB 138.
B)Nordenfelt v Maxim Nordenfelt Guns and Ammunition Company Ltd [1894] AC 535.
C)Forster & Sons Ltd v Suggett (1918)35 TLR 87.
D)Public Service Employees Credit Union Cooperative Ltd v Campion (1984)56 ACTR 39.

Question 17

The decision in A Schroeder Music Publishing Co Ltd v Macauley [1974] 1 WLR 1308 was based on the fact that:

A)the restraint of trade clause was an unreasonable exercise of the employer's superior bargaining power.
B)the restraint of trade clause was a reasonable protection of the employer's proprietary interest.
C)the restraint of trade clause was imposed merely to restrict competition.
D)arms length bargaining with legal advice on both sides meant there was no inequality of bargaining power.

Question 18

If a contract is found to be illegal at the time of its creation,it will be:

A)valid and enforceable.
B)valid but unenforceable.
C)valid but voidable.
D)void and unenforceable.

Question 19

Contracts that are binding in honour only but attempt to oust the jurisdiction of the Courts are valid.

Question 20

The decision in Attwood v Lamont [1920] 3 KB 571 was based on the fact that:

A)the restraint of trade clause was an unreasonable exercise of the employer's superior bargaining power.
B)the restraint of trade clause was a reasonable protection of the employer's proprietary interest.
C)the restraint of trade clause was imposed merely to restrict competition.
D)arms length bargaining with legal advice on both sides meant there was no inequality of bargaining power.

Question 21

At common law,a restraint of trade clause will be enforced if it is reasonable in the circumstances.If you were drafting legislation intended to enact this common law principle,how would you define the term 'reasonable'?

Question 22

In the event of a dispute,a contract clause may refer the parties to arbitration.

Question 23

An employer can enforce a restraint of trade clause in a contract of employment with an employee,provided it is not an attempt to limit competition.

Question 24

How can the court's willingness to declare a contract illegal or void at common law be reconciled with the courts' determination to respect the notion of 'freedom of contract'?

Question 25

Which of the following factors are relevant to the validity of a restraint of trade clause in a contract of employment?

A)Whether the employee has acquired skills or information belonging to their employer.
B)The relative bargaining powers of the parties.
C)The area and duration of the restraint.
D)All of the above.

Question 26

The courts adopt a different approach depending upon the circumstances in which a restraint may be imposed.Discuss.

Question 27

Which of the following scenarios is the best description of an invalid restraint on trade?

A)A restraint upon a solicitor from carrying on business in the same city for one year after the sale of the practice.
B)A restraint upon the vendor of a business from carrying on a similar business within the same district in the next 3 years.
C)A restraint upon an employee from divulging trade secrets.
D)A restraint upon the vendor of a business from carrying on a similar business anywhere for the rest of his life.

Question 28

Explain why the courts are generally reluctant to enforce restraint clauses in contracts of employment.

Question 29

Contracts in restraint of trade are regarded as prima facie void.

Question 30

An employee in possession of secret information belonging to their employer is under a duty to keep it secret.

Question 31

Discuss the factors that determine whether a restraint of trade is reasonable.

Question 32

A restraint of trade contract will be void if:

A)the time for which the restraint is to apply is too long.
B)the geographical extent of the restraint is too wide.
C)the restraint does not apply to a proprietary interest of the person applying the restraint.
D)any of the above.