Question 1

Courts will never limit freedom of contract.

Accepted Answer

A) True 
 B)False

Question 2

Andria, an attorney, has a personal injury case which is set for trial next week.She needs a good doctor to testify on behalf of her client, so she contacts Dr.Wood who agrees to testify on behalf of Andria's client at the trial.In return for Dr.Wood's testimony, Andria agrees to pay Dr.Wood $10,000 if they win the case, and $5,000 if they lose.Dr.Wood agrees.The agreement between Andria and Dr.Wood is unenforceable.

Accepted Answer

A) True 
 B)False

Question 3

A contract that requires a person to commit a tort will be enforced by the courts.

Accepted Answer

A) True 
 B)False

Question 4

The courts readily enforce a covenant not to compete during the period of employment.

Accepted Answer

A) True 
 B)False

Question 5

Alatan owns a building supply store in Russ County.His trade extends throughout River City, the largest city in Russ County, but not beyond the county limits.He sells his store to Hilary and, as part of the transaction, agrees not to engage in the same business anywhere in River City for a period of two years.In this case:

Accepted Answer

A)  the geographic restraint is reasonable. 
B)  this agreement is unreasonable. 
C)  the agreement unduly interferes with the interest of the public. 
D)  the time limit is reasonable, but the geographic restraint is not. 
A)  the geographic restraint is reasonable. 
B)  this agreement is unreasonable. 
C)  the agreement unduly interferes with the interest of the public. 
D)  the time limit is reasonable, but the geographic restraint is not.

Question 6

The court in National Business Services, Inc.v.Wright found a noncompete agreement drafted for an employee of an Internet company was:

Accepted Answer

A)  no different in enforceability than noncompete agreements for other types of companies. 
B)  subject to smaller geographic restrictions than for other types of companies. 
C)  unreasonable in duration with a one-year time restriction. 
D)  subject to larger geographic restrictions than for other types of companies. 
A)  no different in enforceability than noncompete agreements for other types of companies. 
B)  subject to smaller geographic restrictions than for other types of companies. 
C)  unreasonable in duration with a one-year time restriction. 
D)  subject to larger geographic restrictions than for other types of companies.

Question 7

Courts usually will require evidence for a transaction to be usurious.What factors will the courts require as evidence of usury?

Accepted Answer

For a transaction to be usurious, courts

Question 8

Nanette wanted to purchase a new car and found one she liked at Minson Motors.Several important contractual terms were buried in the written agreement and some of the meaning of the contract was obscured by legal jargon.The contract involved:

Accepted Answer

A)  procedural unconscionability. 
B)  substantive unconscionability. 
C)  adhesion. 
D)  exculpatory clauses. 
A)  procedural unconscionability. 
B)  substantive unconscionability. 
C)  adhesion. 
D)  exculpatory clauses.

Question 9

The Code and the Restatement both contain definitions of what constitutes "unconscionable" conduct.

Accepted Answer

A) True 
 B)False

Question 10

In considering a covenant not to compete in an employment contract, the court in the case of Payroll Advance, Inc.v.Yates said in its opinion:

Accepted Answer

A)  in order to obtain an injunction it is necessary for the employer to show that actual damage has occurred. 
B)  covenants not to compete are presumptively valid, and they are enforceable to the extent they are reasonable. 
C)  the question of reasonableness of a restraint requires consideration of such circumstances as the subject matter of the contract, the purpose to be served, the situation of the parties, the extent of the restraint, and the specialization of the business. 
D)  Two of these answers are correct. 
A)  in order to obtain an injunction it is necessary for the employer to show that actual damage has occurred. 
B)  covenants not to compete are presumptively valid, and they are enforceable to the extent they are reasonable. 
C)  the question of reasonableness of a restraint requires consideration of such circumstances as the subject matter of the contract, the purpose to be served, the situation of the parties, the extent of the restraint, and the specialization of the business. 
D)  Two of these answers are correct.

Question 11

Archie bets his friend Jerry $100 that the Packers will win the next Super Bowl.This is an:

Accepted Answer

A)  unconscionable contract and therefore illegal. 
B)  illegal wagering agreement. 
C)  agreement to obstruct justice and therefore illegal. 
D)  illegal restraint of trade. 
A)  unconscionable contract and therefore illegal. 
B)  illegal wagering agreement. 
C)  agreement to obstruct justice and therefore illegal. 
D)  illegal restraint of trade.

