Deck 8: Capacity, Legality, and Enforceability

Question 1

In some states, misrepresentation of age by a minor is enough to prohibit disaffirmance.

Answer 1

True

Question 2

All states require that members of certain professions to have licenses.

Answer 2

True

Question 3

If a minor disaffirms a contract, he or she must disaffirm the entire contract.

Answer 3

True

Question 4

All forms of gambling are legal in all states.

Question 5

An exculpatory clause in an employment contract is not enforceable if it removes the employer's potential liability for injuries to employees.

Question 6

Any contract entered into with an unlicensed party is unenforceable.

Question 7

A covenant not to compete is never enforceable.

Question 8

An adhesion contract is a contract drafted by one party and presented to another on a take-it-or-leave-it basis.

Question 9

A minor has a reasonable time, after the minor reaches the age of major?ity, to disaffirm a contract.

Question 10

Parents who sign a contract made by their minor child with an adult have the same option to disaffirm as the child.

Question 11

Some states impose a duty on a minor who disaffirms a contract to re?store the adult party to the position he or she held before the con?tract was made.

Question 12

In general, minors are personally liable for their contracts.

Question 13

For a minor to disaffirm a contract, he or she must present the contract to a court.

Question 14

Gambling involves the distribution of property by chance among persons who have paid valuable consideration for the opportunity to receive it.

Question 15

A person who enters into a contract when he or she is intoxicated can void the contract if he or she did not comprehend the legal consequences.

Question 16

If a contract is fully performed by all parties to it, then it is pre?sumed to have been ratified.

Question 17

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

Question 18

When a minor disaffirms a contract, he or she cannot keep whatever he or she has received as a result of the contract without paying for it.

Question 19

It is legal to charge any interest rate for an ordinary loan.

Question 20

A minor may enter into a contract for the sale of alcoholic beverages if the other contractual party is an adult.

Question 21

In general, if a contract is illegal, a court will not enforce it.

Question 22

A deceived person must have a justifiable reason for relying on a misrepresentation.

Question 23

An innocent party does not need to suffer an injury to collect damages as a result of a misrepresentation.

Question 24

A unilateral mistake always gives the mistaken party a right to relief from the contract.

Question 25

For a party to a contract to receive relief from either a unilateral or a bilateral mistake, the mistake must involve a material fact.

Question 26

Gaye, a minor, signs a contract to buy a motorcycle from Hi-Valu Cycles by mis?representing her age as twenty-one. Gaye fails to make the pay?ments. Hi-Valu sues. Ordinarily, Gaye can

A) not return the motorcycle nor avoid further liability.
B) not return the motorcycle but can avoid further liability.
C) return the motorcycle and avoid further liability.
D) return the motorcycle but cannot avoid further liability.

Question 27

A seller's failure to disclose a serious defect about a product for sale may give rise to an action for fraud.

Question 28

Eli, a minor, buys an automobile insurance policy from Faithful Insurance Company and pays a $1,000 pre?mi?um. If Eli can disaffirm the contract, he can most likely recover

A) $500.
B) $1,000.
C) $1,500.
D) nothing.

Question 29

A false statement by an expert to a naive buyer usually will entitle the buyer to rescind or reform a contract.

Question 30

A unilateral mistake is a mistake made by both parties to a contract.

Question 31

Olivia, a minor, signs a contract to buy a bike from Phil, the owner of SuperCycles Bike Store. Olivia's right to disaffirm the contract

A) does not change the fact that Phil is bound by the contract.
B) does not yet exist because Olivia is still a minor.
C) gives Phil, an adult, the right to disaffirm the contract.
D) is not valid because a bike is a "necessary."

Question 32

A mistake in value will rarely enable a party to a contract to avoid the contract.

Question 33

An innocent party may never rescind a fraudulent con?tract.

Question 34

A prenuptial agreement must be in writing to be enforceable.

