Chapter 12

Question 1

People who lack capacity

Answer 1

Minors
Insane persons
Intoxicated persons

Question 2

Infancy doctrine

Answer 2

Doctrine that allows minors to disaffirm (cancel) most contracts they have entered into with adults

Question 3

Disaffirmance

Answer 3

The act of a minor to rescind a contract under the infancy doctrine

Question 4

Duty of restoration

Answer 4

A minor is obligated only to return the goods or property he or she has received from the adult in the condition it is in at the time of disaffirmance

Question 5

Duty of restitution

Answer 5

If a minor has transferred money, property, or other valuables to the competent party before disaffirming the contract, that party must place the minor in status quo

Question 6

Ratification

Answer 6

The act of a minor after the minor has reached the age of majority by which he or she accepts a contract entered into when he or she was a minor

Question 7

Parents’ liability for child contracts

Answer 7

Parents owe a legal duty to provide food, clothing, shelter, and other necessaries of life for their minor children

Question 8

Emancipation

Answer 8

Act or process of a minor voluntarily leaving home and living apart from his or her parents

Question 9

Necessaries of life

Answer 9

Food, clothing, shelter, medical care, and other items considered necessary to the maintenance of life

Question 10

Mentally incompetent persons

Answer 10

Law protects people suffering from substantial mental incapacity from enforcement of contracts

Question 11

Adjudged insane

Answer 11

Declared legally insane by a proper court or administrative agency
- contract entered into w adjudged insane is void

Question 12

Insane but not adjudged insane

Answer 12

Being insane but not having been adjudged insane by a court or an administrative agency
- A contract entered into by such person is generally voidable
-Insane persons are liable in quasi contract to pay reasonable value

Question 13

Intoxicated persons

Answer 13

A person who is under contractual incapacity because of ingestion of alcohol or drugs to the point of incompetence
- General rule Contract is voidable only if the person was so intoxicated when the contract was entered into that he or she was incapable of understanding or comprehending the nature of the transaction

Question 14

Contracts Contrary to Law

Answer 14

Both federal and state legislatures have enacted statutes that prohibit certain types of conduct
Contracts to perform activities that are prohibited by statute are illegal contracts

Question 15

Usury Laws

Answer 15

Law that sets an upper limit on the interest rate that can be charged on certain types of loans
Lenders who charge a higher rate than the state limit are guilty of usury
- intended to help unsophisticated people with loan sharks

Question 16

Contracts in Restraint of Trade

Answer 16

Contracts like agreements to collude and reduce competition in markets

Question 17

Gambling Statutes

Answer 17

All states prohibit or regulate gambling, wagering, lotteries, and games of chance States provide various criminal and civil penalties for illegal gambling

Question 18

Indiana Gaming Regulatory Act (IGRA)

Answer 18

This law establishes a framework for permitting and regulating Native American gambling casinos.

Question 19

Effect of illegality

Answer 19

Doctrine that states that the courts will refuse to enforce or rescind an illegal contract and will leave the parties where it finds them

Question 20

In pari delicto

Answer 20

A situation in which both parties are equally at fault in an illegal contract

Question 21

Exculpatory agreements

Answer 21

A contractual provision that relieves one (or both) of the parties to a contract from tort liability for ordinary negligence

Question 22

Confidentiality Agreements

Answer 22

An agreement whereby individuals who are privy to a company’s secret or proprietary information agree not to disclose such information to any other party

Question 23

Non-Solicitation Agreements

Answer 23

An agreement in which employees agree that they will not solicit the clients or customers of the employer for their own benefit or benefit of another company

Question 24

Covenants Not to Compete

Answer 24

An agreement that a seller of a business or an employee will not engage in a similar business or occupation within a specified geographical area for a specified time following the sale of the business or termination of employment.

Question 25

Regulatory licensing statute

Answer 25

Licensing statute enacted to protect the public

Question 26

Revenue-raising statute

Answer 26

Licensing statute with the primary purpose of raising revenue for the government

Question 27

Unconscionable Contracts

Answer 27

Contract that courts refuse to enforce in part or at all because it is so oppressive or manifestly unfair as to be unjust

Question 28

Elements of