Deck 10: Consideration

Question 1

Which of the following is an element of a legally binding contract?

A) Inquiry
B) Acknowledgement
C) Capacity
D) Knowledge
E) Affirmance

Answer 1

C
Explanation: Capacity is the third element of a legally binding contract.

Question 2

As a general rule, parents are not liable for contracts entered into by their minor children.

Answer 2

True
Explanation: As a general rule, parents are not liable for the contracts entered into by their minor children.

Question 3

A person who has legal _____________ to contract is one who has the mental ability to understand his or her rights and obligations under a contract and, therefore, will presumably be able to understand how to comply with the terms of the agreement.

A) Capacity
B) Understanding
C) Ratification
D) History
E) Consideration

Answer 3

A
Explanation: A person who has legal capacity to contract is one who has the mental ability to understand his or her rights and obligations under a contract and therefore will presumably be able to understand how to comply with the terms of the agreement.

Question 4

Because their contracts are _____________, minors have the right, until a reasonable time after reaching the age of majority, to __________, or avoid, their contracts.

A) Void; disaffirm
B) Void; affirm
C) Void; resist
D) Voidable; disaffirm
E) Voidable; affirm

Question 5

A contract of an intoxicated person for necessaries will be enforced for the reasonable value of the necessaries.

Question 6

For purposes of determining capacity, intoxicated persons include those under the influence of alcohol, but not drugs.

Question 7

When a contract is overturned due to having illegal subject matter or being illegal to perform, the attempted contract is generally declared voidable.

Question 8

In most states a person is given full legal capacity to enter into contracts when he or she becomes _____________ before reaching the age of majority.

A) Emancipated
B) Freed
C) Released
D) Employed
E) Either released or employed

Question 9

Exculpatory clauses are illegal as a matter of law.

Question 10

In most cases, when a minor marries, she or he is considered _____________.

A) Emancipated
B) Freed
C) Released
D) Disaffirmed
E) Either freed or disaffirmed depending on the circumstances

Question 11

A minor who chooses to disaffirm a contract may disaffirm the entire contract or any part of it.

Question 12

Historically, which of the following were considered people with limited or no capacity?

A) Minors
B) Insane persons
C) Women
D) Minors and insane persons, but not women
E) Minors, insane persons, and women

Question 13

What was the result in Swalberg v. Hannegan, the case in the text in which the minor attempted to disaffirm a contract for the purchase of an automobile?

A) The minor was legally required to restore the other contracting party to his pre-contract position.
B) The minor was not allowed to disaffirm the contract because a vehicle was involved.
C) The minor was not allowed to disaffirm the contract because a contract in an amount over $10,000 was involved.
D) The minor was not allowed to disaffirm the contract because a contract in an amount over $5,000 was involved.
E) The minor was allowed to disaffirm the contract and was not required to restore the other contracting party to his pre-contract position.

Question 14

Which of the following is some sort of mental or physical defect that prevents a person from being able to enter into a legally binding contract?

A) Immajority
B) Capacity
C) Chronic illness
D) Incapacity
E) None of these

Question 15

Which of the following occurs when a minor's parents or legal guardians give up their right to exercise legal control over the minor, typically when the minor moves out of the parents' house and begins supporting himself or herself?

A) Ratification
B) Disaffirmance
C) Emancipation
D) Legal release
E) Reaffirmance

Question 16

Today in all but _____________ states, a minor is someone under the age of _____________.

A) 2; 18
B) 3; 18
C) 5; 18
D) 5; 21
E) 7; 21

Question 17

Under federal law parents are responsible for the torts of their minor children without any showing of lack of supervision on the part of the parents.

Question 18

In the law, when both parties are equally responsible for an illegal agreement, it is known as in pari delicto.

Question 19

If a person's mental deficiencies have resulted in his being adjudicated insane and a guardian has been appointed for him, he has no capacity to enter into contracts, and any contract he attempts to enter into is void.

Question 20

Today, married women have been removed from the category of those lacking contractual capacity, although in a few states their capacity to enter into certain kinds of contracts is still limited.

Question 21

Which of the following is false regarding contracts for necessaries entered into by minors?

A) A minor cannot disaffirm contracts for necessaries.
B) A minor can disaffirm a contract for necessaries, but the minor will still be held liable for the reasonable value of the necessary.
C) A contract for a necessary is a contract that supplies the minor with the basic necessities of life.
D) The purpose of the limitation on the minor's right to disaffirm contracts for necessaries is to ensure that minors are able to obtain the basic necessities of life when their parents will not provide them.
E) Whether something is considered a necessary, is related to whether the minor's parents are willing to provide the item in question for the minor.

