Reference no: EM131057801

1. In deciding whether there existed undue influence, a court will evaluate whether:

The allegedly inluenced person had access to outsdiders for advice and time to consider the alternatives

The contract was discussed and formed in the usual time and place that would be expected for such a transaction

It appeas that the weaker person entered the contract because he was subjected to unfair methods of persuasion

All of the above

2. We live in an era in which the lengthy, complex, standardized, pre-printed contract is quite common. When a consumer is presented with this type of adhesion contract and signs it without fully understanding it, a judge will be likely to not enforce it if there also exists a lack of bargaining power and a substantial cost - price disparity.

True

False

Question 3. Which of the following is true regarding exculpatory clauses in contracts?

So long as there is equal bargaining power and voluntary consent, such clauses will be enforced.

So long as the terms of the contract are conspicuously disclosed and clearly known, such clauses will be enforced.

Such clauses can be used to disclaim intentional tort liability.

None of the above.

Question 4. Once a court finds a contract or a term of the contract to be unconscionable, it may:

Refuse to enforce the entire agreement.

Enforce the contract without the unconscionable provision.

Change the unconscionable term so as to avoid any unconscionable result.

The court can choose to do any of the above.

Question 5. Generally speaking, courts do not enforce illegal agreements or compensate parties who have performed under such agreements. Instead, the court leaves the parties where it finds them.

True

False

Question 6. An adult may disaffirm her contract if:

The other party is a minor and the court refused to approve the contract

The other party is an emancipated minor.

The other party is a minor and the contract is for necessaries.

None of the above.

Question 7. Bill and Wanda are living together without being married. They make an agreement that in the event they split up, Wanda will get the couple's waterbed. In most states, this agreement is unenforceable because it is an agreement between unmarried cohabitors.

True

False

Question 8. Although by definition, contracts of adhesion provide no opportunity for bargaining, such contracts are not per se violative of public policy.

True

False

Question 9. A voidable contract is not a contract at all, and in such cases the courts will leave the parties where they find them.

True

False

Question 10. X's threat to breach an existing contract unless Y makes another contract with X:

Is always duress because such behavior is always wrongful.

May or may not be duress, depending mainly on the coerciveness of the threat and possible bad faith

Is not duress because it does not involve physical force.

Is not duress, because breaking a contract normally does not violate a criminal statute.

Question 11. Contracts made by severely intoxicated people:

Are void rather than voidable.

Cannot be disaffirmed until the person has regained his mental faculties.

Cannot be ratified until the person has regained his mental faculties.

Are always binding, because the law does not want to reward drug or alcohol abuse.

Question 12. Forgetting to voluntarily disclose a latent material fact to the other contracting party can result in the court deciding that the non-disclosing party is liable for innocent misrepresentation.

True

False

Question 13. In general, which of the following is most true regarding duress?

A threat to initiate a well-founded civil suit is usually duress.

A threat to initiate a frivolous (ill-founded) criminal prosecution is usually duress.

A threat to breach a contract is always duress.

In the 19th century, the only kind of duress was physical compulsion to enter a contract (e.g., grasping someone's hand and forcing him to sign).

Question 14. If a party to an illegal contract sues to rescind the contract before the illegal bargained for act is performed, he or she may successfully petition the court to recover any consideration already given to the other party.

True

False

Question 15. When determining the legality of an exculpatory clause the court will consider whether the particular clause affects the public interest. Which of the below factors will most impress a court in favor of a ruling that a public interest is being affected?

If the nature of the business and service is regulated by the government

If the service is considered an essential service that members of the public from time to time must use

If the service is a recreational one such as downhill skiing, skydiving or bungee jumping

A & B

Question 16. Which of the following is true about the relationship between mutual mistake and unilateral mistake?

It's easier to avoid a contract on the basis of unilateral mistake than on the basis of mutual mistake.

To avoid a contract on the basis of unilateral mistake, the mistaken party must prove that the non-mistaken party either knew or should have known of the mistake being made

Mutual mistake makes a contract void, while unilateral mistake makes a contract voidable.

There's little difference between mutual mistake and unilateral mistake; in particular, each requires the same things to be proven.

Question 17. Which of the following is least likely to constitute ratification of a contract made by a minor?

Performing one's duties under the contract after reaching the age of majority.

