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Business Law - Exam 2 Practice Questions

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Quiz on Business Law - Exam 2 Practice Questions, created by Antonio P - EMU on 27/10/2015.
Antonio P - EMU
Quiz by Antonio P - EMU, updated more than 1 year ago
Antonio P - EMU
Created by Antonio P - EMU over 8 years ago
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Resource summary

Question 1

Question
A collection agency threatened to sue Martha for the unpaid hospital bills from her heart operation. She signed a promissory note at a high but not illegal rate of interest. What result?
Answer
  • It is valid because she signed it.
  • It is valid because the threat to bring a civil suit to collect money owed is permissible.
  • It is invalid because she signed under duress.
  • It is invalid because the agency put her under undue pressure.

Question 2

Question
Tommy's parents died in a plane crash and he went to live with his guardian, Aunt Rose. Rose had a very small house and did not have a separate bedroom and bath for 12-year-old Tommy. She and Tommy decided to use some of his inheritance to pay for an addition to the house. He had some shares of stock transferred into Rose's name so that she could sell them when the money was due to be paid. The stock transfers are:
Answer
  • presumed voidable unless Rose can show no unfair advantage was taken.
  • presumed valid unless it can be proven that Tommy was taken advantage of.
  • null and void because of undue influence.
  • presumed void because of duress.

Question 3

Question
Eliza was an antique expert. She went to a tea party at Grandma Jones' house and saw a magnificent Queen Anne table out on the back porch. She asked Grandma about it and was told it was in the way so they were going to store it in the barn. Eliza offered to buy it from her for $200. The next week, Grandma saw it in Eliza's store on sale for $3,000. Which of the following is true?
Answer
  • She can get it back because of fraudulent concealment of the value.
  • She can get the true value, because it would not be fair otherwise.
  • She cannot rescind the contract because Eliza did not have a duty to tell her the value of the table.
  • She cannot rescind the contract because she did not rely on Eliza to give her a fair price.

Question 4

Question
James threatens to hit Kenneth on the head with a baseball bat unless Kenneth signs a contract agreeing to pay James $300 for his latest painting. Because of the threat, Kenneth signs the contract.
Answer
  • This contract is voidable at Kenneth's option.
  • James has committed physical duress against Kenneth.
  • This is an example of economic duress.
  • All of the above.

Question 5

Question
During a visit to Joe's Jewelry, Patrick looked at a watch that appeared in every way to be a Rolex. Having no reason to believe that this watch was not a Rolex, Patrick paid $2,000 for the watch. Later, Patrick discovered that the watch was a fake Rolex. Patrick can:
Answer
  • not rescind the transaction since he did not ask the clerk if the watch was a fake.
  • not rescind the transaction, but can get at least part of his money back based on the watch's value.
  • give back the watch and get back the $2,000.
  • rescind the transaction and keep the watch.

Question 6

Question
Larry and Fred had been negotiating for a landscaping contract for Fred's business. Larry began by offering to do the work for $6,000 and they had been talking about doing a little less work for around $5,000 in their most recent discussions. Finally, Fred called Larry and said that he was going to be off in the foreign office for the next month and that he wanted the work to be done while he was gone; he'd send over a contract the next day on his way to the airport. The contract arrived, stipulating payment of $15,000 for the work that had been discussed. Larry decides to go ahead and do the work. When Fred gets the bill for $15,000 a month later, he
Answer
  • must pay the $15,000.
  • must pay the reasonable value of the services.
  • need not pay anything to Larry.
  • can rescind the contract.

Question 7

Question
A contract was made for 125 bales of cotton to arrive on a ship named "Peerless" from Bombay. Unbeknownst to either party to the contract, there were two ships named "Peerless," both of which were sailing from Bombay. One sailed in October and the other in December. The buyer had in mind the ship sailing in October, but the seller had in mind the ship sailing in December. Each party held his belief in good faith. When the goods failed to arrive on time, the buyer sued for breach of contract.
Answer
  • The seller is in breach and must pay damages.
  • The seller is guilty of fraud in the inducement for failing to disclose to the buyer which ship would contain the goods.
  • No contract exists due to mutual mistake of fact as to the existence or identity of the subject matter of the contract.
  • Two of the above, (a) and (b).

Question 8

Question
Sam wants to sell his Golden Retriever dog to Jordan. Sam tells Jordan that the dog is three years old and that he will point, back, and retrieve. Although the dog is three years old and will point at birds, he will not back (honor another dog's point). Al relies on these statements and purchases the bird dog. The buyer has most probably been a victim of:
Answer
  • duress
  • undue influence.
  • fraud in the inducement.
  • fraud in the execution.