Question 22

Which of the following was the result in the Case Opener, the case in which the plaintiff attempted, almost a year after attaining the age of majority, to disaffirm contracts for aviation courses on the basis that he had entered into the contracts as a minor?

A) That it was unreasonable for the plaintiff to wait so long after attaining the age of majority to attempt to disaffirm and that the contracts would be enforced.
B) That the services were necessaries entitling the defendant to enforcement of the contracts.
C) Both that it was unreasonable for the plaintiff to wait so long after attaining the age of majority to attempt to disaffirm and that the contracts would be enforced and that the services were necessaries entitling the defendant to enforcement of the contracts.
D) That the contracts would be enforced against the plaintiff's parents but not against the plaintiff.
E) That it was not unreasonable for the defendant to disaffirm his contracts almost a year after attaining the age of majority and that the disaffirmance would be allowed.

Question 23

If a legal contract is formed and the subject of the contract then becomes illegal under a new statute, the contract is _____________.

A) Discharged
B) Enforced
C) Disregarded
D) Executed
E) Executory

Question 24

Which of the following was the result in John Miller v. Jay Preefer, Richard Preefer, Compromised Management, Inc. and Palm Beach Ale House and Raw Bar, Inc., the case in the text involving Florida law in which the plaintiff claimed that a covenant not to compete in regard to the restaurant business entered into in conjunction with a settlement agreement was unenforceable as a violation of public policy?

A) That Florida law provides for enforceability of covenants not to compete under specific circumstances including when entered into as part of a settlement agreement.
B) That all covenants not to compete, including the one at issue, were illegal under Florida law.
C) That Florida law enforces all covenants not to compete.
D) That the covenant not to compete was illegal only because the time constraint was excessive.
E) That the plaintiff waited too long to sue after the final judgment incorporating the covenant not to compete and that the covenant not to compete was, therefore, enforceable.

Question 25

Which of the following is true regarding the ability of persons suffering from a mental illness to enter into a binding contract?

A) Persons suffering from a mental illness never have capacity to enter into a binding contract.
B) Persons suffering from a mental illness have full capacity to enter into a binding contract so long as they do not present a danger to themselves or others.
C) Persons suffering from a mental illness have full capacity to enter into a binding contract so long as they inform the other party that they are in treatment.
D) Persons suffering from a mental illness may have full, limited, or no legal capacity to enter into a binding contract depending on the nature and extent of their mental deficiency.
E) Persons who suffer from a mental illness always have full capacity to enter into a binding contract.

Question 26

Which of the following is true regarding the obligation of a minor on disaffirmance?

A) In all states, a minor must return any consideration in his control but is entitled to a full refund of any purchase price regardless of the condition of the consideration when returned.
B) In all states, a minor is entitled to a full refund without returning consideration.
C) In all states, a minor must return any consideration in his control, must make restitution, and must pay for any loss in value of the collateral.
D) In all states, a minor only receives a return of half the minor's investment.
E) The obligations of a minor on disaffirmance vary from state to state.

Question 27

Guardians may be appointed for which of the following?

A) Only those who are adjudicated insane.
B) Only those who are adjudicated habitual drunkards.
C) Only those whose judgment has been impaired because of a condition such as Alzheimer's.
D) Those who are adjudicated insane or those whose judgment has been impaired because of a condition such as Alzheimer's, but not those who are adjudicated habitual drunkards.
E) Those who are adjudicated insane, those whose judgment has been impaired because of a condition such as Alzheimer's, and also those who are adjudicated habitual drunkards.

Question 28

If a licensing statute is intended to protect the public's health, safety, and welfare, an agreement with an unlicensed professional is typically deemed ___________.

A) Executed
B) Enforceable without a fine
C) Illegal and unenforceable
D) Enforceable but with a fine
E) Usurious

Question 29

Which of the following is the majority rule regarding a minor's misrepresentation of his or her age?

A) That if a competent party relies on a misrepresentation in good faith, the minor gives up the right to disaffirm the agreement.
B) That the minor must restore the competent party to that party's precontract position before obtaining the disaffirmance.
C) That the minor may disaffirm but that the competent party has the right to sue the minor in tort and recover damages for fraud.
D) That misrepresentation does not affect the minor's right to disaffirm the contract.
E) That misrepresentation results in the minor receiving a return of only half the consideration he or she supplied.