Question 12

B& B, Inc.pays an attorney to draft and lobby for a bill which will greatly lessen B & B's tax liability to the state and federal governments.B&B gives the attorney $20,000 in cash to pay legislators for taking the time to listen to him.This is an agreement which is a violation of public policy.

Accepted Answer

A) True 
 B)False

Question 13

In the Pacific Custom Pools, Inc.v.Turner Construction Company case, the court found:

Accepted Answer

A)  that the trial court erred in granting a motion for summary judgment on the basis that PCP had not been licensed in California and thus could not bring suit. 
B)  that the purpose of the relevant licensing law was to protect the public from incompetence and dishonesty in those who provide building and construction services. 
C)  that, under the facts, PCP acted reasonably and in good faith to maintain its license. 
D)  PCP met an exception to the California statute providing that a contractor may not maintain an action for the recovery of compensation for work requiring a license unless it had a license at all times during performance of the work. 
A)  that the trial court erred in granting a motion for summary judgment on the basis that PCP had not been licensed in California and thus could not bring suit. 
B)  that the purpose of the relevant licensing law was to protect the public from incompetence and dishonesty in those who provide building and construction services. 
C)  that, under the facts, PCP acted reasonably and in good faith to maintain its license. 
D)  PCP met an exception to the California statute providing that a contractor may not maintain an action for the recovery of compensation for work requiring a license unless it had a license at all times during performance of the work.

Question 14

An agreement for the purchase of an illegal substance will be enforced by the courts if all other elements of the contract are present.

Accepted Answer

A) True 
 B)False

Question 15

A covenant not to compete is a type of restraint of trade that courts today will enforce under certain circumstances.

Accepted Answer

A) True 
 B)False

Question 16

Al, an accountant, has a tax service and accounting business in Redwood City.He decides to move to Center City, which is 150 miles away and sells his accounting practice to Able and Baker, a CPA firm.In the sale contract, he agrees that he will refrain from practicing accounting anywhere within a 60-mile radius of Redwood City for a period of two years.However, on weekends he returns to his house in Redwood City, and when clients call him, he meets with them in his home.In this case:

Accepted Answer

A)  Al is in violation of the sale agreement, which contained restrictions that would probably be held to be valid. 
B)  the agreement is invalid, because it is an illegal restraint on trade. 
C)  the agreement is illegal, because it is a violation of public policy. 
D)  the two-year provision is likely to be held invalid, because it is too long a period of time. 
A)  Al is in violation of the sale agreement, which contained restrictions that would probably be held to be valid. 
B)  the agreement is invalid, because it is an illegal restraint on trade. 
C)  the agreement is illegal, because it is a violation of public policy. 
D)  the two-year provision is likely to be held invalid, because it is too long a period of time.

Question 17

Don has an employment contract with Dunkirk Ice Cream.He sells ice cream and novelty ice cream products.He has nine children and doesn't make enough money, so he decides to see if another dairy will hire him, too."After all," he reasons, "most stores carry four or five different brands." His employment contract prohibits him from competing.If Don sells for another dairy in addition to Dunkirk, will he be in trouble under his contract?

Accepted Answer

A)  No, it is unenforceable as against public policy. 
B)  Yes, it is likely to be enforceable during employment. 
C)  No, the prohibition against competing is enforceable only after he quits Dunkirk. 
D)  A court would have to rule on the enforceability of the covenant not to compete since courts are reluctant to enforce such covenants during a period of employment. 
A)  No, it is unenforceable as against public policy. 
B)  Yes, it is likely to be enforceable during employment. 
C)  No, the prohibition against competing is enforceable only after he quits Dunkirk. 
D)  A court would have to rule on the enforceability of the covenant not to compete since courts are reluctant to enforce such covenants during a period of employment.

Question 18

Edward, an engineer, is working on a new design for some highly technical equipment which Martus, Inc.hopes to market within the next five years.The employment agreement between Edward and Martus states that Edward will not go to work for another company in the same business for a period of two years after termination of his employment with Martus, Inc.This agreement is void and unenforceable because, although Martus is a very specialized company, it would make it difficult for Edward to find other employment.

