Question 1

An unconscionable contract is one in which the terms of the agreement are oppressive, unscrupulous, or grossly unfair.

Accepted Answer

A) True 
 B)False  True

Question 2

Owen, the owner of Parts Company, pays Quint to obtain a competitor's design patent. Quint keeps the money but does not deliver. Owen can

Accepted Answer

A)  none of the choices. 
B)  recover from Quint. 
C)  enforce the contract with Quint. 
D)  recover from the competitor. 
A)  none of the choices. 
B)  recover from Quint. 
C)  enforce the contract with Quint. 
D)  recover from the competitor. A

Question 3

A contract to do something that is prohibited by statutory law is illegal but not void from the outset.

Accepted Answer

A) True 
 B)False  False

Question 4

Intoxicated, Hank enters a contract for the sale of ten acres of timberland to Ira for less than its market value. Later, Hank seeks to cancel the deal. In determining whether Hank can avoid his duties under the contract, a court is most likely to look at

Accepted Answer

A)  only Hank's intoxicated mental state. 
B)  only factors other than the Hank's intoxicated mental state. 
C)  Hank's intoxicated mental state and other factors. 
D)  none of the choices. 
A)  only Hank's intoxicated mental state. 
B)  only factors other than the Hank's intoxicated mental state. 
C)  Hank's intoxicated mental state and other factors. 
D)  none of the choices.

Question 5

Oscar owns Payroll Company, a bookkeeping service. Oscar pays Remy $5,000 to steal a list of a competitor's clients. This deal is

Accepted Answer

A)  enforceable. 
B)  void. 
C)  voidable at the option of either party. 
D)  voidable at the option of the party having less bargaining power. 
A)  enforceable. 
B)  void. 
C)  voidable at the option of either party. 
D)  voidable at the option of the party having less bargaining power.

Question 6

Floyd, a minor, misrepresents his age when entering into a contract to buy a car from Gas Hogs Inc. Floyd takes possession of the car, but makes no payments on the contract and tries to disaffirm it. Most likely, Gas Hogs can recover

Accepted Answer

A)  an amount equal to the wholesale value of the car. 
B)  the car, but not any of the balance due on the contract. 
C)  the balance due on the contract. 
D)  nothing. 
A)  an amount equal to the wholesale value of the car. 
B)  the car, but not any of the balance due on the contract. 
C)  the balance due on the contract. 
D)  nothing.

Question 7

Any contract entered into with an unlicensed party is enforceable.

Accepted Answer

A) True 
 B)False

Question 8

Contracts entered into by mentally incompetent persons are not valid under any circumstances.

Accepted Answer

A) True 
 B)False

Question 9

Contracts in restraint of trade always violate one or more federal or state statutes.

Accepted Answer

A) True 
 B)False

Question 10

A party may have the capacity to enter into a valid contract and the right to avoid liability under it.

Accepted Answer

A) True 
 B)False

Question 11

Sam is mentally incompetent but has not been adjudged by a court to be incompetent. Sam enters into a contract with Tony for the cleaning and maintenance of Uptown Office building. Most likely, the contract is

Accepted Answer

A)  voidable if Sam did not comprehend the consequences. 
B)  enforceable if Tony did not know that Sam was mentally incompetent. 
C)  enforceable if Sam is the owner of the building. 
D)  void. 
A)  voidable if Sam did not comprehend the consequences. 
B)  enforceable if Tony did not know that Sam was mentally incompetent. 
C)  enforceable if Sam is the owner of the building. 
D)  void.

Question 12

Gretchen is adjudged by a court to be mentally incompetent. Gretchen

Accepted Answer

A)  can enter into a valid contract and cannot avoid liability under it. 
B)  can enter into a valid contract but has the right to avoid liability under it. 
C)  cannot form a legally binding contract with another party. 
D)  is presumed to have contractual capacity. 
A)  can enter into a valid contract and cannot avoid liability under it. 
B)  can enter into a valid contract but has the right to avoid liability under it. 
C)  cannot form a legally binding contract with another party. 
D)  is presumed to have contractual capacity.

