Question 1

Which of the following is correct about contracts entered into by insane persons?

Accepted Answer

A)  Contracts entered into by all insane persons are void. 
B)  Contracts entered into by all insane persons are voidable. 
C)  Contracts entered into by persons adjudicated insane are void,and those entered into by nonadjudicated insane persons are voidable. 
D)  Contracts entered into by persons adjudicated insane are voidable,and those entered into by nonadjudicated insane persons are void. 
A)  Contracts entered into by all insane persons are void. 
B)  Contracts entered into by all insane persons are voidable. 
C)  Contracts entered into by persons adjudicated insane are void,and those entered into by nonadjudicated insane persons are voidable. 
D)  Contracts entered into by persons adjudicated insane are voidable,and those entered into by nonadjudicated insane persons are void.

Question 2

Bob,a 16-year-old minor,buys a snowmobile from Sam,an adult,for $2,000.Bob uses it for 2 months and then advertises the snowmobile for sale for $3,000 but has not yet sold it.At this point,which of the following is true?

Accepted Answer

A)  Bob can still disaffirm the contract. 
B)  Either Bob or Sam can disaffirm the contract. 
C)  Bob has ratified the contract by trying to sell the snowmobile. 
D)  Bob has ratified the contract by using the snowmobile for 2 months. 
A)  Bob can still disaffirm the contract. 
B)  Either Bob or Sam can disaffirm the contract. 
C)  Bob has ratified the contract by trying to sell the snowmobile. 
D)  Bob has ratified the contract by using the snowmobile for 2 months.

Question 3

Bob sells Frank some cocaine,but Frank thinks he received baking soda.In this case:

Accepted Answer

A)  This contract is voidable by either party because it is illegal. 
B)  The court in this suit could impose a criminal penalty against either party. 
C)  Frank will win the suit because he is a victim of fraud. 
D)  The court won't order either party to pay the other,regardless of whether Frank has already paid Bob. 
A)  This contract is voidable by either party because it is illegal. 
B)  The court in this suit could impose a criminal penalty against either party. 
C)  Frank will win the suit because he is a victim of fraud. 
D)  The court won't order either party to pay the other,regardless of whether Frank has already paid Bob.

Question 4

If a court finds that the subject matter of a contract is not legal,the court will undo the contract and place the parties in the status quo.

Accepted Answer

A) True 
 B)False

Question 5

On your first spring break,you go in a bar after reading a large sign outside saying,"Beers $1.00 each all night long.If you can drink 30,they're all free?we'll pay for a taxi." You pay for your beers as you drink,and you manage to drink 30 beers.The bar agrees that you drank 30 beers,but refuses to refund your money.You sue the bar.Which is most likely true?

Accepted Answer

A)  This contract is voidable by the bar if you get so intoxicated while drinking the 30 beers that you don't comprehend the nature of what you are doing. 
B)  The sign is an offer for a bilateral contract because both you and the bar must do something. 
C)  A court would ignore this contract on the basis of illegality even if it does not violate a specific statute. 
D)  There is no consideration on your part if you don't pay for the beer. 
A)  This contract is voidable by the bar if you get so intoxicated while drinking the 30 beers that you don't comprehend the nature of what you are doing. 
B)  The sign is an offer for a bilateral contract because both you and the bar must do something. 
C)  A court would ignore this contract on the basis of illegality even if it does not violate a specific statute. 
D)  There is no consideration on your part if you don't pay for the beer.

Question 6

In most states,if a minor misrepresents her age when entering into a contract,that contract cannot be disaffirmed.

Accepted Answer

A) True 
 B)False

Question 7

Lisa has been a dentist in Elmville for several years.She is now ready to retire and she sells her practice to Angie.As part of the sales agreement,Lisa agrees not to practice dentistry within 20 miles of Elmville for a period of three years.After 2 years,Lisa is bored,so she opens up a dental practice in her home.This practice is very small and Lisa wants to keep it that way.Angie sues on the noncompete agreement.What is the most likely result?

