Question 1

In some states, a lender who charges a usurious rate forfeits both the principal and interest on the loan.

Accepted Answer

A) True 
 B)False

Question 2

John operates a small repair business and is in desperate need of a certain type of building material.He obtains the material from a large corporation, but is charged a grossly unreasonable price and is forced to buy other material he does not need.In view of the buyer's unequal bargaining power and unreasonable terms of the contract, this may be a case of:

Accepted Answer

A) in para delicto. 
B) partial illegality. 
C) substantive unconscionability. 
D) procedural unconscionability. 
A) in para delicto. 
B) partial illegality. 
C) substantive unconscionability. 
D) procedural unconscionability.

Question 3

An agreement to refrain from a particular trade, profession, or business is enforceable if:

Accepted Answer

A) the purpose of the restraint is to protect a property interest of the promisee. 
B) the agreement is for no longer than two years. 
C) the restraint is no more extensive than is reasonably necessary to protect the promisee's property interest. 
D) Both (a) and (c) are correct. 
A) the purpose of the restraint is to protect a property interest of the promisee. 
B) the agreement is for no longer than two years. 
C) the restraint is no more extensive than is reasonably necessary to protect the promisee's property interest. 
D) Both (a) and (c) are correct.

Question 4

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, the agreement would make it difficult for Edward to find other employment.

Accepted Answer

A) True 
 B)False

Question 5

Specific lender usury statutes rather than the general usury statute generally apply to real estate mortgages and small consumer loans.

Accepted Answer

A) True 
 B)False

Question 6

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 7

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

Accepted Answer

A) True 
 B)False

Question 8

State-operated lotteries have come under increasing regulation because of statutes criminalizing wagers.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following would generally be considered to be a revenue-raising licensing law?

Accepted Answer

A) A statute requiring that doctors be licensed. 
B) A statute requiring that salespeople be licensed, but not establishing any educational or training requirements. 
C) A statute requiring public school teachers to be licensed. 
D) A statute that requires insurance agents to pass a test before selling insurance in a state. 
A) A statute requiring that doctors be licensed. 
B) A statute requiring that salespeople be licensed, but not establishing any educational or training requirements. 
C) A statute requiring public school teachers to be licensed. 
D) A statute that requires insurance agents to pass a test before selling insurance in a state.

Question 10

The legal effect of a usurious loan varies from state to state.

Accepted Answer

A) True 
 B)False

Question 11

Divided Parcel (DP) includes the following on its mailing receipts: "We are not responsible for any damages to packages whether or not through the intentional or reckless fault or negligence of our employees.Send packages at your own risk." Mary reads this clause but sends her watch back to the manufacturer to be repaired anyway.The watch is destroyed when the DP driver uses the package for a ball and tosses it to his buddy.Mary is:

Accepted Answer

A) out of luck because the clause was communicated to her. 
B) out of luck because she should have insured the package. 
C) likely to collect from DP since exculpatory clauses always violate public policy. 
D) likely to collect from DP because it attempted to excuse intentional and reckless behavior. 
A) out of luck because the clause was communicated to her. 
B) out of luck because she should have insured the package. 
C) likely to collect from DP since exculpatory clauses always violate public policy. 
D) likely to collect from DP because it attempted to excuse intentional and reckless behavior.

Question 12

Which of the following contracts is generally held to be unenforceable?

Accepted Answer

A) A divisible agreement that is partly lawful and partly unlawful. 
B) Allison enters an illegal agreement but, before performance, withdraws from the transaction. 
C) An exculpatory clause on the back of a parking lot claim check, attempting to relieve the parking lot operator for negligence. 
D) Merle enters a contract and is ignorant of minor legislation that makes the contract illegal. 
A) A divisible agreement that is partly lawful and partly unlawful. 
B) Allison enters an illegal agreement but, before performance, withdraws from the transaction. 
C) An exculpatory clause on the back of a parking lot claim check, attempting to relieve the parking lot operator for negligence. 
D) Merle enters a contract and is ignorant of minor legislation that makes the contract illegal.

Question 13

Mel has a neighborhood grocery store that he would like to sell.Casey is interested in purchasing the business, but he is concerned because he knows that Mel has built up a lot of goodwill over the years, and he wonders whether Mel might not just open another store down the block and take all of the business from the old store with him.Casey asks for and receives from Mel a clause in the sale agreement that Mel will not open another grocery store within a 150-mile radius of the old store for a period of at least ten years.
a.What is this agreement called?
b.Is the negotiated clause a valid one? Explain why or why not.
c.What guidelines would a court ordinarily use in determining whether to enforce such a clause?

Accepted Answer

a.The agreement is a covenant in restrai

Question 14

Courts will never limit freedom of contract.

Accepted Answer

A) True 
 B)False

Question 15

An agreement to refrain from a particular trade, profession, or business is enforceable if two requirements are met: that the purpose of the restraint is to protect a property interest of the promisee and the restraint is no more extensive than is reasonably necessary to protect that interest.

Accepted Answer

A) True 
 B)False

Question 16

Claudia sells her highly successful hair salon to Carl.In the sales contract, Claudia agrees never to open a hair salon in the state.Which of the following best describes this contract clause?