Question 9

Question
Tom tries to sell his Aston-Martin to Victoria for $12,000. Tom tells Victoria, "I paid $12,000 for the car in 1978 and it's worth twice that today." Tom really paid $8,000 for the car in 1978. If Victoria buys the car, basing her decision on Tom's statement, which of the following correctly states the situation?
Answer
  • Tom's statements amount to puffing only.
  • Tom's statements provide grounds to set the contract aside.
  • Tom's statements are actionable only if intentional.
  • Tom's statements amount to fraud in the execution.

Question 10

Question
Kyle wants to buy a six-passenger car. The salesperson tells him that the two-seat sports car Kyle sees on the car lot would be just perfect for six people. Kyle test drives the car and then buys it.
Answer
  • Kyle has a valid cause of action for fraud.
  • Kyle was not justified in relying upon the salesperson's representation that the car would seat six people.
  • The element of scienter is missing in this fact situation.
  • The saleperson is a fiduciary.

Question 11

Question
David offers to sell Elmer a house located in another state. Elmer accepts the offer and agrees to buy the house. Unknown to either party, the house has been destroyed by a tornado.
Answer
  • This is an example of mutual mistake by law.
  • This is an example of unilateral mistake of fact.
  • This is an example of mutual mistake as to the existence or identity of the subject matter.
  • The contract is enforceable, because each party was negligent in not checking out the house before entering into the contract.

Question 12

Question
Jason agrees to sell to Barbara a vacant lot adjoining a house which he owns. The vacant lot is "Lot 2, block 1," and the house is located on "Lot 1, block 1." When the typist types the contract, she mistakenly types "Lot 1, block 1" on the contract. Neither Jason nor Barbara notices the error when they read the contract.
Answer
  • This is a mutual mistake in failing to carefully read the document, which will not allow the parties to reform the contract.
  • The property description in the written contract is a clerical error that will have no effect on the intent of the parties.
  • Arthur has committed fraud in the execution.
  • The typing error is a palpable unilateral mistake on the part of the typist. Jason and Barbara will both be forced to comply with the agreement.

Question 13

Question
Stewart entered into a contract with Will to have Will build a 10-unit apartment complex on Elm Street in Randolph County. Unknown to both parties, this land had recently been rezoned and only single-unit dwellings can be constructed.
Answer
  • This is a mistake of law.
  • This is a mutual mistake of fact.
  • Stewart is obligated to buy land elsewhere and have the complex constructed on property zoned for apartments.
  • Will is liable to Stewart since Will is a contractor.

Question 14

Question
Steven has a typed copy of a contract, which he would like to have Thomas sign. Thomas, who needs glasses to read typing, doesn't want to sign until he has read the document, but Steven convinces Thomas to sign it anyway, because it is a "standard" contract for this type of situation. Is the contract which Thomas signed binding upon him?
Answer
  • No, because he did not read it.
  • No, because he entered into it based upon fraud in the execution.
  • Yes, because he has made a unilateral mistake of law.
  • Yes, because he was negligent in not ascertaining its contents.

Question 15

Question
Albert found a stone in his yard and took it to Bob, a jeweler, for evaluation. Although Bob knew what the stone was, he told Albert that he wasn't sure as to the nature of the stone, but that he thought it was a topaz. Bob then offered to buy the stone for $25 and Albert agreed. Later Albert found out the stone was an uncut diamond worth about $700.
Answer
  • The sale was a valid contract that should be enforced by the law.
  • This contract can be voided based upon fraud in the execution.
  • This contract can be voided based upon fraud in the inducement.
  • This contract can be voided based upon mistake as to the identity of the subject matter.

Question 16

Question
Fred is a concert violinist who is scheduled to perform at Carnegie Hall for the first time. He buys what he is told is a Stradivarius violin from a well-known, reputable dealer in quality violins, and he pays the going rate for a Stradivarius. He later learns the violin is an imitation, although it is such a good imitation that even the dealer thought it was authentic.
Answer
  • Fred has made a unilateral mistake and cannot avoid the contract.
  • The dealer has committed fraud in the inducement.
  • The sale is voidable by the purchaser for mutual mistake.
  • The sale is voidable, because the dealer has made a fraudulent misrepresentation.

