Question 1

In certain circumstances, bargains are so oppressive that the courts relieve innocent parties of part or all of their duties.

Accepted Answer

A) True 
 B)False

Question 2

Contracts entered into by mentally incompetent persons can be valid.

Accepted Answer

A) True 
 B)False

Question 3

Alexis, a minor acting on her own, signs a contract to buy a motorcycle and accessories from Bad Bikes dealership. Later, after taking possession, Alexis disaffirms the deal. She

Accepted Answer

A)  ​can keep the motorcycle and accessories. 
B)  ​can keep the motorcycle but not the accessories. 
C)  ​can keep the accessories but not the motorcycle. 
D)  ​must return both motorcycle and accessories.

Question 4

A contract that is void from the outset can be enforced in some circumstances.

Accepted Answer

A) True 
 B)False

Question 5

Country Trucking Company contracts with Baldwin to transport crated goods to a certain destination for $5,000. \Country delivers the crates, but Baldwin does not pay. Country learns that the crates contained stolen goods. Country can

Accepted Answer

A)  ​do nothing with respect to the contract. 
B)  ​recover $5,000 from Baldwin. 
C)  ​recover the goods but not the $5,000 from Baldwin. 
D)  ​recover the goods and the $5,000 from Baldwin.

Question 6

To avoid liability for negligence, Mall Mart Discount Stores can normally obtain a court order to enforce

Accepted Answer

A)  ​a covenant not to compete. 
B)  ​an adhesion contract. 
C)  ​an exculpatory clause. 
D)  ​none of the choices.

Question 7

All contracts between adults and minors are void.

Accepted Answer

A) True 
 B)False

Question 8

Digital Enterprise, Inc., promises to pay its employees a year-end bonus "if profits continue to be high and management agrees at the time." This is

Accepted Answer

A)  ​an enforceable contract. 
B)  ​an illusory promise. 
C)  ​an option-to-cancel clause. 
D)  ​an output contract.

Question 9

Maya's motorcycle is damaged in an accident caused by Luc's negligence. Luc agrees to pay Maya $25,000 if she agrees to release him from further liability. Maya agrees. If her damages ultimately exceed $25,000, she can

Accepted Answer

A)  ​recover the balance for lack of consideration. 
B)  ​recover the balance because the consideration was past. 
C)  ​recover the balance due to unforeseen events. 
D)  ​not recover the balance.

Question 10

Rescission is the unmaking of a contract so as to return the parties to the positions they occupied before the contract was made.

Accepted Answer

A) True 
 B)False

Question 11

While sailboarding, Jolene is injured when Kilroy carelessly crosses her path. Kilroy's insurance company offers Jolene $50,000 to release Kilroy from liability, and she accepts. Later, she learns that her injuries are more serious than she realized. The release is

Accepted Answer

A)  ​enforceable. 
B)  ​unenforceable because Jolene's injuries are unforeseeably difficult. 
C)  ​unenforceable because Kilroy has a preexisting duty to pay. 
D)  ​unenforceable because the release is an illusory promise.

Question 12

Intoxicated and not aware of the consequences, Umberto agrees to a two-year cell-phone service contract with Wander Talk, Inc., at more than the average market price. This contract is

Accepted Answer

A)  ​enforceable. 
B)  ​not enforceable because contracting parties can change their minds. 
C)  ​not enforceable because the contract clearly favors Wander Talk. 
D)  ​not enforceable because Umberto was intoxicated enough to lack mental capacity when he agreed to it.

Question 13

A contract that exculpates one party for negligence or other wrongdoing will often be viewed as unconscionable.

Accepted Answer

A) True 
 B)False

Question 14

Frisco offers to buy a Gibson guitar owned by Hayden for twice what Hayden paid for it. She accepts and hands the guitar to Frisco. Her delivery of the guitar is

Accepted Answer

A) not consideration because her voluntary consent may be lacking. 
B) not consideration because the exchange is not a bargain. 
C) consideration. 
D) not consideration because the value is not legally sufficient.