Question 30

Which of the following is true regarding an agreement to commit a crime or a tort?

A) An agreement to commit a crime is enforceable, but an agreement to commit a tort is unenforceable.
B) An agreement to commit a tort is enforceable, but an agreement to commit a crime is unenforceable.
C) An agreement to commit a crime is unenforceable, and an agreement to commit a tort is unenforceable unless a business tort in involved in which case the agreement is enforceable.
D) An agreement to commit a crime is unenforceable except an agreement to commit white collar crime in which case the agreement is enforceable; and an agreement to commit a tort is unenforceable unless a business tort is involved in which case the agreement is enforceable.
E) An agreement to commit a crime is unenforceable, and an agreement to commit a tort is also unenforceable.

Question 31

A[n] _____________ occurs when a former minor does not specifically state that he affirms a contract entered into as a minor but takes some action that is consistent with intent to ratify the contract.

A) Implied ratification
B) Express ratification
C) Express novation
D) Implied novation
E) Disaffirmance

Question 32

How many states have statutes requiring that people working in certain professions obtain a license before practicing their craft?

A) 50
B) 49
C) 45
D) 30
E) 25

Question 33

As a general rule, most states will not allow a minor to disaffirm contracts for which of the following?

A) Life insurance
B) Health insurance
C) Psychological counseling
D) Life insurance, health insurance, and psychological counseling
E) Life insurance and health insurance, but not psychological counseling

Question 34

Which of the following occurs when a person reaches the age of majority and states, either orally or in writing, that he or she intends to be bound by the contact entered into as a minor?

A) Implied ratification
B) Express ratification
C) Express novation
D) Implied novation
E) Disaffirmance

Question 35

Which of the following is the maximum interest rate?

A) 20%.
B) 15%
C) 12%
D) 10%
E) It varies depending on the state involved.

Question 36

Which of the following occurs when a party gives a loan at an interest rate exceeding the legal maximum?

A) No enforceable legal violation
B) Interest prohibition
C) Principle reduction
D) Usury
E) Plenary

Question 37

How many states engage in at least some regulation of gambling?

A) 50
B) 47
C) 40
D) 35
E) 10

Question 38

When must a disaffirmance of a contract based on minority occur?

A) Before or within a reasonable time of the minor's reaching the age of majority.
B) Within 30 days of the minor's reaching the age of majority.
C) Within 60 days of the minor's reaching the age of majority.
D) Within 90 days of the minor's reaching the age of majority.
E) Within one year of the minor's reaching the age of majority.

Question 39

Which of the following is true in regard to how Chinese law treats contracts entered into by minors?

A) Because parents are considered responsible for their children's actions, parents are held responsible for any contracts entered into by their minor children.
B) Minors are held responsible only for contracts involving necessities.
C) Minors are not held responsible for any contracts, and contracting with a minor is illegal subjecting the adult contracting party to prison time.
D) Children between ten and eighteen are deemed competent for entering into certain contracts appropriate to each child's mental state.
E) Children are held responsible only for contracts involving educational expenses.

Question 40

Which of the following is true if a contract is disaffirmed on the basis of intoxication?

A) Each party to the contract must return the other to the condition he or she was in at the time the contract was entered into.
B) The intoxicated person must be returned to the condition he or she was in at the time the contract was entered into, but that is not true for any other party.
C) Any party other than the intoxicated person must be returned to the condition he or she was in at the time the contract was entered into.
D) So long as the contract was objectively fair, neither party must be returned to the condition he or she was in prior to the time the contract was entered into.
E) So long as the contract was subjectively fair in the opinion of the intoxicated party, neither party must be returned to the condition he or she was in prior to the time the contract was entered into.

Question 41

A statement releasing one of the parties to an agreement from all liability, regardless of who is at fault or what the injury suffered is, would be referred to as a[n] _____________.

A) Substantive agreement
B) Adhesion agreement
C) In pari delicto agreement.
D) Exculpatory
E) Res Ipsa

Question 42

Reference - Irresponsible Teen. At age 17, in a state in which the age of majority is 18, Sally purchased a prom dress from Formal Stuff. She wore it to the prom and then attempted to return it to the store claiming that she was a minor and that she was entitled to a refund. The dress had clearly been worn and had a purple stain which Sally claimed was from grape juice. Additionally, a few days before she turned 18, Sally purchased a used car from Dings and Dents used cars. She had a deal whereby she paid $100 per month on the car. She drove the car and made payments for fourteen months after she turned 18. Then, she returned the car to Dings and Dents and told them that she wanted all her money back. Dings and Dents claimed the car was a necessity. Sally and her parents claimed that the parents were ready and willing to provide a car to Sally and that she only purchased the car from Dings and Dents because she liked that particular style and color. When purchases of the dress and car were made, the sellers knew that Sally was under the age of 18. Which of the following is true regarding Sally's attempt to return the damaged dress?