Question 17

Question
Jill contracts to purchase Kevin's automobile under the belief that she can sell it at a profit to Linda, but after Jill has bought the car, she finds out that Linda isn't interested in buying it.
Answer
  • Jill cannot void the contract.
  • Jill can rescind the agreement.
  • Jill could rescind the agreement if she was mistaken in her estimate of the value of the auto.
  • Jill can sue Linda for detrimental reliance.

Question 18

Question
Alex wants to submit a bid on a city sewer project. He computes the cost, but mistakenly omits the cost of one item. Accordingly, he submits a bid of $430,000 to the city. The next highest bid is $675,000, and the rest of the bids are even higher. The city is happy to have such a low bid, so it accepts Alex's bid and awards him the contract for the job, even though the city engineer is of the opinion the job cannot be done for less than $650,000.
Answer
  • Alex must perform for the agreed upon price because he has made a unilateral mistake.
  • The city was aware of or should have been aware of Alex's mistake. When it accepted the bid with knowledge of Alex's mistake, the city sought to take an unconscionable advantage of Alex's error.
  • This case is an example of a palpable unilateral mistake.
  • Both (b) and (c).

Question 19

Question
Ralph sold a motel to Steve by stating that he had paid $250,000 for it and that his net average annual profit from the business has been $40,000. In reality he paid $100,000 for the motel and has earned a net average annual profit of only $30,000. Steve made no attempt to verify the statements until after the transaction was completed.
Answer
  • Ralph has committed fraudulent misrepresentation.
  • Steve is bound by the contract, because he failed to verify the statements which were made to him.
  • The contract is voidable at Steve's option.
  • Both (a) and (c).

Question 20

Question
The State of Florida enters into a contract with Treasure Salvors governing the salvage of a Spanish galleon that sunk in the 1600's. Under the terms of the contract, the salvagers agree to relinquish 25% of the items recovered to the State of Florida in return for the right to salvage on state lands. At the time the parties enter into the contract, they both believe that the seabed where the ship lies is state land. Subsequently, the United States Supreme Court holds that the continental shelf on which the ship rests has never been owned by Florida. The salvagers sue to rescind the contract.
Answer
  • The contract cannot be rescinded.
  • The parties made a mutual mistake for which the contract should be avoided.
  • There is a mutual mistake, but because it is not material, the court should enforce the contract.
  • The United States government will automatically step into the shoes of the State of Florida to make the contract enforceable.

Question 21

Question
Aunt Ellie promises her 21-year-old nephew, Robbie, that she will pay him $100 if he quits smoking for a month. If Robbie does, is there a binding contract?
Answer
  • No, because Robbie gave no benefit to Aunt Ellie.
  • No, because Robbie did not suffer any detriment.
  • Yes, because stopping smoking will benefit Robbie's health.
  • Yes, because Robbie gave up a legal right.

Question 22

Question
Janet promises Eli $4,000 for one of his original paintings on the condition that she receive $5 million from her mother's will.
Answer
  • Jan has made an illusory promise.
  • Jan's promise is legally sufficient.
  • Jan has made a conditional promise which is not sufficient to form consideration.
  • Jan's promise is legally inadequate and the courts will therefore not enforce it.

Question 23

Question
Stan purchased 400 pairs of gloves from Isaac at a contract price of $800. Fifty of the gloves were defective, and a dispute arose as to the amount due and owing under the contract. Stan refuses to pay the $800, and Isaac is threatening to sue. Which of the following is correct with regard to this transaction?
Answer
  • If Isaac agrees to accept $600 to settle the dispute and Stan agrees to pay that amount, the substitute agreement is enforceable.
  • If Isaac agrees to accept $600 to settle the dispute and Stan pays that amount, Isaac can still sue for the balance of $200 and will win the lawsuit.
  • Stan is under a pre-existing legal obligation to pay the $800.
  • Both (b) and (c).

Question 24

Question
Marilyn contracted with Bravo Builders to build an addition to her house for $15,000. After digging the foundation, Bravo decides that it will take more work and more concrete than it had originally thought and that it will need to charge an additional $5,000 for the job. Assuming Marilyn agrees, which of the following is correct?
Answer
  • Marilyn will have to pay $20,000.
  • This is a contract under seal which is enforceable.
  • This is a modification of a preexisting contract, which under common law must be supported by additional consideration on the part of Bravo Builders.
  • This is the settlement of a disputed debt that requires no additional consideration on the part of Bravo Builders.