Question 15

Contractual capacity includes the financial ability to pay for the benefits of a contract.

Accepted Answer

A) True 
 B)False

Question 16

Centre City Properties, Inc., owns and manages a warehouse. DIY Home Improvement Stores agrees to lease the warehouse for six years. Under the lease, DIY is obligated to pay all of the utility costs. Two years into the term, DIY asks Centre City to modify the lease to provide that the utility costs will be split equally between them. The landlord agrees, but later decides it does not want to share the costs and refuses to pay. Is Centre City bound to its agreement to share the utility costs? Why or why not?​

Accepted Answer

The answer of Centre City Properties, Inc., owns and manages...

Question 17

John obtains a loan from Liberty Credit Bank at an interest rate that exceeds the state's maximum. Liberty has

Accepted Answer

A)  ​created a risk for the purpose of assuming it. 
B)  ​engaged in a restraint of trade. 
C)  ​violated a licensing statute. 
D)  ​committed usury.

Question 18

Fay is mentally incompetent but has not been so adjudged by a court. Any contract Fay enters into is

Accepted Answer

A)  ​voidable if Fay has a lucid interval at the time of contracting. 
B)  ​voidable if Fay lacks the capacity to comprehend the consequences. 
C)  ​voidable if the other party does not realize that Fay is incompetent. 
D)  ​unavoidable.

Question 19

Whether a contract with an unlicensed professional is legal and enforceable depends on the purpose of the licensing statute.

Accepted Answer

A) True 
 B)False

Question 20

Essentially, adequacy of consideration concerns the fairness of the bargain.

Accepted Answer

A) True 
 B)False

Exam 12: Consideration, Capacity, and Legality

In certain circumstances, bargains are so oppressive that the courts relieve innocent parties of part or all of their duties.

Contracts entered into by mentally incompetent persons can be valid.

Alexis, a minor acting on her own, signs a contract to buy a motorcycle and accessories from Bad Bikes dealership. Later, after taking possession, Alexis disaffirms the deal. She

A contract that is void from the outset can be enforced in some circumstances.

Country Trucking Company contracts with Baldwin to transport crated goods to a certain destination for $5,000. \Country delivers the crates, but Baldwin does not pay. Country learns that the crates contained stolen goods. Country can

To avoid liability for negligence, Mall Mart Discount Stores can normally obtain a court order to enforce

All contracts between adults and minors are void.

Digital Enterprise, Inc., promises to pay its employees a year-end bonus "if profits continue to be high and management agrees at the time." This is

Maya's motorcycle is damaged in an accident caused by Luc's negligence. Luc agrees to pay Maya $25,000 if she agrees to release him from further liability. Maya agrees. If her damages ultimately exceed $25,000, she can

Rescission is the unmaking of a contract so as to return the parties to the positions they occupied before the contract was made.

While sailboarding, Jolene is injured when Kilroy carelessly crosses her path. Kilroy's insurance company offers Jolene $50,000 to release Kilroy from liability, and she accepts. Later, she learns that her injuries are more serious than she realized. The release is

Intoxicated and not aware of the consequences, Umberto agrees to a two-year cell-phone service contract with Wander Talk, Inc., at more than the average market price. This contract is

A contract that exculpates one party for negligence or other wrongdoing will often be viewed as unconscionable.

Frisco offers to buy a Gibson guitar owned by Hayden for twice what Hayden paid for it. She accepts and hands the guitar to Frisco. Her delivery of the guitar is

Contractual capacity includes the financial ability to pay for the benefits of a contract.

John obtains a loan from Liberty Credit Bank at an interest rate that exceeds the state's maximum. Liberty has

Fay is mentally incompetent but has not been so adjudged by a court. Any contract Fay enters into is

Whether a contract with an unlicensed professional is legal and enforceable depends on the purpose of the licensing statute.

Essentially, adequacy of consideration concerns the fairness of the bargain.