MGMT 311 Exam 3 - FLASHCARDS - Chapter 12 part 3 (1)

Question 1

What happens if a person is declared judicially mentally incompetent and a guardian represents them?

Answer 1

If a person is declared judicially incompetent, and a guardian is appointed to represent him or her; contracts entered into by him or her are void.

Question 2

How can a person not declared incompetent by a court, still be considered mentally incompetent by law?

Answer 2

A person not declared incompetent by a court can be considered legally mentally incompetent if his or her judgment is impaired because he or she cannot understand or comprehend the nature and effect of a particular transaction

Question 3

A contract that is made by a person who is mentally incompetent (but has not been so adjudicated) is voidable by the mentally incompetent person while he or she is mentally incompetent, or within a reasonable time after regaining mental competency, or by his or her guardian or other representative, when one is appointed

Answer 3

.

Question 4

What are lucid intervals?

Answer 4

Brief period during which a person who is incompetent due to age or illness can regain the legal capacity to contract and act on his/her own behalf. People who are incompetent due to age or illness can have Lucid Intervals where every contract formed is valid.

Question 5

True or false: during lucid intervals, every contract formed is valid?

Answer 5

TRUE

Question 6

How does ratification occur?

Answer 6

Ratification can occur after the incompetent period and during a lucid interval; or by a guardian

Question 7

A contract for necessaries may be disaffirmed, but the mentally incompetent party is liable for the reasonable value of the necessaries furnished.

Answer 7

.

Question 8

True or false: any contract to commit a crime is void?

Answer 8

TRUE

Question 9

What happens if the purpose or object of a contract becomes illegal because of the enactment of a statute after the contract has been entered into?

Answer 9

The contract may be “void” in the eyes of the legal system and thus be unenforceable. The parties are discharged from their obligations by operation of law.

Question 10

Do usury statutes exist in every state?

Answer 10

Yes

Question 11

What is the illegal action or practice of lending money at unreasonably high rates of interest?

Answer 11

Usury

Question 12

What is a usury statute?

Answer 12

Usury statutes fix the maximum lawful contract rate of interest that can be charged for a loan of money. The rate varies from state to state, and over time.

Question 13

What are exceptions for usury?

Answer 13

If the borrower is a corporation. An entity and not a person. People are more dependable

If the borrower is getting a small loan

Question 14

True or false: gambling contracts are illegal and void?

Answer 14

TRUE

Question 15

What is gambling?

Answer 15

Gambling or wagering is defined as the creation of risk and distribution of property by chance among persons who have given consideration in order to participate

Question 16

Is gambling legal in all states?

Answer 16

No. All states have statutes that regulate gambling, but in a few states, gambling is legal

Question 17

What are licencing statutes?

Answer 17

Statutes that require licenses to be obtained in order to engage in certain trades, professions, or business

Question 18

What does enforceability of contracts made by unlicensed persons depends upon?

Answer 18

the purpose of the licensing statute

Question 19

What if the purpose of the licensing statute is regulatory?

Answer 19

If the purpose of a statute is regulatory (to protect the public from unauthorized practitioners), contracts with the unlicensed professional are void and unenforceable.

Question 20

What if the purpose of a licensing statute is revenue raising?

Answer 20

If the purpose of a statute is merely revenue raising – to raise government revenue, contracts with the unlicensed professional are enforceable.

Question 21

What are contracts contrary to public policy?

Answer 21

an agreement which injures an established interest of society, or which has a negative effect on society is void and will not be enforced.

Question 22

What type of contract is where no legal obligation exists on the part of either party?

Answer 22

Void contract

Question 23

True or false: If two or more parties enter into an agreement in which they exchange mutual promises not to compete with each other and their only objective is to restrict competition, the agreement is void because it is against a strong public policy favoring free, fair competition?

Answer 23

TRUE

Question 24

What is an example of a contract in restraint of trade?

Answer 24

The seller of a business agrees not to open another competing store within the area of the store that he is selling.

Question 25

Is the covenant not to compete enforceable if it is ancillary?

Answer 25

Yes

Question 26

What does ancillary mean?

Answer 26

Secondary

Question 27

What is the reasonableness of an ancillary covenant not to compete based on?