Question 25

Question
Carlos ordered an aluminum storm door from Sears for $249.99. Before it was delivered, Sears ran an ad in the paper for the same storm door at $179.99. Carlos calls Sears and demands the advertised price. They say okay.
Answer
  • Carlos must pay $179.99.
  • Carlos must pay $249.99.
  • There is no contract.
  • There is a contract for the reasonable value of the door.

Question 26

Question
Mary agrees to sew Georgia's prom dress for $50 plus costs. Georgia decides that she wants ruffles around the neck and calls Mary who says it will now cost $60. When Mary finishes the dress (with ruffles), Georgia must pay:
Answer
  • $50, since that is the original agreement.
  • $50, since a modification must be in writing.
  • $60, since the modified agreement is supported by additional consideration.
  • $60, since any subsequent agreement is enforceable.

Question 27

Question
Sue owes $5,000 to the First National Bank for a student loan which will come due on January 1 next year. She has been offered a two-year graduate fellowship, but she will not be able to pay the loan back if she accepts the fellowship. The bank manager tells Sue that if she pays $3,000 now, they will forgive the loan. Should Sue accept the offer?
Answer
  • No, because the bank can still sue for the remaining $2,000.
  • No, because the manager's promise is not binding on the bank.
  • Yes, because the early payment of the loan is consideration that makes the bank's promise binding.
  • Yes, because the bank must do whatever the manager says.

Question 28

Question
Jack moved from New Hampshire to Florida and decided to have an air conditioner installed in his car. After it was installed, Jack received a bill for $1,200. Jack called the dealer and told him he'd never heard of this service costing more than $500. They argued, but the dealer finally agreed to take $900. Is the agreement enforceable?
Answer
  • Yes, there is no way for the dealer to get the extra money anyway.
  • Yes, there is consideration for the modified amount.
  • No, there is no consideration and the dealer can sue for the extra $300.
  • No, there is an implied contract to pay the dealer whatever he billed Jack.

Question 29

Question
Wayne helped Hank study all night for an important exam. After Hank got an A on the exam, he told Wayne, "I will give you $10 for helping me get a good grade." Wayne said, "Thanks, I'll take it."
Answer
  • There is no contract because there is no mutual assent.
  • There is no contract because there is no valid consideration.
  • There is no contract because $10 is reasonably inadequate consideration.
  • There is a contract with sufficient consideration.

Question 30

Question
Mark paid off his brother Steve's debt to the loan shark on condition that Steve wouldn't be contacted by the loan shark for payment. The loan shark says that he doesn't have to honor that promise because Steve didn't pay. Mark would help his cause by accurately pointing out which of the following to the loan shark?
Answer
  • Mark's payment to the loan shark was a gift to Steve.
  • Mark's payment to the loan shark was a gift to the shark.
  • Mark's payment to the loan shark was payment of a moral obligation.
  • Mark's payment to the shark was a legal detriment to Mark.

Question 31

Question
Alice says to Brian, "If I decide to buy a word processor next year, I will buy it from you." This is an example of:
Answer
  • an illusory promise.
  • past consideration.
  • the pre-existing duty rule.
  • good consideration.

Question 32

Question
Nancy, who lives in Birdville, wants to open a McHenry Roast Chicken franchise. Mark, a representative of McHenry, told Nancy, "If you will buy a lot and build a building in River City, we will give you a franchise." Nancy bought the lot and built the building as instructed, only to discover that McHenry had awarded the franchise to a large corporation. McHenry claims no liability to Nancy since there was no consideration. Which statement is most accurate?
Answer
  • McHenry is not liable to Nancy since there is no consideration.
  • McHenry is not liable to Nancy since there is past consideration.
  • McHenry is liable to Nancy since adequate consideration is given by both parties.
  • McHenry is liable to Nancy based on the concept of promissory estoppel.

Question 33

Question
Darla offers to pay Edward $6,000 for Edward's car, provided that Darla receives that much from her uncle's estate, which is currently being probated. She expects to know for sure how much she will receive within a week or so.
Answer
  • This is an illusory contract, because Darla doesn't know whether she will receive the money for sure.
  • The consideration moving from Darla to Edward is the promise of $6,000 subject to a condition.
  • Darla's conditional promise is sufficient consideration unless Darla knows she cannot receive at least$6,000 from her uncle's estate.
  • Both (b) and (c).