Accepted Answer

A)  This agreement is fully enforceable. 
B)  This agreement is not enforceable because agreements in restraint of trade are never enforceable. 
C)  This agreement is not enforceable because it is not ancillary to an employment agreement. 
D)  This agreement is not enforceable because it is unreasonable as to area. 
E)  This agreement is not enforceable because it is unreasonable as to time. 
A)  This agreement is fully enforceable. 
B)  This agreement is not enforceable because agreements in restraint of trade are never enforceable. 
C)  This agreement is not enforceable because it is not ancillary to an employment agreement. 
D)  This agreement is not enforceable because it is unreasonable as to area. 
E)  This agreement is not enforceable because it is unreasonable as to time.

Question 8

A contract in which one party agrees to get divorced will usually not be enforced even if the contract does not call for the violation of any specific statute.

Accepted Answer

A) True 
 B)False

Question 9

A law that sets an upper limit on the interest rate that can be charged is unconscionable.

Accepted Answer

A) True 
 B)False

Question 10

In most states,where a minor wants to disaffirm a contract and the minor has caused damage to the consideration received by gross negligence,the minor:

Accepted Answer

A)  can disaffirm,and owes a duty of restitution to the competent party 
B)  can disaffirm,and owes a duty of restoration to the competent party 
C)  cannot disaffirm 
D)  must pay the reasonable value at the time the contract was entered into 
A)  can disaffirm,and owes a duty of restitution to the competent party 
B)  can disaffirm,and owes a duty of restoration to the competent party 
C)  cannot disaffirm 
D)  must pay the reasonable value at the time the contract was entered into

Question 11

Marsha bought a car from Indy Auto Sales when she was 16.Marsha's parents had given their consent for Marsha to purchase the car.However,in order to buy the car,Marsha lied about her age.A few months later,Marsha was intoxicated,driving too fast,and caused an accident with Mr.Jones.Marsha's car was totally destroyed,and Mr.Jones' car was badly damaged.Marsha wishes to minimize her liability for this accident.Which of the following best describes this situation?

Accepted Answer

A)  Marsha can disaffirm the auto sales contract,get back all her money,and disaffirm any damage done to Mr. Jones because she is a minor. 
B)  Marsha can disaffirm the auto sales contract and get back all her money,but she is still liable to Mr. Jones for damages. 
C)  Because Marsha's parents consented to Marsha buying the car,Marsha cannot disaffirm the contract. 
D)  Because Marsha's parents consented to Marsha buying the car,they are liable to both Indy Auto Sales and Mr. Jones. 
A)  Marsha can disaffirm the auto sales contract,get back all her money,and disaffirm any damage done to Mr. Jones because she is a minor. 
B)  Marsha can disaffirm the auto sales contract and get back all her money,but she is still liable to Mr. Jones for damages. 
C)  Because Marsha's parents consented to Marsha buying the car,Marsha cannot disaffirm the contract. 
D)  Because Marsha's parents consented to Marsha buying the car,they are liable to both Indy Auto Sales and Mr. Jones.

Question 12

Minors are liable for the contract price of any necessaries of life for which they contract.

Accepted Answer

A) True 
 B)False

Question 13

An exculpatory clause releasing a white water adventure rafting company from liability for all injuries it causes is:

Accepted Answer

A)  usually valid 
B)  usually valid for negligence,not for intentional acts 
C)  usually against public policy 
D)  an illusory promise 
A)  usually valid 
B)  usually valid for negligence,not for intentional acts 
C)  usually against public policy 
D)  an illusory promise

Question 14

Gertrude wants to buy a new car,but is short of money.She promises the salesperson that she will grant him sexual favors for the next year if he will give her an automobile.He agrees.She later changes her mind,and he seeks to enforce the contract.How will a court most likely rule on the matter?