Accepting performance from the other party to the contract after the age of majority.

Failing to disaffirm a completely executory contract within one month after the age of majority.

Making an oral statement that "I ratify the contract" months after reaching majority.

Question 18. Contracts that affect title to real estate cannot be disaffirmed until the age of majority.

True

False

Question 19. Today, the "justifiable reliance" requirement in fraud and misrepresentation is more difficult to prove than in the 19th century. In other words, today, there is a greater burden in proving that reliance was justifiable than there was during the 19th century.

True

False

Question 20.20. X and Y make a bet concerning whether a particular warehouse will burn down within the next year. Neither has any economic interest in the warehouse. This is a wagering contract and will be ruled illegal if the state has the normal kind of statute forbidding wagering contracts.

True

False

Question 21. Which, if any of the underlying persons would be required to have a regulatory license as a condition of recovering damages in court for services provided under a contract?

A real estate broker

A dentist

A lawyer

An architect

All of the above

Question 22. Exculpatory clauses:

Cannot be enforced if the clause relieves a party from liability for the intentional tort of battery.

Are always enforceable if they are clearly and conspicuously stated in the agreement.

May be enforced if they relieve an employer from liability for workers' compensation benefits.

Are enforceable only when the party relying on the clause owes a duty to the public.

Question 23. So-called "contracts of adhesion":

May be unconscionable.

Are absolutely binding.

Are always unenforceable.

Are per se, voidable at the option of the weaker party.

Question 24. Dr. Jones, an excellent surgeon, received his license to practice medicine in 1990 after graduating from Harvard Medical School. Since 2011, he has failed to pay to the American Medical Association his annual dues. A contract between the doctor and his patient would nevertheless be enforceable if he performed the surgery in a competent manner.

True

False

Question 25. Usury statutes have fallen out of favor; virtually no states have such statutes today.

True

False

Question 26. In most states today, the age of contractual capacity remains 21.

True

False

Question 27. Concealment is always the equivalent of an assertion of fact, while nondisclosure may or may not be so regarded.

True

False

Question 28. In a fraud case, the misrepresentation need not be material.

True

False

Question 29. Norm Hefty was a door-to-door salesman for Toothrot Candy Company. His duties were to call on customers and make sales in Bedford, Indiana, which is located in the southern part of the state. Toothrot's business territory covers the entire state of Indiana. Hefty and Toothrot had entered into a written employment contract at the time he joined the firm. One of the clauses in the contract stated that if Hefty ceased working for Toothrot, he could not work as a salesman for a competing company anywhere in Indiana for a period of five years. Hefty left his employment with Toothrot and promptly went to work as a salesman for a candy company that competed with Toothrot. His duties with the new employer were confined to the town of Elkhart, which is located in northern Indiana. Toothrot has sued Hefty in an effort to obtain an injunction against further violation of the non-competition clause in the parties' employment contract. Which of the following is most true?

Toothrot will win because the clause's geographic scope was restricted to the state in which Toothrot does business.

Toothrot will win because the time period of the clause was reasonable.

Both a and b are true.

Hefty will win because the clause restricts him from engaging in a common calling.

Question 30. Agreements that are made by unmarried people (who are living together) to divide their assets if they dissolve their relationship:

Are unenforceable regardless of their nature.

Are enforceable so long as the agreement is in writing even if one of the parties is married to someone else

Are unenforceable if one of the parties is married to someone else.

Are enforceable regardless of their nature.

Question 31. Assume that FIDO, a big and ugly dog, barked constantly thereby annoying the neighbors. FIDO belonged to Green. Red, who was Green's next door neighbor, hired Canine Extinction Inc. to poison FIDO. Canine Extinction Inc. would be able to enforce the agreement assuming that it carried out its end of the bargain.

True

False

Question 32. Angel promises Ronald that she'll divorce her husband if Ronald agrees to divorce his wife. Ronald agrees. This agreement is illegal.

True

False

Question 33. In order to have any chance of being enforced, an illegal agreement must be indivisible.

True

False

Question 34. In violation of a state licensing statute, Jones holds himself out to be a licensed attorney which he was not. After making that representation to client Smith, he contracts to perform legal services for Smith who pays Jones a $500 retainer. Later, after discovering that Jones is not licensed and therefore cannot get the job done, Smith sues Jones to recover the $500. What is the most likely result, and why?

