Exam 12: The Legality of Agreements

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.

Countrywide Trucking Inc. contracts with Dewey to transport crated goods to a certain destination for $5,000. Countrywide delivers the crates, but Dewey does not pay. Countrywide learns that the crates contained stolen goods. Countrywide can recover from Dewey

An unconscionable contract is one in which the terms of the agreement are so unfair as to "shock the conscience" of the court.

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 for nine years. This promise is most likely

Cathy agrees to sell her Daily Donut shop to Ernie. In the agreement, there is a covenant not to compete that prohibits Cathy from operating a donut shop within a certain distance. If the restriction is unreasonable, a court will most likely

Ordinarily, a court does not look at the fairness, or equity, of a contract.

Pharma Corporation requires its customers to sign contracts with uncon-scionable terms or Pharma, which has few competitors, will not do business with them. Pharma can normally enforce

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

Bev and Chuck negotiate a deal to transfer stolen goods for counterfeit currency that Chuck will attempt to spend at Discount Mart. This contract is

A vast disparity of bargaining power between the parties to a contract may result in a court deeming the contract unconscionable.

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

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

Skylar enters into a contract to buy a car from Truck & Auto Sales Inc. on an installment payment plan. In considering whether this deal is unconscionable, a court would most likely look at

Horse racing, video poker games, and charity-sponsored bingo are

The general rule is that no party to an illegal contract can sue for breach.

A contract that calls for an action contrary to public policy is illegal but enforceable.

In State X, persons must be at least eighteen years old before they can purchase alcoholic beverages. The state also has passed a law requiring that persons who prepare and serve liquor in the form of drinks in commercial establishments be licensed. The only requirement for obtaining a yearly license is that the person be at least eighteen years old. Moffitt, aged thirty-five, is hired as a bartender for Lone Star Restaurant.  Bekins, an alumnus of State X University, brings twenty of his friends to the restaurant to celebrate State X U's football victory. Bekins orders four rounds of drinks, and the bar bill exceeds $200. When Bekins learns that Moffitt has failed to renew his bartender's license, Bekins refuses to pay, claiming the contract is unenforceable. Is Bekins correct? Explain.

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

Restraint of trade involves interfering with free competition.

For a contract to be valid and enforceable, it must be formed for