A) In all states Sally has the right to keep the dress and get a refund.
B) In all states Sally must return the dress; but she has a right to a full refund.
C) Regardless of what she does with the dress, Sally has no right to a refund in any state.
D) In some states Sally would have an obligation of restitution to the store.
E) In all states Sally would have an obligation of restitution to the store.

Question 43

Reference - Useless Friend. Charles, who is very gullible, is friends with Bobby. Bobby, who cannot be trusted, decides to try to bind Charles to a contract in Bobby's favor. Bobby has Charles sign a contract promising to wash Bobby's car once a week for a month for $80. The contract incorporated by reference terms on the back. The terms on the back were in very small print and required Charles for one year to cook dinner for Bobby, do his laundry, and clean his apartment. Bobby is also very angry with his former girlfriend, Tessa, and decides to start rumors, that would constitute the tort of defamation, such as that she has a vile disease, cheated on tests, and stole from friends. Bobby wants to enlist the help of Charles but knows that Charles would be hesitant to assist in his endeavors. One evening, however, Charles drank too much beer and was clearly intoxicated - a fact apparent to Bobby. Bobby had him sign a contract agreeing to defame Tessa for $50. When he sobers up, Charles tells Bobby that he was drunk and that he has no intention of defaming Tessa, who also happens to be Charles' new girlfriend. He also finally takes a look at the contract involving work for Bobby and tells Bobby that the contract is outrageous and that he has no intentions of going through with any of it. Which of the following would be a possible defense to the contract as far as the harsh and lopsided requirements involving chores is concerned?

A) Substantive unconscionability
B) Unclear drafting
C) Procedural unconscionability
D) Outrageous wording
E) Adhesion conscionability

Question 44

Reference - Beauty Shop Woes. When Janice went to work as a hair stylist in Rick's beauty shop, she entered into an agreement with Rick whereby if she left she would not work for another beauty shop within 50 miles for 2 years. Rick trained Janice in a number of new techniques. After nine months, Janice was offered a great job down the street at a new beauty shop, quit Rick, and had a number of customers follow her down the street to her new job. Rick claimed that she had signed a contract and had no right to go to work at the new shop. Janice disagreed and told Rick that no judge in the country would enforce such an agreement. Janice told Rick that she was more worried about a customer, Treena, who was threatening to sue her because her hair turned green after Janice worked on it. Janice agreed that Treena's hair was damaged. Janice pointed out, however, that she told Treena that odd results could result from a dye attempt, and she required that Treena sign a contract releasing Janice from all liabilities before she did anything with Treena's hair. Treena, however, sued anyway. Which of the following is true regarding the enforceability of the clause providing that Treena not hold Janice liable for any bad results?

A) Such clauses are enforced so long as no duress was applied.
B) Such clauses are never enforced.
C) Such clauses are always enforced so long as the complaining party had the capacity to contract.
D) Such clauses are enforced unless a person sustains a physical injury, and hair damage would not qualify as a physical injury.
E) Such clauses might be enforced if the contract involves private businesses providing nonessential services.

Question 45

Reference - Beauty Shop Woes. When Janice went to work as a hair stylist in Rick's beauty shop, she entered into an agreement with Rick, whereby, if she left she would not work for another beauty shop within 50 miles for 2 years. Rick trained Janice in a number of new techniques. After nine months, Janice was offered a great job down the street at a new beauty shop, quit Rick, and had a number of customers follow her down the street to her new job. Rick claimed that she had signed a contract and had no right to go to work at the new shop. Janice disagreed and told Rick that no judge in the country would enforce such an agreement. Janice told Rick that she was more worried about a customer, Treena, who was threatening to sue her because her hair turned green after Janice worked on it. Janice agreed that Treena's hair was damaged. Janice pointed out, however, that she told Treena that odd results could result from a dye attempt, and she required that Treena sign a contract releasing Janice from all liabilities before she did anything with Treena's hair. Treena, however, sued anyway. The agreement Rick and Janice entered into is referred to as which of the following?

A) A competition agreement
B) A prohibited competition agreement
C) A covenant not to misappropriate
D) A policy agreement
E) A covenant not to compete

Question 46

Which of the following involves overly harsh or lopsided substance in an agreement?