Smith definitely wins, because here we have a revenue-raising statute.

Smith probably wins, because parties for whose protection a regulatory statute has been enacted often can recover amounts paid under a contract declared illegal by the statute.

Smith definitely loses, because here we have a regulatory statute.

Smith probably loses, because the law obligates one to check the licensure of a professional with whom one deals.

Question 35. Unconscionability:

Exists only under Article 2 of the UCC.

Requires a jury trial.

Makes a contract voidable.

Exists both at common law and under Article 2 of the UCC.

Both C & D

Question 36. Goofy was adjudged mentally incompetent in a court of law. Two days before the court made this ruling, Goofy sold is car to B. At the time of their transaction, Goofy acted rationally and reasonably and appeared to be competent. B had no idea that Goofy was mentally impaired and the price he paid was a fair one. The agreement is legally enforceable.

True

False

Question 37. Non-competition clauses in employment contracts are less likely to be enforced than non-competition clauses in contracts for the sale of a business.

True

False

Question 38. Sam, a minor, bought a pleasure yacht from Marine Co. Inc. Under the terms of the contract, Sam agreed to make monthly payments. About four months after reaching his 18th birthday, Sam became bored with boating and wanted to disaffirm the contract. He had made five (5) payments up to the point that he decided to rescind.

Sam could not disaffirm because the yacht was a necessity

Sam, most likely, could not disaffirm because he ratified the contract

Sam could not disaffirm because the yacht was now used and worth much less than when he bought it

None of the above

Question 39. A contract made by a mentally impaired person who was not adjudicated insane by a court:

Can only be disaffirmed after the person has regained his mental capacity.

Can only be ratified after the person has regained his mental capacity.

Normally is void rather than voidable.

a and b are true.

Question 40. Non-competition clauses in employment contracts are especially unlikely to be enforced where they restrict employees from engaging in a common calling.

True

False

Question 41. Why does the fraud-misrepresentation distinction matter?

Because rescission is not available in a misrepresentation case.

Because contracts induced by fraud are void, while contracts induced by misrepresentation are voidable.

Because justifiable reliance is not required in a fraud case.

Because materiality is not required in a fraud case.

Question 42. Misrepresentations made with scienter make a contract void, while negligent misrepresentations make a contract voidable.

True

False

Question 43. A and B, who own competing businesses, entered into a contract whereby each agreed to not solicit or sell to the other's customers.

The agreement is legal and enforceable

The mutual promises to not compete are ancillary to the contract between A and B and the contract is thus valid and enforceable

Since the mutual promises appear reasonable in scope, they will be enforced

The mutual promises to not compete are not ancillary to a contract of employment or one for the sale of a business, and as such, are illegal.

Question 44. The act of turning back the odometer of a car so that a lower mileage is shown which is done for purposes of sale, would be:

Fraudulent misrepresentation

Acceptable because the buyer would be able to discover this by conducting a reasonable investigation

Innocent misrepresentation

A circumstance that would enable the innocent party to prove that the contract lacked real consent

A and D

Question 45. Which, if any, of the below examples is/are generally considered by a court that is deciding if the contract is unconscionable?

A price that is excessive (far exceeds the market value)

A denial of basic rights and remedies to a buyer of consumer goods

The hiding of clauses and or terms (that are disadvantageous to one party) in a mass of fine print, trivia or in places that are inconspicuous

All of the above

Question 46. Which of the following cannot be disaffirmed until after the age of majority?

A contract that affects title to real estate.

An executory contract for a necessary.

A contract that is fully executed.

A contract for the sale of goods.

Question 47. The term 'mistake' in ordinary conversation means an error in judgment or an unfortunate act. In contract law, however, mistake is a belief about a fact that is not in accordance with the truth.

True

False

Question 48. A contract of adhesion is one that the courts will always enforce because of the strong public policies that favor the enforcement of contracts that are willingly made. Otherwise, there would be too much uncertainty involving commercial transactions.

True

False

Question 49. An exculpatory clause relieving a person from liability for her fraud will not be enforced.

True

False

Question 50. A contract made by a person who has already been adjudicated to be insane and institutionalized or already put under a guardian's care is void rather than voidable.

True

False