Question 1

Parents who sign a contract made by their minor child with an adult have the same option to disaffirm as the child.

Accepted Answer

A) True 
 B)False

Question 2

A usurious contract involves the purchase and sale of usable goods.

Accepted Answer

A) True 
 B)False

Question 3

A person who is intoxicated can avoid liability on any contract due to the intoxication.​

Accepted Answer

A) True 
 B)False

Question 4

Even in states that permit certain types of gambling, courts find that gambling contracts are illegal.

Accepted Answer

A) True 
 B)False

Question 5

Orin signs a covenant not to compete with his employer, Product Distribution, Inc. The covenant will be enforced if it

Accepted Answer

A)   ​does not require either party to obtain a business license.
B)   ​is reasonable with respect to geographic area and duration.
C)   ​relieves the employer from liability for any injury to Orin.
D)   ​none of the choices.

Question 6

A contract entered into by a mentally incompetent person can be valid if the person had capacity at the time the contract was formed.

Accepted Answer

A) True 
 B)False

Question 7

Justin is mentally incompetent but has not been so adjudged by a court. Any contract Justin enters into is voidable if, at the time of contracting, Justin

Accepted Answer

A)   ​has a lucid interval.
B)   ​lacks the capacity to comprehend the consequences.
C)   ​does not inform the other party that he is incompetent.
D)   ​none of the choices.

Question 8

Bay City Mall requires its tenants to sign a lease that includes a clause releasing Metro from liability in the event of monetary or physical injury no matter who is at fault. Coco's Chocolate signs a lease with Bay City that contains the clause. This is

Accepted Answer

A)   ​a covenant not to compete.
B)   ​an adhesion contract.
C)   ​an exculpatory clause.
D)   ​an illusory promise.

Question 9

Oscar owns Payroll Company, a bookkeeping service. Oscar pays Remy $5,000 to steal a list of a competitor's clients, to whom Oscar will aggressively market Payroll's services. This deal is

Accepted Answer

A)   ​enforceable.
B)   ​void.
C)   ​voidable at the option of either party.
D)   ​voidable at the option of the party having less bargaining power.

Question 10

All gambling contracts are legal but voidable.

Accepted Answer

A) True 
 B)False

Question 11

Floyd signs a contract to buy a drum kit just before reaching the age of majority. After reaching the age of majority, Floyd does not take possession or make payments. With respect to the contract, most courts would hold that this is

Accepted Answer

A)   ​disaffirmance.
B)   ​emancipation.
C)   ​ratification.
D)   ​restitution.

Question 12

If an illegal contract is executory, either party can always enforce it.

Accepted Answer

A) True 
 B)False

Question 13

Leon relinquishes the right to his daughter Meredith's control, care, custody, and earnings. This is

Accepted Answer

A)   ​disaffirmance.
B)   ​emancipation.
C)   ​ratification.
D)   ​severability.

Question 14

Baylor obtains a loan from City Bank at 4.5 percent interest. Their state's usury statute limits interest rates to a 3.5 percent maximum. Baylor's contract with the bank is enforceable only if

Accepted Answer

A)   ​Baylor does not attempt to disaffirm it.
B)   ​the bank does not attempt to disaffirm it.
C)   ​both Baylor and the bank knew of the state limit.
D)   ​none of the choices.

Question 15

If one of the wrongdoers in an illegal contract is unjustly enriched at the expense of the other, the courts are usually not concerned.

Accepted Answer

A) True 
 B)False

Question 16

A contract entered into by an intoxicated person is always valid.

Accepted Answer

A) True 
 B)False

Question 17

For a minor to disaffirm a contract, he or she must present the contract to a court.

Accepted Answer

A) True 
 B)False

Question 18

Rosa, a seventeen-year-old, signs a contract to sell her car to Street Fleet Cars. Later, Rosa decides not to sell the car. Rosa is liable to Street Fleet for

Accepted Answer

A)   ​the cost of a car of comparable value.
B)   ​the value of her performance under the contract.
C)   ​the amount of the buyer's profit on the deal.
D)   ​nothing.

Question 19

Contractual capacity refers to the legal ability to enter into a contract.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A)   ​invalid because it is part of a sale of an ongoing business.
B)   ​invalid because of the unreasonable terms of area and time.
C)   ​valid because it is part of a sale of an ongoing business.
D)   ​valid if Reed and Taylor are reasonably intelligent.

Exam 14: Capacity and Legality

For a minor to disaffirm a contract, he or she must present the contract to a court.

Correct AnswerverifiedShow Answer

A contract entered into by a mentally incompetent person can be valid if the person had capacity at the time the contract was formed.

Correct AnswerverifiedShow Answer

Floyd signs a contract to buy a drum kit just before reaching the age of majority. After reaching the age of majority, Floyd does not take possession or make payments. With respect to the contract, most courts would hold that this is

Correct AnswerverifiedShow Answer

A person who is intoxicated can avoid liability on any contract due to the intoxication.​

Correct AnswerverifiedShow Answer

Leon relinquishes the right to his daughter Meredith's control, care, custody, and earnings. This is

Correct AnswerverifiedShow Answer

Baylor obtains a loan from City Bank at 4.5 percent interest. Their state's usury statute limits interest rates to a 3.5 percent maximum. Baylor's contract with the bank is enforceable only if

Correct AnswerverifiedShow Answer

If an illegal contract is executory, either party can always enforce it.

Correct AnswerverifiedShow Answer

Oscar owns Payroll Company, a bookkeeping service. Oscar pays Remy $5,000 to steal a list of a competitor's clients, to whom Oscar will aggressively market Payroll's services. This deal is

Correct AnswerverifiedShow Answer

Even in states that permit certain types of gambling, courts find that gambling contracts are illegal.

Correct AnswerverifiedShow Answer

Bay City Mall requires its tenants to sign a lease that includes a clause releasing Metro from liability in the event of monetary or physical injury no matter who is at fault. Coco's Chocolate signs a lease with Bay City that contains the clause. This is

Correct AnswerverifiedShow Answer

Rosa, a seventeen-year-old, signs a contract to sell her car to Street Fleet Cars. Later, Rosa decides not to sell the car. Rosa is liable to Street Fleet for

Correct AnswerverifiedShow Answer

Parents who sign a contract made by their minor child with an adult have the same option to disaffirm as the child.

Correct AnswerverifiedShow Answer

A usurious contract involves the purchase and sale of usable goods.

Correct AnswerverifiedShow Answer

Justin is mentally incompetent but has not been so adjudged by a court. Any contract Justin enters into is voidable if, at the time of contracting, Justin

Correct AnswerverifiedShow Answer

Contractual capacity refers to the legal ability to enter into a contract.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A contract entered into by an intoxicated person is always valid.

Correct AnswerverifiedShow Answer

All gambling contracts are legal but voidable.

Correct AnswerverifiedShow Answer

If one of the wrongdoers in an illegal contract is unjustly enriched at the expense of the other, the courts are usually not concerned.

Correct AnswerverifiedShow Answer

Orin signs a covenant not to compete with his employer, Product Distribution, Inc. The covenant will be enforced if it

Correct AnswerverifiedShow Answer

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A person who is intoxicated can avoid liability on any contract due to the intoxication.

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