Question 34

Question
Jason's mother would like him to go to college, so in June he enrolls at State University. He also quits his job and tells his mother his plans to continue taking classes. His mother says, "I'm so happy that you are going to college that I want to pay for your books." Jason then sends her a bill for $485. Which of the following is true regarding his mother's promise?
Answer
  • It is enforceable, because Jason returned to college.
  • It is enforceable, because Jason is giving up the right to do something else.
  • It is unenforceable, because it is a unilateral contract.
  • It is unenforceable, because Jason had already enrolled in school and there is no consideration.

Question 35

Question
A bank robbery has occurred, and the banker's association has offered a $1,000 reward for information leading to the arrest and conviction of the robber. Several people are claiming to be entitled to the money. Which of them is eligible?
Answer
  • The employees of the bank.
  • An on-duty sheriff's deputy in the county where the arrest occurred.
  • An off-duty deputy sheriff from a county other than the one where the arrest occurred.
  • None of the above are eligible.

Question 36

Question
Andrew agrees to paint Betty's house for $500. Two days after he starts the job, he decides that $500 isn't enough money. He refuses to finish the job unless Betty agrees to pay him $100 more. What law applies to this fact situation?
Answer
  • The acceptance of additional money to settle a disputed claim is supported by consideration.
  • A past obligation is sufficient consideration for a new promise.
  • Andrew was already obligated to paint the house. He gives no additional consideration in return for Betty's promise to pay more money.
  • Betty has made a promise in exchange for a forbearance.

Question 37

Question
William agrees to drill a well up to 200 feet deep for John's rural cabin. The contract price is $3,000. After drilling 100 feet, William strikes solid granite rock. He talks to John and explains that this is highly unusual for the area and could not have been anticipated at the time of entering into the contract. He offers to get a special drill, but says it will cost him more money, so that he will be unable to complete the project for the agreed price. Because John is anxious to have the well, he agrees to pay William an additional $1,000 to complete the job. However, once the well is finished, he changes his mind and now says he will pay only the originally agreed-upon amount.
Answer
  • The parties have agreed to a substitute contract which discharges the original contract. John is obligated to pay the additional $1,000.
  • Under the UCC, the substitute contract is binding, because there is the payment of additional money.
  • William is in breach of contract. John need not pay any additional money.
  • William is under a pre-existing moral duty to perform at the originally agreed-upon price.

Question 38

Question
Barbara, a wealthy widow, promises the pastor of her church that she will donate $10,000 to the church to help pay off its mortgage if the stewardship committee can obtain enough pledges for the balance of the $30,000 mortgage. Other pledges are obtained to pay off the mortgage, but now Barbara has changed her mind and plans to take an around-the-world cruise instead.
Answer
  • The doctrine of promissory estoppel can be applied to this case.
  • The promise to pay $10,000 is a promise to give a gift and is therefore not enforceable.
  • Under the Restatement, Barbara's promise is enforceable.
  • Both (a) and (c).

Question 39

Question
Doug obtains an exclusive franchise to sell widgets for the Acme Widget Company. The exclusive franchise covers the entire State of Wisconsin for a period of three years.
Answer
  • Acme is obligated to use its best efforts to supply the goods even if no such clause appears in the written franchise agreement.
  • According to the UCC, unless otherwise agreed, Doug must use his best efforts to promote the sale of the widgets in his territory.
  • Under the UCC, such an agreement lacks consideration.
  • Both (a) and (b).

Question 40

Question
Tyler contracts to build a garage for Wilbur for a price of $6,000. Because of an increase in the cost of labor and materials, Tyler refuses to perform. Wilbur wants the garage, so he agrees to pay an additional $500.
Answer
  • Wilbur must pay the additional $500.
  • Tyler has given no additional consideration, and under the common law must perform at the agreed upon original price.
  • The substitute agreement is an illusory contract.
  • The debt is a disputed one, and therefore Wilbur is obligated to pay the additional money.

Question 41

Question
Nell gives Al $50 in return for Al's promise to defame Sara. Nell hopes to ruin Sara's chances at a promotion. Nell finds out that Al did not hold up his end of the agreement. Which of the following statements are true?
Answer
  • Nell can get the money back from Al through litigation.
  • Nell can get the money back and force Al to do as he promised.
  • Legally, Nell can neither get the money back nor force Al to do as he promised.
  • Nell can force Al to act through an appeal to the courts, but Al gets to keep the $50.

Question 42

Question
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?
Answer
  • Void as an illegal primary restraint.
  • Valid as a reasonable restraint on trade.
  • An unenforceable restraint against public policy.
  • Binding as fair protection.