Accepted Answer

A)  It is a valid contract. 
B)  It is an illegal contract in violation of public law. 
C)  It is a void contract in violation of public policy. 
D)  It is a contract that may be voidable by Gertrude. 
A)  It is a valid contract. 
B)  It is an illegal contract in violation of public law. 
C)  It is a void contract in violation of public policy. 
D)  It is a contract that may be voidable by Gertrude.

Question 15

Which of the following statements is true?

Accepted Answer

A)  Restitution is placing the other party back in the position it was in prior to the contract. 
B)  Restoration is what a minor is entitled to receive upon disaffirming a contract. 
C)  Revocation refers to a party returning the consideration received in a contract. 
D)  Rejection can occur only as part of a counteroffer. 
A)  Restitution is placing the other party back in the position it was in prior to the contract. 
B)  Restoration is what a minor is entitled to receive upon disaffirming a contract. 
C)  Revocation refers to a party returning the consideration received in a contract. 
D)  Rejection can occur only as part of a counteroffer.

Question 16

Which of the following is NOT true?

Accepted Answer

A)  A minor can still disaffirm a contract for a reasonable time after reaching majority. 
B)  An adult cannot disaffirm a contract made with a minor. 
C)  A minor must pay the agreed price on a contract for necessaries. 
D)  What constitutes a necessary varies over time and can differ from state to state. 
A)  A minor can still disaffirm a contract for a reasonable time after reaching majority. 
B)  An adult cannot disaffirm a contract made with a minor. 
C)  A minor must pay the agreed price on a contract for necessaries. 
D)  What constitutes a necessary varies over time and can differ from state to state.

Question 17

The level of intoxication allowing a party to disaffirm a contract is the same as that considered too intoxicated to legally operate a motor vehicle.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is generally true about exculpatory clauses?

Accepted Answer

A)  They are not valid with respect to intentional acts. 
B)  The test is if they are reasonable in time,scope,and geographic area. 
C)  They are usually found to be invalid. 
D)  They are not valid for ordinary negligence. 
A)  They are not valid with respect to intentional acts. 
B)  The test is if they are reasonable in time,scope,and geographic area. 
C)  They are usually found to be invalid. 
D)  They are not valid for ordinary negligence.

Question 19

Parents still owe a legal duty to provide food,clothing,and shelter for their children regardless of emancipation.

Accepted Answer

A) True 
 B)False

Question 20

A minor's ratification of a contract must be express and cannot be implied.

Accepted Answer

A) True 
 B)False

Exam 12: Capacity and Legality

Which of the following is correct about contracts entered into by insane persons?

Bob,a 16-year-old minor,buys a snowmobile from Sam,an adult,for $2,000.Bob uses it for 2 months and then advertises the snowmobile for sale for $3,000 but has not yet sold it.At this point,which of the following is true?

Bob sells Frank some cocaine,but Frank thinks he received baking soda.In this case:

If a court finds that the subject matter of a contract is not legal,the court will undo the contract and place the parties in the status quo.

In most states,if a minor misrepresents her age when entering into a contract,that contract cannot be disaffirmed.

A contract in which one party agrees to get divorced will usually not be enforced even if the contract does not call for the violation of any specific statute.

A law that sets an upper limit on the interest rate that can be charged is unconscionable.

In most states,where a minor wants to disaffirm a contract and the minor has caused damage to the consideration received by gross negligence,the minor:

Minors are liable for the contract price of any necessaries of life for which they contract.

An exculpatory clause releasing a white water adventure rafting company from liability for all injuries it causes is:

Gertrude wants to buy a new car,but is short of money.She promises the salesperson that she will grant him sexual favors for the next year if he will give her an automobile.He agrees.She later changes her mind,and he seeks to enforce the contract.How will a court most likely rule on the matter?

Which of the following statements is true?

Which of the following is NOT true?

The level of intoxication allowing a party to disaffirm a contract is the same as that considered too intoxicated to legally operate a motor vehicle.

Which of the following is generally true about exculpatory clauses?

Parents still owe a legal duty to provide food,clothing,and shelter for their children regardless of emancipation.

A minor's ratification of a contract must be express and cannot be implied.

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