A) Substantive unconscionability
B) Adhesion conscionability
C) Procedural unconscionability
D) Exculpatory clauses
E) An in pari delicto agreement.

Question 47

Reference - Beauty Shop Woes. When Janice went to work as a hair stylist in Rick's beauty shop, she entered into an agreement with Rick whereby if she left she would not work for another beauty shop within 50 miles for 2 years. Rick trained Janice in a number of new techniques. After nine months, Janice was offered a great job down the street at a new beauty shop, quit Rick, and had a number of customers follow her down the street to her new job. Rick claimed that she had signed a contract and had no right to go to work at the new shop. Janice disagreed and told Rick that no judge in the country would enforce such an agreement. Janice told Rick that she was more worried about a customer, Treena, who was threatening to sue her because her hair turned green after Janice worked on it. Janice agreed that Treena's hair was damaged. Janice pointed out, however, that she told Treena that odd results could result from a dye attempt, and she required that Treena sign a contract releasing Janice from all liabilities before she did anything with Treena's hair. Treena, however, sued anyway. Which of the following is true regarding Janice's claim that no judge in the country would enforce such an agreement?

A) She is correct because such agreements are considered in restraint of trade in every state.
B) She is incorrect because such agreements are criminally illegal in every state.
C) She is incorrect because while no court would approve a geographical restriction, some courts recognize time restrictions as being valid.
D) She is incorrect because all courts approve such agreements so long as it can be shown the employee gained a benefit other than pay from the employment.
E) She is incorrect because courts across the country vary in regards to the enforceability of such agreements.

Question 48

Which of the following are contracts that contain multiple parts which can each be performed separately?

A) Independent contracts
B) Substantive contracts
C) Adhesion contracts
D) Justifiable contracts
E) Severable contracts

Question 49

Bob is hired to do computer sales for an electronics store. He agrees that if he leaves his employment, he will not work for another computer store within 25 miles for a period of two years. That type of agreement is called a[n] _____________.

A) Covenant not to compete
B) Employment covenant
C) Working covenant
D) Termination agreement
E) Public policy agreement

Question 50

Reference - Irresponsible Teen. At age 17, in a state in which the age of majority is 18, Sally purchased a prom dress from Formal Stuff. She wore it to the prom and then attempted to return it to the store claiming that she was a minor and that she was entitled to a refund. The dress had clearly been worn and had a purple stain which Sally claimed was from grape juice. Additionally, a few days before she turned 18, Sally purchased a used car from Dings and Dents used cars. She had a deal whereby she paid $100 per month on the car. She drove the car and made payments for fourteen months after she turned 18. Then, she returned the car to Dings and Dents and told them that she wanted all her money back. Dings and Dents claimed the car was a necessity. Sally and her parents claimed that the parents were ready and willing to provide a car to Sally and that she only purchased the car from Dings and Dents because she liked that particular style and color. When purchases of the dress and car were made, the sellers knew that Sally was under the age of 18. In the dispute between Sally and the owner of Dings and Dents, which of the following is true regarding the defense of Sally and her parents that the car was a necessary?

A) The claim will have no effect because the law does not recognize the concept of necessaries when minors are involved.
B) Social status is always irrelevant in addressing a claim that an item was a necessary.
C) Whether or not parents would buy the item at issue is irrelevant in addressing a claim that an item was a necessary.
D) A minor may not disaffirm a contract for a necessary.
E) Even if a minor is allowed to disaffirm a contract for a necessary, the minor will still be held liable for the reasonable value of the necessary.

Question 51

A[n] _____________ contract is one requiring complete performance by both parties, even if it appears as if the contract contains multiple parts.

A) Adhesion
B) Divisible
C) Justifiable
D) Indivisible
E) Independent

Question 52

The term _____________ refers to the fact that an agreement is so unfair that it is void of conscience.

A) Unreasonable
B) Outrageous
C) Unconscionable
D) Unrealistic
E) Unbelievable

Question 53

A[n] _____________ contract is a contract created by a party to an agreement that is presented to the other party on a take-it-or-leave-it basis.