Question 35

Richard is an adult. He enters into a contract to sell sixteen-year-old Jane his car for $3,000. The next day Richard recieves an offer of $4,000 for his car from twenty-year-old Bill. Richard

A) cannot disaffirm his contract with Jane because he is an adult.
B) can disaffirm his contract with Jane because Bill is an adult and contracts with adults take precedence over contracts with minors.
C) cannot disaffirm his contract with Jane because she is a minor.
D) can disaffirm his contract with Jane because the contract has not been ratified.

Question 36

Chris, a minor, signs a contract to purchase alcoholic beverages for Dine & Drink, his parents' restaurant. The contract is

A) valid but may be disaffirmed.
B) valid but may not be disaffirmed.
C) void as a matter of law.
D) void unless it is also signed by Edie, the manager of Dine & Drink.

Question 37

An oral contract for a sale of goods for more than $5,000 is not enforceable even if the parties to it admit to its existence in court.

Question 38

Under the Statute of Frauds, oral contracts are void.

Question 39

Misrepresentation can occur through conduct.

Question 40

An oral contract may be enforceable if enforcing the promise is the only way to avoid injustice.

Question 41

Wilma, who lives in New York, enters into a contract to buy a painting from Fred, who lives in France. The contract includes all the costs of insuring and shipping the painting from France to New York. The agent that made the shipping estimate makes a mistake when adding up the costs and, as a result, the shipping cost listed in the contract is $1,000 less than the shipping actually costs. A court will most likely

A) allow the parties to rescind the contract.
B) award damages to Wilma for the mistakes.
C) award damages to Fred for the mistakes.
D) enforce the contract without requiring changes.

Question 42

Joy and Karl contract for the sale of Joy's prize-winning show dog for $1,000. Unknown to either party, the dog has died. Karl is

A) entitled to another dog of equivalent value.
B) not required to pay due to the bilateral mistake.
C) not required to pay due to the unilateral mistake.
D) required to pay because he assumed the risk the dog might die.

Question 43

Byron agrees to sell to Charity, for $1,500, a remote parcel of land. They be?lieve the land to be worthless, but beneath it is a gold mine. A court would

A) cancel the contract due to Byron's failure to know the land's value.
B) cancel the contract due to Charity's failure to know the land's price.
C) cancel the contract due to the difference between the contract price and the market price.
D) enforce the contract.

Question 44

SuperBumperCars, Inc. requires all customers to sign a release that contains a clause that releases SuperBumperCars from all liability in the event of an injury occurring during a bumper car ride, no matter who is at fault. This is an example of

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

Question 45

Frugal Insurance Company sells a policy to Grover Company, in?suring the life of one of Grover's key executives. When the executive dies, Frugal re?fuses to pay, noting that it was not licensed to sell insurance in Grover's state and arguing that thus, its policy cannot be enforced. Grover can recover

A) the amount of the policy from Frugal in full.
B) the amount of the premiums that Grover paid to Frugal.
C) as much of the amount of the policy from Frugal as will cover Grover's costs.
D) nothing.

Question 46

The state of Illinois enacts a usury statute. The purpose is to

A) establish a maximum rate of interest that may be charged for loans.
B) establish a minimum rate of interest that may be charged for loans.
C) prevent the misuse of money advanced as loans.
D) prevent the misuse of money paid back on loans.

Question 47

Rolf is an emergency medical technician. Medical personnel such as Rolf are pro?hibited by state statute from working more than a certain num?ber of consecutive hours. One month, Rolf works more than the legal limit. Rolf can recover for

A) the hours up to the statutory maximum but not more.
B) the hours up to the statutory maximum and the extra hours.
C) the hours up to the statutory maximum or the extra hours.
D) nothing.

Question 48

Carly is a minor. Without her parents' knowledge, she signs a contract to buy an airplane ticket to Hawaii for spring break. Carly's parents are

A) liable for the contract.
B) not liable for the contract.
C) liable for up to half the value of the goods in the contract.
D) liable for up to one third of the value of the goods in the contract.

Question 49

Katie buys a car when she is seventeen. When she is twenty-five, Katie tries to disaffirm the contract and recover all her car payments. A court will likely find that the contract was

A) ratified and Katie cannot recover her payments.
B) not ratified and Katie can recover her payments.
C) not a valid contract because Katie was a minor when she entered into it and she can recover her payments.
D) ratified, but Katie can still recover her payments because she was a minor when she entered into the contract.

