Deck 8: Capacity and Legality

Question 1

The age when someone possesses capacity to contract is 21 years.

Answer 1

False

Question 2

Rachel, a 16 year old girl, buys a bike for $20 from an adult. From an adult. If she chooses she may avoid the contract because she is a minor.

Answer 2

True

Question 3

Intoxication will always negate capacity to contract.

Answer 3

False

Question 4

Capacity is the ability to make reasoned wise decisions when contracting.

Question 5

In C.M.D. v. Facebook, the court determined that a 13 year old never disaffirmed or disavowed the user agreement, therefore, Facebook was able to use his likeness in advertising.

Question 6

Determining if an adult is lucid, and thus possesses capacity to contract, is a bright-line rule and fairly easy to apply.

Question 7

Open-ended standards of determining capacity are more flexible and allow a greater range of discretion.

Question 8

If both the employer and the employee agree to it, the employer can pay the employee below minimum wage.

Question 9

If U.S. House Representative Jones agrees to get Valerie appointed to a community organizer position in his district so long as she agrees to give him a large donation to his political campaign, then that is an example of an agreement that is illegal as against public policy.

Question 10

If one party to a contract is not in pari delicto with the other party (that is, the one party is not as guilty as the other party) because he entered the contract due to the other party's fraud, duress, or strong economic pressure, the more innocent party may have restitution for the value of the portion of the contract he already performed.

Question 11

The ability to understand the terms of an agreement is

A) Maturity
B) Consideration
C) Capacity
D) Legality

Question 12

Examples of characteristics of individuals who lack capacity include all of the following except

A) Minors
B) Intoxicated individuals
C) Mental incompetents
D) Impulsive individuals

Question 13

Ralph, 32 years old, sells his car to Joe, 16 years old, thinking Joe is actually 18 years old. When Ralph finds out Joe is actually only 16 years old, he is outraged and wants to have the contract voided because Joe is a minor. Will Ralph be successful?

A) No the contract is only voidable by the Joe, the minor.
B) No because Ralph is actually guilty of a crime.
C) Yes because Joe is a minor.
D) Yes if the court determines that Joe lied to Ralph about his age.

Question 14

According to the contract laws of capacity, the age at which a person can contract is

A) 16 years
B) 21 years
C) 18 years
D) 25 years

Question 15

Kevin, at 17 ½ years of age, buys a motorcycle from an adult, Shelby. On his 18^th birthday Kevin continues to drive his motorcycle. Because he has done so, he becomes legally bound to the terms of the contract by

A) Ratification
B) Restitution
C) Affirmance
D) Acceptance

Question 16

16 year old Grace agrees to quit school to work for Andrew in his flower shop full-time. When Grace's mom finds out what she has done, she orders her to tell Andrew that she will quit the job. This is called

A) Revocation
B) Disaffirmance
C) Restitution
D) Destruction

Question 17

In the case of C.M.D. v. Facebook, Facebook allowed a minor to create a Facebook account, but the minor had to accept Facebook's terms, which included using the minor's name and likeness in advertisements. The minor's parents sued Facebook, claiming the terms of the agreement were not enforceable against a minor, and also claiming that the minor disaffirmed the agreement with Facebook. How did the court rule?

A) There never was a contract because the minor lacked capacity.
B) The contract was illegal and therefore unenforceable.
C) As long as the parents knew their child had a Facebook account and allowed it, they impliedly accepted the terms on behalf of the minor.
D) Since the minor kept using Facebook he never disaffirmed it.

Question 18

Leona is a mean, vindictive woman with a great deal of money. Instead of sharing her money with her family, she donates almost all of her fortune, $53,000,000.00, to the local dog pound in exchange for them naming the building shelter after her daughter. She laughs all the way home. When her daughter finds out, she challenges the contract by stating that her mother lacked legal mental capacity. What would most likely be the outcome of the case?

A) The court would determine that Leona had mental competency as she fully understood the consequences of her actions.
B) The court would determine that Leona lacked mental capacity because her actions were unwise and made out of vindictiveness.
C) The court would determine that Leona had mental capacity because there was consideration.
D) The court would determine that Leona lacked mental capacity because a reasonable person would not act as she did.

Question 19

At an after work networking event, Mike drinks wine while negotiating the terms of an employment contract with Cyndy to start the next day. Cyndy shows up to work the next day and Mike states that he was drunk the night before and therefore lacked capacity. The court will most likely rule

A) Any time a contract is entered into with alcohol, no matter the amount, the person drinking lacks capacity.
B) The contract is voidable by Cyndy if she believed Mike was drunk.
C) The contract is voidable by Mike if he can prove that at the time he entered into the contract his intoxication prevented him from understanding the consequences of his actions.
D) The contract is void because Cyndy had an affirmative obligation to stop the negotiations.