A) Substantively unconscionable
B) Adhesion
C) Outrageous
D) Procedurally unreasonable
E) Unreasonable

Question 54

Reference - Useless Friend. Charles, who is very gullible, is friends with Bobby. Bobby, who cannot be trusted, decides to try to bind Charles to a contract in Bobby's favor. Bobby has Charles sign a contract promising to wash Bobby's car once a week for a month for $80. The contract incorporated by reference terms on the back. The terms on the back were in very small print and required Charles for one year to cook dinner for Bobby, do his laundry, and clean his apartment. Bobby is also very angry with his former girlfriend, Tessa, and decides to start rumors, that would constitute the tort of defamation, such as that she has a vile disease, cheated on tests, and stole from friends. Bobby wants to enlist the help of Charles but knows that Charles would be hesitant to assist in his endeavors. One evening, however, Charles drank too much beer and was clearly intoxicated - a fact apparent to Bobby. Bobby had him sign a contract agreeing to defame Tessa for $50. When he sobers up, Charles tells Bobby that he was drunk and that he has no intention of defaming Tessa, who also happens to be Charles' new girlfriend. He also finally takes a look at the contract involving work for Bobby and tells Bobby that the contract is outrageous and that he has no intentions of going through with any of it. Which of the following would be a possible defense to Bobby's contract involving chores based upon the small print on the back of the contract?

A) Substantive unconscionability
B) Unclear drafting
C) Procedural unconscionability
D) Outrageous wording
E) Adhesion conscionability

Question 55

Reference - Beauty Shop Woes. When Janice went to work as a hair stylist in Rick's beauty shop, she entered into an agreement with Rick whereby if she left she would not work for another beauty shop within 50 miles for 2 years. Rick trained Janice in a number of new techniques. After nine months, Janice was offered a great job down the street at a new beauty shop, quit Rick, and had a number of customers follow her down the street to her new job. Rick claimed that she had signed a contract and had no right to go to work at the new shop. Janice disagreed and told Rick that no judge in the country would enforce such an agreement. Janice told Rick that she was more worried about a customer, Treena, who was threatening to sue her because her hair turned green after Janice worked on it. Janice agreed that Treena's hair was damaged. Janice pointed out, however, that she told Treena that odd results could result from a dye attempt, and she required that Treena sign a contract releasing Janice from all liabilities before she did anything with Treena's hair. Treena, however, sued anyway. What type of clause did Janice have Treena sign to the effect that she would not hold Janice liable for any bad results?

A) Adhesion
B) Exculpatory
C) Procedural
D) Substantive
E) Malfeasance

Question 56

A party who claims that he or she could not understand contractual terms because of tiny, hard-to-read print on the back of an agreement and the excessive use of legalese is referring to which of the following?

A) Substantive unconscionability
B) Adhesion conscionability
C) Procedural unconscionability
D) Exculpatory clauses
E) An in pari delicto agreement.

Question 57

Reference - Useless Friend. Charles, who is very gullible, is friends with Bobby. Bobby, who cannot be trusted, decides to try to bind Charles to a contract in Bobby's favor. Bobby has Charles sign a contract promising to wash Bobby's car once a week for a month for $80. The contract incorporated by reference terms on the back. The terms on the back were in very small print and required Charles for one year to cook dinner for Bobby, do his laundry, and clean his apartment. Bobby is also very angry with his former girlfriend, Tessa, and decides to start rumors, that would constitute the tort of defamation, such as that she has a vile disease, cheated on tests, and stole from friends. Bobby wants to enlist the help of Charles but knows that Charles would be hesitant to assist in his endeavors. One evening, however, Charles drank too much beer and was clearly intoxicated - a fact apparent to Bobby. Bobby had him sign a contract agreeing to defame Tessa for $50. When he sobers up, Charles tells Bobby that he was drunk and that he has no intention of defaming Tessa, who also happens to be Charles' new girlfriend. He also finally takes a look at the contract involving work for Bobby and tells Bobby that the contract is outrageous and that he has no intentions of going through with any of it. Which of the following is true regarding Charles' claim that he had no obligation to defame Tessa?

A) Charles is correct in that he could not be legally obligated to commit defamation.
B) Charles is correct only if it can be proven that the defamation would cause Tessa money damages.
C) Charles is correct only if it can be proven that the defamation would cause Tessa actual injury.
D) Charles is correct only if it can be proven that the defamation is undeserved.
E) Charles is correct only if it can be proven that he had a prior relationship with Tessa.