Question 50

Jolie signs a contract with Keaton, an unlicensed physician, to perform a medical procedure. This contract is enforceable by

A) Jolie.
B) Jolie's medical insurance company.
C) Keaton.
D) no one.

Question 51

At age seventeen, Daryl enters into a contract to buy a dozen movies from eHD TV Stream, Inc., an online video service. Soon after reaching the age of ma?jority, Daryl attempts to disaffirm the contract. eHD files a suit against him. The court will most likely consider the contract ratified if it is

A) executed.
B) exculpatory.
C) express or implied.
D) emancipated.

Question 52

Odina signs a covenant not to compete with her employer, Penultimate 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 Penultimate pays additional consideration.

Question 53

Ruthie, a minor, charges the cost of an expensive leather jacket at a Girl's Trend store. Two nights later, Ruthie loses the jacket at Minors Only Club. She disaf?firms the jacket's purchase. Ruthie owes Girl's Trend the reasonable value of the jacket

A) if it is deemed a "necessary."
B) if it is deemed unnecessary.
C) under any circumstances.
D) under no circumstances.

Question 54

Betty is selling her used clothing shop on Main Street. In the sale agreement, there is a covenant not to compete that prohibits Betty from opening another used clothing shop within 300 miles of the shop she is selling. A court will most likely conclude that this restriction on competition is

A) reasonable.
B) unreasonable and order Betty's successor to stop doing business.
C) unreasonable and may reform the covenant .
D) unreasonable and prohibit both parties from opening used clothing shops.

Question 55

Garth owns two all-terrain vehicles (ATVs), worth $1,000 and $500, re?spec?tively. Helen agrees to buy "Garth's ATV" for $750. Garth believes, in good faith, that he is selling the $500 ATV. Helen believes, in good faith, that she is buying the $1,000 ATV. In this situation

A) Garth is entitled to $750 for the $500 ATV.
B) Helen is entitled to the $1,000 ATV for $750.
C) Helen must buy both ATVs for $1,500.
D) there is no contract.

Question 56

Doug agrees with Elinor to sell methamphetamine to patrons of Elinor's nightclub Garden of Eden for 25 percent of the take. Doug sells the drugs but keeps all of the money. Elinor can

A) recover her share of the money only if she did not aid in the crime.
B) not enforce the deal.
C) recover the total amount of the sales.
D) recover her costs but none of the illegal profit.

Question 57

Colleen is intoxicated, but still mentally capable of understanding the consequences of her actions when she signs a contract to sell the rights to her latest phone app design to Addie. The contract is

A) enforceable only if Colleen does not attempt to disaffirm it.
B) enforceable even if Colleen attempts to disaffirm it.
C) unenforceable if Addie attempts to disaffirm it.
D) enforceable only if Addie does not attempt to disaffirm it.

Question 58

Beth is a minor. She buys a set of sessions with a personal trainer, and a water bottle and some weights from a fitness store. Later, Beth decides that she does not want the water bottle or weights. In most states, Beth

A) can disaffirm the contract and return the water bottle and weights, but keep the training sessions.
B) can only disaffirm the contract if she returns all the goods.
C) cannot disaffirm the contract.
D) can disaffirm the contract and keep all the goods.

Question 59

Brasilia, a real estate broker licensed only in Connecticut, con?cludes a land sale in Delaware. She can

A) collect the commission if it has not been paid.
B) keep the commission if it has already been paid.
C) foreclose on the property to obtain any unpaid amount.
D) not collect the commission, keep it, or foreclose on the property.

Question 60

Lucy, a minor, disaffirms a contract for necessaries without returning the goods. To Manny's Food Mart, the seller, Lucy is required to pay

A) nothing.
B) the reasonable value of the goods.
C) the sales price of the goods.
D) the ultimate worth of the goods.