Question 20

To determine if a person is lucid, courts employ

A) A bright-line rule
B) A flexible standard
C) A fairness standard
D) A reasonableness standard

Question 21

The age when an individual becomes an adult is an example of

A) A bright-line rule
B) A flexible standard
C) A fairness standard
D) A reasonableness standard

Question 22

Caleb contracts with Eliza to beat up Mickey for $50.00. Is that agreement enforceable?

A) No it is illegal.
B) Yes as long as they understand the consequences of their actions.
C) No unless Caleb has already given her the money.
D) It is voidable at Eliza's discretion.

Question 23

The requirement that both the subject matter and performance of a contract must be legal is called

A) Capacity
B) Consideration
C) Legality
D) Validity

Question 24

For a contract to be enforceable it must not violate some __________.

A) Standard of fairness
B) Public policy
C) Requirement of wisdom
D) Standard of reasonableness

Question 25

Aimee and Claire both own their own bakeries in Edwardsville. They both agree with each other to sell their cupcakes for $5.00. Is this contract enforceable?

A) Yes because the promise to sell the cupcakes at $5.00 each by each person is consideration.
B) Yes as long as the price is fair and does not take advantage of consumers.
C) No as it is a restraint on trade which is against public policy.
D) No because it lacks mutual assent.

Question 26

Illegal contracts are

A) Void
B) Voidable
C) Unjust
D) A violation of the Uniform Commercial Code

Question 27

Tom is late for a class and tells his friend Shameem that he will pay her $100.00 to drive 20 miles over the speed limit so that he can make it to class on time. Is there a contract?

A) Yes as long as Shameem agrees to the terms and completes it
B) Yes as long as Shameem is able to get Tom to class on time
C) No as all contracts must be in writing to be enforceable
D) No as an agreement to violate a statue is illegal and void

Question 28

Common sense and conscience of the community extended and applied to matters of public morals, health, safety and welfare is

A) Fair-dealing
B) Ethical-dealing
C) Legal authority
D) Public Policy

Question 29

All newly hired attorneys at the law firm of Annaopoli, Windau and Holton must sign a covenant not to compete where they agree that if they leave the firm they will not practice in the same type of law, within 50 miles of the firm for a year after leaving. Miiko, a new attorney who signed the covenant, quits the firm and decides to open an office across the street. Will the covenant not to compete be enforceable?

A) No all covenants not to compete are illegal as against public policy.
B) Yes all covenants not to compete are legal.
C) Yes if the court determines that the covenant not to compete covers a relatively small area and time.
D) No if the court determines that it would impede Miiko's right to work.

Question 30

Senator Beach agrees with his donors that if they give him $500 he will arrange a meeting with a group of Senators. Brett donates $500 and requests the meeting but is denied. He sues Senator Beach for breach of contract. Will he be successful?

A) No donations are not contracts.
B) No it is illegal to sell public office influence and time.
C) Yes as long as he can prove that both parties were aware of the terms of the agreement.
D) Yes as long as he can prove that the reasonable person would have agreed to the arrangement.

Question 31

Gigi Hilonder, an up and coming tennis star on the tennis circuit, travels to Atlanta to compete in a tournament. Officer Grant, an Atlanta police officer on duty during her tournament, offers to give Gigi "added" security for an additional $100 a day, by standing outside her door and promising to aid her before anyone else should she need it. Gigi readily agrees as her popularity is sky-rocketing and her fans are intrusive. Is this a contract?

A) Yes as Officer Grant is providing an extra feature to his job that has legal value.
B) No because a public officer cannot accept greater pay other than what is fixed by law as it is against public policy.
C) Yes as long as Gigi understands the consequences of the terms of the agreement.
D) No as the facts do not indicate that the agreement was in writing and employment contracts must be in writing to be enforceable.

Question 32

Lotta sells illegal ivory to Johan for $1000.00. Johan gives Lotta the money but Lotta only supplied Johan with half the promised ivory. Johan sues Lotta for breach of contract to force her to provide the remaining promised amount. In general, what most likely will be the outcome of this suit?

A) Both parties will be arrested.
B) The court will force Lotta to provide the remaining amount.
C) Nothing as the courts will leave the parties as is and not enforce recovery or rescission.
D) Fine both parties but then enforce the agreement.

Question 33

If an agreement is illegal in purpose and unperformed

A) Either party will be able to enforce it.
B) Neither party will be able to enforce it.
C) Either party will be able to enforce it if the illegality is not central to the agreement.
D) Neither party will be able to enforce it unless the court determines it would result in an unjust enrichment.

Question 34

25 year old Chloe agrees to sell 10 bottles of vodka to 21 year old Victor for $300.00 and two pounds of an illegal drug for $200.00. She delivers the vodka and illegal drug to Victor but he refuses to pay for the alcohol, stating it was not the brand that he wanted, and he also refused to pay for the illegal drug. She sues him for breach of contract. What will be the outcome of the suit?

