Deck 15: Illegality

Question 1

An agreement is illegal if it calls for behavior that violates a statute,but not a general rule of public policy.

Answer 1

False

Question 2

The courts have no power over unconscionable contracts.

Answer 2

False

Question 3

One of the primary reasons for not enforcing illegal contracts is to deter people from entering into such agreements in the first place.

Answer 3

True

Question 4

Exculpatory clauses are generally enforceable if they do not involve a duty to the public.

Question 5

A party to an illegal contract who is fully aware of the contract's illegality can fully recover damages.

Question 6

Which of the following reasons is applicable for voiding a contract based on illegality?

A)It requires the commission of a misdemeanor.
B)It is in violation of the Code alone; not the common law.
C)It is contrary to public policy.
D)It protects the interests created by the contract to a reasonable measure.

Question 7

A party which enters into an illegal contract may recover any consideration given when:

A)the illegal act has been performed and the party has reported the illegality to law enforcement.
B)the party rescinds the contract before any illegal act has been performed.
C)the illegal act has been performed and the party demonstrates an unequal bargain thereof.
D)the party rescinds the contract immediately after the illegal act has been performed.

Question 8

When a person,whom a regulatory statute seeks to protect,enters into an agreement in violation of the statute,the protected person:

A)is only allowed to enforce the agreement.
B)may recover only for economic loss.
C)cannot recover for any loss but may enforce the agreement.
D)may either enforce the contract or recover any consideration he/she has parted with.

Question 9

The courts allow recovery if one or both of the parties to an illegal bargain are ignorant of the facts that made the bargain illegal.

Question 10

Statutes that impose a significant license fee and allow anyone who pays the fee to obtain a license are classed as regulatory.

Question 11

When one or both parties to an illegal bargain are ignorant of the facts that made the bargain illegal,courts will:

A)never allow either party to recover damages for breach of the agreement.
B)allow recovery for performance rendered before the parties learned of the illegality.
C)declare the bargain unconscionable.
D)regard the contract a serious threat to public welfare and declare it void.

Question 12

A contract of adhesion is not in violation of public policy.

Question 13

Rent control laws have been implemented to limit the exercise of unequal bargaining power.

Question 14

Ali enters into a contract with Billy's Brewpub to be a bartender.Ali does not know that Billy's does not have a liquor license.Under these circumstances:

A)Ali can recover only for emotional distress.
B)Ali can recover the wages for bartending before she learned of the violation.
C)Ali can recover the wages for bartending for the entire term of her employment.
D)Ali cannot recover any of her wages as illegality makes the contract void.

Question 15

Blue laws are uniform across all states in the country.

Question 16

Agreements designed solely to restrict trade are legal.

Question 17

The violation of usury laws may require the forfeiture of interest and principal.

Question 18

Wagering,risk-shifting,and speculative bargaining agreements are all regarded illegal by statutes.

Question 19

Agreements that create a conflict between a public employee's personal interest and public duties are illegal and contrary to public policy.

Question 20

A person who rescinds an illegal contract before any illegal act has been performed can usually recover any consideration he has given the other party.

Question 21

Regulatory statutes are designed primarily to:

A)raise money.
B)protect the public.
C)define a public employee's personal interests and public duties.
D)provide the legal system with a degree of healthy flexibility.

Question 22

The difference between a regulatory and revenue-raising statute depends on:

A)legislative intent.
B)enforceability.
C)the constitutionality of the statute.
D)societal interest.

Question 23

Statutes that require proof of character and skill are considered to be:

A)regulatory.
B)usury.
C)wagering.
D)revenue-raising.

Question 24

Max is employed by a large law firm in a city of one million.His employment contract with the firm includes a promise on his part not to practice law within the city for ten years once he leaves the firm.His promise:

A)is illegal as a contract injurious to public service.
B)is only illegal if it violates state or federal antitrust laws.
C)is illegal as a contract in restraint of trade.
D)is illegal and will invalidate the entire employment contract.

Question 25

Identify the true statement regarding the idea of public policy.

A)The court's view of public policy is determined by what the court believes is in the best interests of society.
B)Public policy is resistant to any social or economic change.
C)Courts have limited discretion in determining what constitutes a violation of public policy.
D)The limited discretionary powers provide the legal system minimal flexibility which ensures a strict adherence to policies.

Question 26

Which of the following statements is true for contracts to influence fiduciaries?

A)This doesn't apply to agreements by fiduciaries that favor the interests of a third person at the expense of their principals' interests.
B)Agreements contrary to public welfare are included under this provision.
C)They operate as duress on the principal or beneficiary who is entitled to the fiduciary's loyalty.
D)Such contracts may be enforced upon full disclosure to,and agreement of,beneficiary.

Question 27

A restraint that is merely ancillary to a contract may be legal if it is:

A)designed to protect interests created by the contract.
B)broader than reasonably necessary to protect the interests created by the contract.
C)solely designed to restrain trade.
D)meant to recover punitive damages for furthering public interest.

Question 28

Exculpatory clauses are generally unenforceable:

A)if they seek to avoid charges of misrepresentation.
B)if they seek to avoid charges of duress.
C)if they seek to avoid charges of fraud and willful misconduct.
D)if they seek to avoid charges of undue influence.

Question 29

____ is an example of an illegal wager.

A)Stock transactions
B)Betting on the performance of a stock
C)Commodity transactions
D)Risk shifting agreements

Question 30

Identify the remedy used in cases involving wagering statues.