Question 58

Reference - Useless Friend. Charles, who is very gullible, is friends with Bobby. Bobby, who cannot be trusted, decides to try to bind Charles to a contract in Bobby's favor. Bobby has Charles sign a contract promising to wash Bobby's car once a week for a month for $80. The contract incorporated by reference terms on the back. The terms on the back were in very small print and required Charles for one year to cook dinner for Bobby, do his laundry, and clean his apartment. Bobby is also very angry with his former girlfriend, Tessa, and decides to start rumors, that would constitute the tort of defamation, such as that she has a vile disease, cheated on tests, and stole from friends. Bobby wants to enlist the help of Charles but knows that Charles would be hesitant to assist in his endeavors. One evening, however, Charles drank too much beer and was clearly intoxicated - a fact apparent to Bobby. Bobby had him sign a contract agreeing to defame Tessa for $50. When he sobers up, Charles tells Bobby that he was drunk and that he has no intention of defaming Tessa, who also happens to be Charles' new girlfriend. He also finally takes a look at the contract involving work for Bobby and tells Bobby that the contract is outrageous and that he has no intentions of going through with any of it. Which of the following is true under the Restatement of Contracts, Section 16, regarding the claim of Charles that he should be able to avoid the contract involving Tessa because he was intoxicated?

A) Contracts of an intoxicated person are voidable by the intoxicant if the other party had reason to know that because of the intoxicated person's condition, that person was unable to understand the nature and consequences of the transaction or was unable to act in a reasonable manner in relation to the transaction.
B) Contracts of an intoxicated person are void if the other party had reason to know that because of the intoxicated person's condition, that person was unable to understand the nature and consequences of the transaction or was unable to act in a reasonable manner in relation to the transaction.
C) Contracts of an intoxicated person are enforceable because a person should be bound by his or her actions.
D) Contracts of an intoxicated person are void only if it can be proven that the other party was involved in encouraging the abuse of alcohol by the intoxicated person.
E) Contracts of an intoxicated person are voidable by the intoxicant only if it can be proven that the other party was involved in encouraging the abuse of alcohol by the intoxicated person.

Question 59

Reference - Irresponsible Teen. At age 17, in a state in which the age of majority is 18, Sally purchased a prom dress from Formal Stuff. She wore it to the prom and then attempted to return it to the store claiming that she was a minor and that she was entitled to a refund. The dress had clearly been worn and had a purple stain which Sally claimed was from grape juice. Additionally, a few days before she turned 18, Sally purchased a used car from Dings and Dents used cars. She had a deal whereby she paid $100 per month on the car. She drove the car and made payments for fourteen months after she turned 18. Then, she returned the car to Dings and Dents and told them that she wanted all her money back. Dings and Dents claimed the car was a necessity. Sally and her parents claimed that the parents were ready and willing to provide a car to Sally and that she only purchased the car from Dings and Dents because she liked that particular style and color. When purchases of the dress and car were made, the sellers knew that Sally was under the age of 18. In the dispute between Sally and the owner of Dings and Dents, which of the following is true regarding any claim that Sally affirmed the contract?

A) So long as, after reaching the age of majority, Sally did not state orally or in writing that she intended to be bound by the contract, then she did not commit the type of express ratification required for her to be bound.
B) Sally may have impliedly ratified the contract by making payments for so long after she turned 18.
C) An implied ratification occurs when parents agree to accept the debt entered into by a minor.
D) If Sally caused any damage whatsoever to the car, she was said to have impliedly ratified the contract.
E) Sally was required to expressly ratify the contract before she could be bound to it so long as no damage was done; but if she did any damage to the car, as a matter of law, she is said to have expressly ratified it.

Question 60

Which of the following is a term for laws that limit the types of business activities in which parties may legally engage on Sundays?

A) Sabbath laws only
B) Blue laws only
C) True laws only
D) Sabbath and blue laws, but not true laws
E) Sabbath laws, blue laws, and true laws

Question 61

Maurice wishes to purchase a small restaurant named "Tasty Burger" in his community from Todd who tells Maurice that, while he loves the teenagers who have frequented his establishment, he is tired of flipping burgers and wants to spend more time fishing on the lake. Maurice has Todd sign a covenant not to compete prohibiting Todd from opening a restaurant within 25 miles of Tasty Burger for five years. Assuming that the covenant was drafted properly, is it likely to be enforced? Discuss arguments for and against covenants not to compete in the sale of a business.