A) The court will enforce only the portion of the agreement that is legal, the sale of the Vodka to Victor.
B) The court will most likely enforce the entire agreement against Victor, who is old enough to purchase alcohol.
C) The court will determine the entire agreement is illegal and unenforceable.
D) The court will force Victor to pay the entire agreed upon amount.

Question 35

In pari delicto means

A) In part diligent
B) Not as guilty as
C) Partially delirious
D) Most likely illegal

Question 36

If a person if not as guilty as another person in entering an agreement that is illegal based upon fraud, the less guilty person

A) Will be considered just as guilty as the other person
B) Will be fined for lack of knowledge
C) May be held criminally responsible if the courts determine that person should have known of the illegality
D) May have restitution for the portion of the performance the less guilty person performed.

Question 37

Janet attends a "purse party" at her friend Nancy's house. Nancy claims she made all of the quilted purses she is selling. Janet purchases one of Nancy's handmade purses for $50.00. A few days later Janet finds out that Nancy did not make the purses, but instead stole them from a warehouse. Would Janet be able to get any of the money back that she paid for the purse?

A) No. If the agreement is illegal neither party will be reimbursed.
B) Maybe. Under the concept of in pari delicto if the court determine one party is less guilty because of fraud, that person may get restitution.
C) Yes. The court will always attempt to make the parties whole again.
D) No. Under the concept of in pari delicto, if one party is guilty then all parties are guilty and cannot profit from bad conduct.

Question 38

When a person lacks capacity, generally those contracts are

A) Voidable
B) Void
C) Unenforceable
D) Illegal

Question 39

Once a minor reaches majority, if that person continues with the terms of the contract they have __________ the contract.

A) Affirmed
B) Renegotiated
C) Rescinded
D) Ratified

Question 40

If a person to an agreement lacks capacity, that person may challenge the agreement if

A) Both parties lacked the capacity
B) The person who lacked the capacity is determined to have been taken advantage of.
C) The person who lacked capacity chooses to do so.
D) The person who lacked capacity was not unjustly enriched.

Question 41

An action by a minor to avoid the obligations under a contract that has been performed is

A) A reaffirmance
B) A disaffirmance
C) An unaffirmance
D) A revocation

Question 42

Mandy, a minor, disaffirms an agreement to purchase a car from Jamie, an adult, for $1000.00. Must Mandy give back the car?

A) No since she lacked capacity it was not a contract but a gift.
B) No because courts do not require minors to return it to discourage adults from contracting with minors.
C) Yes unless she no longer owns it.
D) Yes in order to disaffirm it, the minor must return whatever consideration received.

Question 43

Dottie, 15 years old, purchases a pint of milk and drinks it all. While she is not old enough to have contractual capacity, under what theory would she be held liable for this item that is necessary for her health and welfare?

A) Necessaries
B) Emancipation
C) Unjust enrichment
D) Maturation

Question 44

Hailey purchased an automobile insurance policy through State Insurance. However, State Insurance failed to use the proper legally mandated insurance form. Hailey gets into an accident and seeks to use her policy. Which statement below is most likely correct concerning the outcome of the issue?

A) Since State Insurance did not use the proper legally mandated insurance form, the agreement is illegal and therefore unenforceable.
B) Since Hailey has a legal responsibility to ensure that she is complying with the law when entering into a legal agreement, the agreement is unenforceable.
C) Even though the form may not be the legally approved form, an insured under the policy may still enforce that policy.
D) The court will have to determine if Hailey possessed actual knowledge to determine if the insurance policy is enforceable.

Question 45

In Sparrow v. Demonico, the court ruled that in order for a person to lack mental capacity due to a mental illness

A) Always requires a medical diagnosis.
B) Be permanent and progressive.
C) The person must be on medication for a mental illness.
D) Must focus on a party's understanding at the time of the disputed transaction.

Question 46

Explain the difference between bright-line tests and flexible standards used when determining capacity. When do courts choose to employ one method over another?

Question 47

Contracts may be determined illegal not only because it violates a statute but also because it violates public policy. Why is this so? Explain the rationale behind the public policy illegality and give an example.

Question 48

Explain the process of disaffirmance of a contract if one of the parties to the contract is a minor.

Question 49

Luke, an adult, enters into an agreement with Ashlynn, 17 & ½ years old, wherein she agrees to mow his lawn every week for the next year at $50.00 a week. As a term of the contract, Luke also requires Ashlynn to use a lawnmower that violates a state statute as it pollutes the air that substantially exceeds allowed emission limits. Ashlynn mows the lawn every week until after her 18^th birthday until one day local police issue a citation to her for the use of the lawnmower. Given this fact pattern, discuss whether a contract existed based on capacity and legality.