A)Forfeiture of excess interest.
B)Contracts are generally enforceable in such cases.
C)There is no remedy in such cases.
D)Weekday ratification of contracts.

Question 31

Which of these laws prohibit charging more than a stated amount of interest for the use of money?

A)Rent control law
B)Antitrust law
C)Usury law
D)Blue law

Question 32

Trade agreements are legal if:

A)their sole purpose is to restrict trade.
B)their ancillary purpose is to restrict trade indefinitely.
C)their purpose is to recover punitive damages.
D)their purpose is to protect interests created by the contract.

Question 33

Which of the following statements is true about exculpatory clauses?

A)Exculpatory clauses are always illegal.
B)When an exculpatory clause is enforced,it can effectively relieve a party of liability for his own negligence.
C)Exculpatory clauses are effective only when the party benefited by the clause owes a duty to the public.
D)Exculpatory clauses are always valid and enforceable.

Question 34

Which of the following statements is true for contracts made illegal by statutes?

A)Barbers and beauty operators do not require licenses for working.
B)Blue laws do not regulate the sale of alcohol.
C)Agreements violating wagering statutes are regarded illegal only in certain states.
D)Forfeiture of excess or all interest is a common penalty for violation of usury laws.

Question 35

Mayor Magnus wants to recruit a Harvard economist,Milton,to be the Chief Developer for the Small Town's economic development division.The legal cap on the job of Chief Developer is $60,000.Mayor Magnus offers Milton $100,000.The contract is:

A)unconscionable based on unequal bargaining power.
B)injurious to public service.
C)exculpatory.
D)enforceable.

Question 36

An agreement to restrain trade:

A)is illegal under certain cases of the exculpatory clause.
B)is never illegal in our democratic society.
C)may be legal if it covers a reasonable geographic area and a reasonable time period.
D)may be legal if it is contradictory to a contract that protects business interests.

Question 37

Failure to pay for a license which is required for revenue-raising purposes:

A)affects the legality of the unlicensed person's agreements and it will be considered void.
B)results in generally unenforceable contracts.
C)does not affect the legality of the unlicensed person's agreements.
D)generally imposes a nominal fine for violation.

Question 38

Blue laws:

A)prohibit performing certain acts on Sunday.
B)regulate betting.
C)regulate interest charged for the use of money.
D)regulate licensing activities.

Question 39

Harry Hotdog is hired as an accountant by a large Indianapolis-based accounting firm.The firm's attorney drafts an employment contract which contains the following clause: "Employee agrees that he will not engage in the practice of accounting in Indianapolis for one year after termination of his employment with this firm." Hotdog signs the contract,works for six months,and then resigns and opens his own accounting firm in Indianapolis.His former employer sues him for breach of contract,and is likely to:

A)lose,because contracts that restrict trade are not considered illegal in Indianapolis.
B)lose because the contract represented an unequal bargain.
C)win,because Harry's act is a violation of the Blue laws.
D)win,because the restriction has reasonable geographic and time restrictions.

Question 40

If a part of a divisible contract is illegal:

A)the whole contract is void.
B)the illegal parts will be removed and the legal parts remain in force.
C)the whole contract will be unenforceable.
D)the whole contract is still enforceable.

Question 41

What factors do the courts consider in determining whether a contract is unconscionable?

Question 42

Explain the difference between a regulatory and revenue-raising statute.

Question 43

The legal concept of unconscionability:

A)is a part of the doctrine of freedom of contract.
B)establishes that certain classes of contracts are voidable.
C)pertains to unequal bargains.
D)is only present in contracts between consumers and large companies.

Question 44

Name the kinds of contracts courts often hold to be illegal because they violate public policy.

Question 45

Identify the true statement regarding unconscionable contracts.

A)It protects clauses in fine print or in such technical language that an ordinary person would not understand their meaning.
B)They may result when a party with superior bargaining power imposes unfair terms on the other party.
C)They work on the basic assumption that public interest is best served by free competition.
D)They are provisions in a contract that attempts to relieve one party from liability for the consequences of his/her own negligence.

Question 46

What are the exceptions to contracts under statute violation?

Question 47

If a court finds a contract to be unconscionable,the UCC gives it the power to:

A)enforce only the legal parts of the contract.
B)relieve one party from liability for the consequences of his/her own negligence.
C)prevent liability under willful misconduct or fraud.
D)enforce the contract in a way that avoids an unconscionable result.

Question 48

Adhesion contracts fall under:

A)contracts from unequal bargains.
B)contracts injurious to public service.
C)contracts to influence fiduciaries.
D)contracts in restraint of trade.

Question 49

Which of the following is a true statement for unconscionable contracts?

A)The doctrine of unconscionability can be used to relieve people of their bad bargains.
B)Any contract between two parties with unequal bargaining power is unconscionable.
C)If the court finds a term of a contract to be unconscionable,it must hold the entire contract to be illegal and unenforceable.
D)A court may refuse to enforce an unconscionable contract as contrary to public policy.

Question 50

Sam was an expert distance runner who entered into Big City Marathon.In order to participate,he had to sign a "General Release of Claim," which said that he assumed all risk of competition and released all claims against the Marathon and its sponsors.During the first mile,Sam was found unconscious,probably as a result of tripping and falling on his head.He died a few hours later.Sam's estate filed a wrongful death suit against Marathon.Is the suit barred by the exculpatory clause?