Question 62

Reference - Cheap Motorcycle. Tony, a hateful, disgruntled, business law teacher notices that a student, Peter, who is past the age of majority, has bought a new motorcycle. Peter has struggled through school, is in his last semester, and needs to pass business law in order to graduate. Tony tells Peter that he would like to see Peter pass; and, in the next sentence, Tony says that he wants to buy the motorcycle for $100, a price far below the value of the motorcycle. Peter asks if Tony is serious about the price, and Tony replies, "I have the power here!" Tony proceeds to draw up a contract for the sale of the motorcycle for $100 with lots of fine print by which he can sue Peter and recover any maintenance costs for the next five years. Seeing that he is at an advantage, Tony also throws into the deal that Peter will mow Tony's one acre yard for $5 all summer long. After Tony tells Peter to either take the contract or leave it, Tony reluctantly signs. Which of the following is true regarding the yard mowing agreement?

A) It is enforceable.
B) It is not enforceable because it is unconscionable.
C) It is not enforceable because a teacher and student are involved.
D) It is not enforceable unless it can be proven that Peter is over the age of twenty-five.
E) It is not enforceable unless Tony also signs a binding contract to pass Peter even if he makes terrible grades.

Question 63

Define the offense of usury. Identify two legal exceptions discussed in the text whereby usury statutes will not be applied.

Question 64

Discuss the views applied in determining the obligations of a minor to the other contracting party on disaffirmance of a contract, which you support and why.

Question 65

Set forth in detail the test that most states follow regarding the treatment of the capacity of intoxicated persons to enter into contracts.

Question 66

John and Joan enter a contract whereby John will feed Joan's cat for $100 while Joan is on vacation. Another part of the contract provides that John will mow Joan's whole yard for the summer for $500. Just before Joan leaves for vacation, John discovers that Joan's cat is not a domesticated cat, but a lion rescued from the circus. John tells Joan to forget it, that she misrepresented the nature of the animal, and that she can forget about the contract, including the lawn mowing deal. Joan, being a somewhat reasonable person, feels bad about not telling John the whole truth about the cat; and she is willing to give in on that issue. She does, however, want to enforce the yard mowing agreement. What is her best argument?

Question 67

Reference - Cheap Motorcycle. Tony, a hateful, disgruntled, business law teacher notices that a student, Peter, who is past the age of majority, has bought a new motorcycle. Peter has struggled through school, is in his last semester, and needs to pass business law in order to graduate. Tony tells Peter that he would like to see Peter pass; and, in the next sentence, Tony says that he wants to buy the motorcycle for $100, a price far below the value of the motorcycle. Peter asks if Tony is serious about the price, and Tony replies, "I have the power here!" Tony proceeds to draw up a contract for the sale of the motorcycle for $100 with lots of fine print by which he can sue Peter and recover any maintenance costs for the next five years. Seeing that he is at an advantage, Tony also throws into the deal that Peter will mow Tony's one acre yard for $5 all summer long. After Tony tells Peter to either take the contract or leave it, Tony reluctantly signs. Which of the following is an appropriate term for the contract drawn up by Tony?

A) Adhesion
B) Valid
C) Misapplied
D) Misdrafted
E) Misdirected

Question 68

Reference - Cheap Motorcycle. Tony, a hateful, disgruntled, business law teacher notices that a student, Peter, who is past the age of majority, has bought a new motorcycle. Peter has struggled through school, is in his last semester, and needs to pass business law in order to graduate. Tony tells Peter that he would like to see Peter pass; and, in the next sentence, Tony says that he wants to buy the motorcycle for $100, a price far below the value of the motorcycle. Peter asks if Tony is serious about the price, and Tony replies, "I have the power here!" Tony proceeds to draw up a contract for the sale of the motorcycle for $100 with lots of fine print by which he can sue Peter and recover any maintenance costs for the next five years. Seeing that he is at an advantage, Tony also throws into the deal that Peter will mow Tony's one acre yard for $5 all summer long. After Tony tells Peter to either take the contract or leave it, Tony reluctantly signs. Which of the following is true if Peter seeks to rescind the contractual agreement to sell the motorcycle?

A) Peter may rescind the agreement on grounds of fraud.
B) Peter may rescind the agreement on grounds of unconscionability.
C) Peter may rescind the agreement on grounds of mistake.
D) Peter may rescind the agreement on grounds of fraud, unconscionability, and mistake.
E) Peter may rescind the agreement on grounds of fraud or unconscionability, but not mistake.

Question 69

Polly decides to go snow skiing at a ski facility owned by Bill. Bill requires that all the skiers sign an agreement containing a release providing that even if the ski facility is guilty of negligence resulting in injury, the skier agrees not to hold the ski facility liable. While on one of the steepest slopes, Polly fell breaking her leg. She complains that she was not adequately warned of conditions on the slope and sues Bill. Polly's position is that the release is not enforceable. What is the release Polly signed called, and what is Bill's best argument?