Question 13

Blanche, a minor, enters into a contract to buy two all-season passes from Chalet Mountain Resort. The contract will be made enforceable if Blanche

Accepted Answer

A)  ratifies it. 
B)  disaffirms it. 
C)  nullifies it. 
D)  voids it. 
A)  ratifies it. 
B)  disaffirms it. 
C)  nullifies it. 
D)  voids it.

Question 14

A minor can enter into any contract an adult can, without exception.

Accepted Answer

A) True 
 B)False

Question 15

Through fraudulent means, Duke induces Emma to sign a contract to invest with him the profits from her business. When Emma learns the truth, she may

Accepted Answer

A)  withdraw from the deal. 
B)  recover what she invested. 
C)  enforce the contract. 
D)  any of the choices. 
A)  withdraw from the deal. 
B)  recover what she invested. 
C)  enforce the contract. 
D)  any of the choices.

Question 16

Lee, a minor, enters into a contract to buy a dirt bike from Motor Bikes & Cycles. Lee can ordinarily disaffirm the contract

Accepted Answer

A)  in a timely manner. 
B)  at any time during minority. 
C)  for a reasonable time after coming of age. 
D)  all of the choices. 
A)  in a timely manner. 
B)  at any time during minority. 
C)  for a reasonable time after coming of age. 
D)  all of the choices.

Question 17

The performance of a contract cannot be rendered illegal by a statute after the parties have already entered into the contract.

Accepted Answer

A) True 
 B)False

Question 18

When a covenant not to compete is unreasonable in its essential terms, a court will refuse to reform the covenant.

Accepted Answer

A) True 
 B)False

Question 19

A lender who makes a loan at an interest rate above the lawful maximum commits usury.

Accepted Answer

A) True 
 B)False

Question 20

A promise to refrain from competing in business with another is considered to be unconscionable.

Accepted Answer

A) True 
 B)False

Exam 13: Capacity and Legality

An unconscionable contract is one in which the terms of the agreement are oppressive, unscrupulous, or grossly unfair.

Owen, the owner of Parts Company, pays Quint to obtain a competitor's design patent. Quint keeps the money but does not deliver. Owen can

A contract to do something that is prohibited by statutory law is illegal but not void from the outset.

Intoxicated, Hank enters a contract for the sale of ten acres of timberland to Ira for less than its market value. Later, Hank seeks to cancel the deal. In determining whether Hank can avoid his duties under the contract, a court is most likely to look at

Oscar owns Payroll Company, a bookkeeping service. Oscar pays Remy $5,000 to steal a list of a competitor's clients. This deal is

Floyd, a minor, misrepresents his age when entering into a contract to buy a car from Gas Hogs Inc. Floyd takes possession of the car, but makes no payments on the contract and tries to disaffirm it. Most likely, Gas Hogs can recover

Any contract entered into with an unlicensed party is enforceable.

Contracts entered into by mentally incompetent persons are not valid under any circumstances.

Contracts in restraint of trade always violate one or more federal or state statutes.

A party may have the capacity to enter into a valid contract and the right to avoid liability under it.

Sam is mentally incompetent but has not been adjudged by a court to be incompetent. Sam enters into a contract with Tony for the cleaning and maintenance of Uptown Office building. Most likely, the contract is

Gretchen is adjudged by a court to be mentally incompetent. Gretchen

Blanche, a minor, enters into a contract to buy two all-season passes from Chalet Mountain Resort. The contract will be made enforceable if Blanche

A minor can enter into any contract an adult can, without exception.

Through fraudulent means, Duke induces Emma to sign a contract to invest with him the profits from her business. When Emma learns the truth, she may

Lee, a minor, enters into a contract to buy a dirt bike from Motor Bikes & Cycles. Lee can ordinarily disaffirm the contract

The performance of a contract cannot be rendered illegal by a statute after the parties have already entered into the contract.

When a covenant not to compete is unreasonable in its essential terms, a court will refuse to reform the covenant.

A lender who makes a loan at an interest rate above the lawful maximum commits usury.

A promise to refrain from competing in business with another is considered to be unconscionable.

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