Exam 14: Capacity and Legality

A contract provision that deprives one party of the benefits of the agreement may seem unfair but a court is not likely to consider it unconscionable.

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

Reed agrees to sell his Sports Equipment store to Taylor. As part of the sale, Reed promises not to open a similar, competing store anywhere. This promise is most likely

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

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

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

A party to a contract who has no reason to know that the contract is illegal can often obtain restitution on a partially executed contract.

Generally, any party to an illegal contract can recover for performance rendered.

Dari, a minor, wants to disaffirm a contract that she entered into with Echo, a cell service company. The law in Dari's state, as in all states, permits minors to disaffirm

Goods and services that are reasonably needed to maintain a minor's standard of living, such as food, clothing, shelter, and medical services, are known as utilities .

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

Ada agrees in writing to pay Bob to damage Ada's car, which is fully insured. Bob damages the car, but Ada's insurer refuses to pay for the damage. In Ada and Bob's suit against each other for breach of contract, the court is most likely to