Question 61

Beau sells a car to Cody without disclosing that the odometer, which reads 40,000 miles, was disconnected 80,000 miles ago. Beau is liable for

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

Question 62

Selena buys a cell phone for $350 and an air hockey table for $1,500, and signs a one-year employment contract for a $4,000 monthly salary to start at the beginning of the next month. The Statute of Frauds covers

A) the employment contract, and the game table and phone purchases.
B) the employment contract and the game table purchase only.
C) the employment contract only.
D) the game table and phone purchases only.

Question 63

Chloe files a suit against Digital Associates, Inc. (DAI), to enforce a con?tract. The only written evidence of the contract is a memo on DAI's let?terhead as signed by a DAI officer in its files. The con?tract can be en?forced if the memo includes

A) a correct title, such as "Chloe-DAI Contract."
B) all essential terms.
C) a statement of the consideration.
D) the parties' addresses.

Question 64

Valley Tack Shop signs a contract with Gary's Boots and Saddles for delivery of five saddles that cost $200 each. To be enforceable under the Statute of Frauds, the written contract must designate

A) the method of delivery.
B) the method of payment.
C) the quantity of saddles.
D) the seller.

Question 65

Dixie May enters into a contract to buy one hundred pounds of pecans from Margaret. The contract must be in writing if the pecans cost

A) $100.
B) $150.
C) $250.
D) $500.

Question 66

Barb, a real estate agent, is showing John a house. She tells him that this is a house where "his family can live happily ever after." John buys the house, but his wife does not like it. John

A) can rescind the contract on the ground of fraud.
B) can rescind the contract on the ground of misrepresentation.
C) can rescind the contract on the ground of mistake.
D) was not defrauded.

Question 67

Multi Investments, Inc., offers to buy Nano Toy Corporation. On May 1, Nano provides copies of its financial statements for the pre?vious year, showing an inventory of $10 million. On May 15, Nano discovers that the previous year's inventory is overstated by $5 million, but does not inform Multi. On June 1, Multi, relying on the fi?nancial statements, buys Nano. On June 10, the buyer discovers the inven?tory over?statement. Can Multi succeed in a suit against Nano for fraud?

Question 68

Andy knows nothing about horses. Peter, an expert horse trainer, knows that a certain horse has no talent and is not likely to win any competitions. Peter convinces Andy to buy the horse for $500,000 by assuring him that it has great talent. The horse turns out to have no talent and never wins any competitions. Andy can most likely recover damages based on

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

Question 69

Best Products, Inc., hires Cole to develop and implement an e-commerce strategy for marketing Best's products. Cole signs a contract that in?cludes a clause prohibiting him from competing with Best during and af?ter the employment. Before the strategy is implemented, Cole resigns from Best's employ and opens a business to compete with Best. In Best's suit against Cole, what is the most important factor the court should consider in determining whether Cole should be allowed to compete with Best?

Question 70

Kathleen sells Richard a racehorse for $1,000. Both Kathleen and Richard think that the horse is too slow to win any races. Richard then enters the horse in a race, and it wins easily. He enters it in more races, and the horse soon wins more than $1 million. Kathleen tries to rescind the contract to sell the horse, claiming that it was worth more than $1,000. A court will

A) cancel the contract due to Kathleen's failure to know the horse's value.
B) cancel the contract due to Richard's failure to know the horse's price.
C) cancel the contract due to the difference between the contract price and the horse's true value.
D) enforce the contract.

Question 71

Wild Rides Theme Park owes money to both RollercoasterRepair, Inc. and Hot Dog Harry. RollercoasterRepair orally agrees to assume Wild Rides's debt to Hot Dog Harry to prevent Hot Dog Harry from filing suit against Wild Rides. This contract is enforceable by

A) no party.
B) any party.
C) Wild Rides only.
D) RollercoasterRepair only.

Question 72

James is in an art gallery when Mitch, who has no special art expertise, points to a painting and says, "That artist is so good. That piece will be worth a fortune in a few years!" James buys the painting, which does not turn out to be valuable. James tries to return the painting and recover his purchase price. A court will

A) order the art gallery to pay James the full purchase price.
B) order Mitch to pay James the full purchase price.
C) enforce the contract between James and the art gallery.
D) enforce the contract between James and the art gallery, but order Mitch to pay James the full purchase price.