Accepted Answer

A) Void as an illegal violation of a statute. 
B) Valid as a reasonable restraint on trade. 
C) Unenforceable as a violation of public policy. 
D) Binding as fair protection. 
A) Void as an illegal violation of a statute. 
B) Valid as a reasonable restraint on trade. 
C) Unenforceable as a violation of public policy. 
D) Binding as fair protection.

Question 17

Elmer promises to pay Fred $100 if Fred will register and vote in the next election as a Democrat.This is:

Accepted Answer

A) a valid contract. 
B) an illegal agreement. 
C) an adhesion contract. 
D) a usurious agreement. 
A) a valid contract. 
B) an illegal agreement. 
C) an adhesion contract. 
D) a usurious agreement.

Question 18

Non-compete agreements drafted for employees of Internet companies:

Accepted Answer

A) are no different in enforceability than non-compete agreements for other types of companies. 
B) are subject to smaller geographic restrictions than for other types of companies. 
C) have been held subject to larger geographic restrictions than for other types of companies. 
D) have not yet been the subject of litigation. 
A) are no different in enforceability than non-compete agreements for other types of companies. 
B) are subject to smaller geographic restrictions than for other types of companies. 
C) have been held subject to larger geographic restrictions than for other types of companies. 
D) have not yet been the subject of litigation.

Question 19

Which of the following would be considered a valid and legally enforceable agreement?

Accepted Answer

A) An agreement to pay a legislator to vote for a particular bill. 
B) An agreement under which Arthur agrees to pay Barbara $3,000 to disparage the product of Arthur's competitor. 
C) An agreement by the seller of a service station not to enter the service station business in Ohio for a period of thirty years after the sale of his business. 
D) An agreement by a fund-raising director not to operate a fund-raising business in Marin County for a period of one year after terminating his employment. 
A) An agreement to pay a legislator to vote for a particular bill. 
B) An agreement under which Arthur agrees to pay Barbara $3,000 to disparage the product of Arthur's competitor. 
C) An agreement by the seller of a service station not to enter the service station business in Ohio for a period of thirty years after the sale of his business. 
D) An agreement by a fund-raising director not to operate a fund-raising business in Marin County for a period of one year after terminating his employment.

Question 20

Carlos owns a store in Polk County.His trade extends throughout River City, but not beyond the county limits.He sells his store to Virginia and, as part of the transaction, agrees not to engage in the same business anywhere within the state for a period of three years.The agreement:

Accepted Answer

A) is reasonable. 
B) is unreasonable. 
C) unduly interferes with the interests of the public. 
D) Two of the above, (b) and (c). 
A) is reasonable. 
B) is unreasonable. 
C) unduly interferes with the interests of the public. 
D) Two of the above, (b) and (c).

Exam 13: Illegal Bargains

In some states, a lender who charges a usurious rate forfeits both the principal and interest on the loan.

An agreement to refrain from a particular trade, profession, or business is enforceable if:

Specific lender usury statutes rather than the general usury statute generally apply to real estate mortgages and small consumer loans.

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

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

State-operated lotteries have come under increasing regulation because of statutes criminalizing wagers.

Which of the following would generally be considered to be a revenue-raising licensing law?

The legal effect of a usurious loan varies from state to state.

Which of the following contracts is generally held to be unenforceable?

Courts will never limit freedom of contract.

An agreement to refrain from a particular trade, profession, or business is enforceable if two requirements are met: that the purpose of the restraint is to protect a property interest of the promisee and the restraint is no more extensive than is reasonably necessary to protect that interest.

Claudia sells her highly successful hair salon to Carl.In the sales contract, Claudia agrees never to open a hair salon in the state.Which of the following best describes this contract clause?

Elmer promises to pay Fred $100 if Fred will register and vote in the next election as a Democrat.This is:

Non-compete agreements drafted for employees of Internet companies:

Which of the following would be considered a valid and legally enforceable agreement?

Carlos owns a store in Polk County.His trade extends throughout River City, but not beyond the county limits.He sells his store to Virginia and, as part of the transaction, agrees not to engage in the same business anywhere within the state for a period of three years.The agreement:

Introduction to Law

Business Ethics

Civil Dispute Resolution

Constitutional Law

Administrative Law

Criminal Law

Intentional Torts

Negligence and Strict Liability

Introduction to Contracts

Mutual Assent

Conduct Invalidating Assent

Consideration

Contractual Capacity

Contracts in Writing

Third Parties to Contracts

Performance, Breach, and Discharge

Contract Remedies

Introduction to Sales and Leases

Performance

Transfer of Title and Risk of Loss

Product Liability: Warranties and Strict Liability

Sales Remedies

Form and Content

Transfer

Holder in Due Course

Liability of Parties

Bank Deposits, Collections, and Funds Transfers

Relationship of Principal and Agent

Relationship With Third Parties

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 Corporations

Secured Transactions and Suretyship

Bankruptcy

Securities Regulation

Intellectual Property

Employment Law

Antitrust

Accountants Legal Liability

Consumer Protection

Environmental Law

International Business Law

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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