Question 43

Question
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 Sealtest 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 Sealtest too, will he be in trouble under his contract?
Answer
  • No, it is unenforceable as against public policy.
  • Yes, it is likely to be enforceable during employment.
  • No, it is enforceable only after he quits Dunkirk.
  • Yes, it is a mutually agreed upon exchange and therefore enforceable.

Question 44

Question
William recently sold his successful business to Janice. The contract for the sale contained an unreasonable restriction that did not allow William to open a similar business for fifteen years. The courts would, in this instance,
Answer
  • delete the unreasonable portions of the contract.
  • require the parties to draft a new contract.
  • enforce the contract as it is written.
  • make the entire contract voidable by William.

Question 45

Question
Divided Parcel Service includes the following on its mailing receipts: "We are not responsible for any damages to packages whether or not through the fault or negligence of our employees. Send packages at your own risk." Mary reads this clause but sends her watch back to Bulova Co. to be repaired anyway. The watch is destroyed when the DPS driver uses the package for a ball and tosses it to his buddy. Mary is:
Answer
  • out of luck because the clause was communicated to her.
  • out of luck because she should have insured the package.
  • likely to collect from DPS since exculpatory clauses always violate public policy.
  • likely to collect from DPS because it is a common carrier.

Question 46

Question
Glen, acting as real estate agent for James, sold one thousand acres of land to a buyer in New Orleans. Two hundred acres of the land are in Texas and eight hundred acres are in Louisiana. Glen's commission on the transaction is $15,000. If Glen is licensed as a real estate agent in Texas, but not Louisiana, he is:
Answer
  • not entitled to any commission because a large portion of the land is in Louisiana.
  • not entitled to any commission because the buyer is a citizen of Louisiana.
  • entitled to the $15,000 commission since a portion of the land is in Texas.
  • entitled to a portion of the commission based on the land sold in Texas.

Question 47

Question
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:
Answer
  • in para delicto.
  • partial illegality.
  • substantive unconscionability.
  • procedural unconscionability.

Question 48

Question
Andrew owns a store in Polk County. His trade extends throughout River City, but not beyond the county limits. He sells his store to Betty and, as part of the transaction, agrees not to engage in the same business anywhere within the state for a period of three years.
Answer
  • The agreement is reasonable.
  • The agreement is unreasonable.
  • The agreement unduly interferes with the interests of the public.
  • Both (b) and (c).

Question 49

Question
Andrew owns a store in Polk County. His trade extends throughout River City, but not beyond the county limits. He sells his store to Betty and, as part of the transaction, agrees not to engage in the same business anywhere in River City for a period of five years.
Answer
  • The geographic restraint is reasonable.
  • This agreement is unreasonable.
  • The agreement unduly interferes with the interest of the public.
  • Both (b) and (c).

Question 50

Question
Sarah is working hard on the mayoral campaign of Timothy. She thinks that just a few more votes could win the election, so she promises to pay her friend Violet $50 to register and vote. Violet does so, but Timothy loses the election, and Sarah now refuses to pay.
Answer
  • This agreement is enforceable.
  • This agreement is unenforceable and opposed to public policy.
  • This is an agreement to obstruct the administration of justice.
  • This is an unconscionable contract covered by the UCC.

Question 51

Question
Patrick agrees to sell two different goods to his friend Ron, a retailer. One item is legal, and one item is illegal. The contract price is $2,000.
Answer
  • Patrick may not recover payment for either of the goods if delivered.
  • Patrick may recover for the legal item, but he may not recover for the illegal item.
  • This is an unconscionable contract under the UCC.
  • The court may view the contract as in (a) or (b).

Question 52

Question
A major distributor of popular sportswear offers a franchise agreement to retail stores. The contract is prepared on a standard form and offers terms on a take-it-or-leave-it basis. Such a contract is called:
Answer
  • exculpatory.
  • a usurious contract.
  • an illegal restraint of trade.
  • an adhesion contract.

Question 53

Question
Elmer promises to pay Fred $100 if Fred will register and vote in the next election as a Republican.
Answer
  • This is a valid contract.
  • This is an illegal agreement.
  • This is an adhesion contract.
  • This is a usurious agreement.