Accepted Answer

A) True 
 B)False

Question 19

If a court finds a contract unconscionable:

Accepted Answer

A)  the court may refuse to enforce only the unconscionable part. 
B)  it must, in all states, be found both substantively and procedurally unconscionable to be unenforceable. 
C)  the court must refuse to enforce the contract. 
D)  the contract must fall strictly within the Code's or the Restatement's definition of "unconscionable" to be unenforceable. 
A)  the court may refuse to enforce only the unconscionable part. 
B)  it must, in all states, be found both substantively and procedurally unconscionable to be unenforceable. 
C)  the court must refuse to enforce the contract. 
D)  the contract must fall strictly within the Code's or the Restatement's definition of "unconscionable" to be unenforceable.

Question 20

A __________ is a law establishing a maximum rate of permissible interest for which a lender and borrower of money may contract.

Accepted Answer

A)  wager 
B)  usury statute 
C)  Sunday statute 
D)  None of these. 
A)  wager 
B)  usury statute 
C)  Sunday statute 
D)  None of these.

Exam 13: Illegal Bargains

Courts will never limit freedom of contract.

A contract that requires a person to commit a tort will be enforced by the courts.

The courts readily enforce a covenant not to compete during the period of employment.

The court in National Business Services, Inc.v.Wright found a noncompete agreement drafted for an employee of an Internet company was:

Courts usually will require evidence for a transaction to be usurious.What factors will the courts require as evidence of usury?

Nanette wanted to purchase a new car and found one she liked at Minson Motors.Several important contractual terms were buried in the written agreement and some of the meaning of the contract was obscured by legal jargon.The contract involved:

The Code and the Restatement both contain definitions of what constitutes "unconscionable" conduct.

In considering a covenant not to compete in an employment contract, the court in the case of Payroll Advance, Inc.v.Yates said in its opinion:

Archie bets his friend Jerry $100 that the Packers will win the next Super Bowl.This is an:

B& B, Inc.pays an attorney to draft and lobby for a bill which will greatly lessen B & B's tax liability to the state and federal governments.B&B gives the attorney $20,000 in cash to pay legislators for taking the time to listen to him.This is an agreement which is a violation of public policy.

In the Pacific Custom Pools, Inc.v.Turner Construction Company case, the court found:

An agreement for the purchase of an illegal substance will be enforced by the courts if all other elements of the contract are present.

A covenant not to compete is a type of restraint of trade that courts today will enforce under certain circumstances.

If a court finds a contract unconscionable:

A __________ is a law establishing a maximum rate of permissible interest for which a lender and borrower of money may contract.

Introduction to Law

Business Ethicspart Ii: the Legal Environment of Business

Civil Dispute Resolution

Constitutional Law

Administrative Law

Criminal Law

Negligence and Strict Liabilitypart Iii: Contracts

Introduction to Contracts

Mutual Assent

Conduct Invalidating Assent

Consideration

Contractual Capacity

Contracts in Writing

Third Parties to Contracts

Performance, Breach, and Discharge

Contract Remediespart Iv: Sales

Introduction to Sales and Leases

Performance

Transfer of Title and Risk of Loss

Product Liability: Warranties and Strict Liability

Sales Remediespart V: Negotiable Instruments

Form and Content

Transfer and Holder in Due Course

Liability of Parties

Bank Deposits, Collections, and Funds Transferspart Vi: Agency

Relationship of Principal and Agent

Relationship With Third Partiespart Vii: Business Associations

Formation and Internal Relations of General Partnerships

Operation and Dissolution of General Partnerships

Limited Partnerships and Limited Liability Companies

Nature and Formation of Corporations

Financial Structure of Corporations

Management Structure of Corporations

Fundamental Changes of Corporationspart Viii: Debtor and Creditor Relations

Secured Transactions and Suretyship

Bankruptcypart Ix: Regulation of Business

Securities Regulation

Intellectual Property

Employment Law

Antitrust

Accountants Legal Liability

Consumer Protection

International Business Lawpart X: Property

Introduction to Property, Property Insurance, Bailments, and Documents of Title

Interests in Real Property

Transfer and Control of Real Property

Trusts and Wills

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