Question 54

Question
ABC, Inc. entered into a contract with Scott, an agent, under the terms of which Scott would receive $20,000 if he stole trade secrets from the leading competitor of ABC. Scott performed his end of the agreement by delivering the trade secrets. ABC now refuses to pay Scott for his services.
Answer
  • Scott may recover based upon the express contract of the parties.
  • Scott may recover based upon a quasi-contractual theory in order to prevent the unjust enrichment of ABC.
  • Scott will be unable to recover, because this is an illegal contract.
  • Scott will be able to recover based upon promissory estoppel, because he has detrimentally relied upon the promises made by ABC.

Question 55

Question
Bill bets his friend $100 that the Vikings will win the next Super Bowl.
Answer
  • This is an unconscionable contract and therefore illegal.
  • This is an illegal wagering agreement.
  • This is an agreement to obstruct justice and therefore illegal.
  • This is an illegal restraint of trade.

Question 56

Question
Carl and Rob are both engaged in road construction work. They know that several jobs are going to be up for public bids, and agree between themselves that Carl will bid on one job and Rob will bid on the other, so that they both have work for the summer. When the bids are opened, Carl realizes that Rob has bid on both jobs. Rob is awarded both contracts. Carl now wants to sue Rob for breach of contract.
Answer
  • Carl has detrimentally relied upon Rob's representation that he would not bid.
  • Since Carl is less at fault than Rob, the court will likely award Carl damages.
  • This is an agreement in violation of public policy that will not be enforced by the courts.
  • This is an agreement obstructing the administration of justice that will not be enforced by the courts.

Question 57

Question
Al 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 sales contract, he agrees that he will refrain from practicing accounting anywhere within a 20-mile radius of Redwood City for a period of five years. However, on weekends he returns to his house in Redwood City, and when clients call him, he meets with them in his home.
Answer
  • Al is in violation of the sales agreement.
  • The agreement is invalid, because it is an illegal restraint on trade.
  • The agreement is illegal, because it is a violation of public policy.
  • The five-year provision is likely to be held invalid, because it is too long a period of time.

Question 58

Question
Theresa is a travel agent at the Fly Away Travel Agency. She has signed an agreement with her employer which prohibits her from working in any similar business in any town within a 100-mile radius of where she works. If she wants to quit her job and go to work for another travel agency, it is likely that:
Answer
  • a court would uphold these restrictions.
  • if no trade secrets are involved, and she has no dominion over customers, a court would rule the restrictions to be invalid.
  • if the period of time of the agreement is reasonable, it will be upheld by the court.
  • Both (a) and (c).

Question 59

Question
Anna is 88 years old and under the legal guardianship of her daughter. One day Anna receives a telephone call from a health insurance salesman and purchases a $400 a month Medigap insurance policy.
Answer
  • This contract is valid.
  • This contract is voidable.
  • This contract is void.
  • This contract is unenforceable.

Question 60

Question
Fay, age 17, ordered a pair of skis on the installment plan. She paid $20 every month until she turned 18, the age of majority. The next day, she sold them to Sharon and disaffirmed the contract. What result?
Answer
  • Fay is still liable since she had to disaffirm before her 18th birthday.
  • Fay is still liable because selling the skis amounts to a ratification.
  • Fay is still liable because she used the skis.
  • Fay is not liable because skis are not necessaries.

Question 61

Question
Ann, a minor, disaffirmed her agreement to buy $127 worth of cosmetics from Facial Glo Company. She had used up all the eye shadows, lipsticks, and powders. The general rule is that:
Answer
  • She may disaffirm, but she must pay the asking price of the cosmetics used.
  • She may disaffirm, but she has to return the makeup that is not used up.
  • She may not disaffirm without paying the value of used makeup.
  • She may not disaffirm because she has used the goods.

Question 62

Question
Mary, age 17, sold Mark, age 22, the briefcase she got for graduation. Mark's father liked it and bought it from him. If Mary decides to disaffirm the contract, will Mark's father have to return the briefcase to her?
Answer
  • Yes, the briefcase is not a necessary.
  • Yes, if Mark's father still has it.
  • No, her contract was with Mark and he cannot return goods he does not have.
  • No, if Mark's father bought it without knowing that Mary was a minor.

Question 63

Question
Chris, a 17-year-old college freshman, signed the agreement that he would be responsible for damages to the athletic equipment caused by his negligence. If he slams a tennis racket into the ground and breaks it, will Chris be liable for his negligence?
Answer
  • No, because it would mean enforcement of the contract.
  • No, because minors are not liable for their torts.
  • Yes, because minors are liable for their torts.
  • Yes, because he voluntarily agreed to be liable.

Question 64

Question
Tim, who is a minor, enters into a contract with Violet, who is an adult. Which of the following is correct?
Answer
  • Violet may not disaffirm the contract.
  • Violet may disaffirm the contract at any time.
  • Violet may disaffirm the contract when Tim becomes an adult.
  • Tim may ratify the contract at any time during his minority.

Question 65

Question
Don, a minor, contracts to sell a car to Jerry, who is also a minor. Don reaches the age of 21, as does Jerry. Don takes no action to avoid the contract, but continues to use the car. Which of the following most accurately describes the status?
Answer
  • Don has ratified the contract.
  • Don has not ratified the contract.
  • The contract remains executory.
  • There is no contract, so there is no legal obligation owed by either party.

Question 66

Question
Steve purchases a four-wheel drive truck from Belk Ford. Steve is only 17 years of age. He wrecks the vehicle and attempts to disaffirm the contract and have Belk Ford repay him all that he has paid. In the majority of jurisdictions, what would happen?
Answer
  • Steve would be out of luck.
  • Steve must have the truck repaired.
  • Steve will receive his money less the depreciation in value of the vehicle.
  • Steve may simply return the vehicle and get his money.

Question 67

Question
Randy, a minor, buys a new four-wheel drive truck from Jones Ford. Randy sells this truck to his cousin, Steve, who is an adult. Steve conveys this vehicle to Arthur Smith. Arthur does not personally know Steve or Randy. Which of the following expresses the status of this situation?
Answer
  • Randy may recover the vehicle from Mr. Smith.
  • Randy may not recover the vehicle from Mr. Smith.
  • Randy may hold Steve liable in tort.
  • Randy may recover the reasonable value of the vehicle from Mr. Smith but not the vehicle itself.

Question 68

Question
Robert Briscoe is 17 years old. He lies to Belk Ford in order to induce it to sell him a new pickup. Belk falls for this lie and sells him the pickup. In most jurisdictions, which of the following is correct?
Answer
  • Robert may disaffirm and get his money back.
  • Robert may not disaffirm since he lied.
  • Robert may only receive a portion of his money.
  • Robert will receive his money less depreciation.

Question 69

Question
Percy, age 17, purchased a used mobile home from a mobile home dealer for $20,000. This price, however, was twice the reasonable value of the mobile home. One month later, Percy wishes to disaffirm the contract. If the mobile home is considered a necessity, then:
Answer
  • Percy can disaffirm the contract based on the wrongful act of the dealer.
  • Percy can disaffirm the contract because the minor can live in an apartment rather than a mobile home.
  • Percy must keep the mobile home but is only liable for the reasonable value of the mobile home.
  • Percy must keep the mobile home and abide by the original terms of the contract.

Question 70

Question
Cheryl, age 16, ordered a new dress to wear to the school prom. She has contracted to pay $500 when the dress arrives. Before the dress arrives, Cheryl decides that the dress is too expensive and now wishes to cancel the order.
Answer
  • Cheryl must pay $500 for the dress because the dress was specially ordered for Cheryl.
  • Cheryl must pay $500 for the dress because clothing is classified as a necessity.
  • Cheryl may disaffirm this executory contract.
  • Cheryl must accept the dress and pay the reasonable value of the dress.

Question 71

Question
Wanda at age 17 purchased an expensive stereo system from Stereo Sales. If Wanda wishes to ratify this contract, Wanda:
Answer
  • must reach the age of majority and ratify the contract as a whole.
  • may do so by express notification at any time before reaching the age of majority.
  • may at any time keep the stereo but avoid any remaining debt owed on the stereo.
  • may do so at any time by express or implied action before or after reaching the age of majority.

Question 72

Question
Donald, a minor, makes a contract with Albert, an adult, to buy a computer. One week later, Donald has his eighteenth birthday and shortly thereafter tells Albert he will pick up the computer next week.
Answer
  • Donald has expressly ratified the contract.
  • The contract must be renegotiated, because Donald was a minor when it was made.
  • Donald can change his mind and avoid the contract, because it was made when he was a minor.
  • The contract is void ab initio, because Donald was a minor at the time it was made.

Question 73

Question
When a minor falsely advises the other party that he is of the age of majority and based upon that misrepresentation, the other party in good faith enters into a contract with the minor:
Answer
  • the minor has lost his right to disaffirm the contract because of the misrepresentation.
  • the adult party can recover damages from the minor in tort.
  • the minor is required to restore the other party to the position occupied before the making of the contract.
  • There is no uniform rule. States differ, and depending upon the state, all of the above could be correct.
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