Answer 27

a) time - courts will allow 6 months
b) geographic area
c) scope - what you are saying someone can’t do

Question 28

True or false: a contract may be unconscionable if it “shocks the conscience” of the court?

Answer 28

TRUE

Question 29

When might a contract be unconscionable?

Answer 29

A contract may be unconscionable if a party who is receiving an unusually greater benefit has superior bargaining power (a “take it or leave it” situation).

Question 30

True of false: if a contract is unconscionable, it is fair?

Answer 30

False. If a contract is unconscionable, it is shockingly unfair

Question 31

What is a clause within a contract that attempts to release a party from any and all liability for property damages or personal injury related to the contract?

Answer 31

Exculpatory contract

Question 32

In what cases are exculpatory contracts sometimes enforced?

Answer 32

1) they are reasonable
2) do not violate public policy
3) do not protect parties from liability for intentional misconduct
4) language used is unambiguous
5) parties have relatively equal bargaining positions

Question 33

In what type of contracts are exculpatory clauses unenforceable?

Answer 33

1) Employment contracts relieving employer of liability for employee’s on-the-job injury.
2) Rental of commercial property.
3) Residential property leases

Question 34

What are examples of subjects where exculpatory contracts are enforced?

Answer 34

health clubs, amusement parks, ski resorts, ski-diving, etc.

Question 35

What is the writing requirement or statute of frauds?

Answer 35

statute of frauds was created at early common law to help prevent fraud

Question 36

Are some contracts unenforceable due to lack of proper form?

Answer 36

Yes

Question 37

In order to be enforceable, what two requirements of the statute of frauds must contractual promises comply with?

Answer 37

1. Written evidence of the agreement

            2. signed by the party against whom the promises are being enforced (or their authorized agent).

Question 38

What are the 5 contracts that fall under the statute of frauds?

Answer 38

1) Contracts involving Interests in Land
2) The “one-year” rule
3) Collateral Promises
4) Promises Made in Consideration of Marriage
5) Uniform Commercial Code, contracts for the sale of goods for a price of $500 or more

Question 39

What type of property includes the land itself and anything permanently attached to land? Also includes anything valuable under the land such as coal, oil, diamond

Answer 39

Real property

Question 40

What is the one year rule?

Answer 40

contracts that cannot be performed within one year are under the statute of frauds. So, an oral contract that by its terms will take longer than a year is not enforceable

Question 41

What are secondary promises to answer for the debt or duty of another?

Answer 41

Collateral promises.

Question 42

Who must the promise be made to to become a collateral promise?

Answer 42

Promise must be made directly to the creditor to be a collateral promise

Question 43

True or false: we need to have written evidence for collateral promises?

Answer 43

TRUE

Question 44

What are unilateral promises to pay money or give other property in exchange for promises to marry?

Answer 44

Promises Made in Consideration of Marriage

Question 45

Which of the following job offers are under the statute of frauds? (assume you are 22 years old)
a. you have a job with this company, as long as we are in business
b. you have a job with this company for life
c. you have a job with this company until you reach retirement age
d. A and B are both under the statute of frauds
e. A, B, and C are all under the statute of frauds

Answer 45

.

Question 46

Which of the following contracts is enforceable if formed orally? (think statute of frauds)
1. A contract for the sale of mineral interests on 500 acres of ranch land in south texas
2. An executer of an estate agrees to pay the debts of the estate with the executor’s own money
3. A contract for the submission of a research paper with a 2 year deadline for submission
4. Sara agrees to give up community property rights acquired after her marriage to Don
5. A sale of clothes worth $50
6. A contract for the sale of a house and 2 acres where the buyer moves onto the property, starts making improvements to the property, and has made 3 monthly payments

Answer 46

3, 5, and 6

Question 47

Zayn boards the Big Rock Metro to ride downtown to his job. Zayn gives his money to the driver and takes his seat. Neither the driver nor Zayn says anything. Zayn and the bus driver

have a formal contract.

have no contract.

have an express contract.

have an implied contract.

Answer 47

have an implied contract.

Question 48

Owen offers to sell his motorcycle to Julian for $5,000. After he makes the offer, Owen has second thoughts. Owen can revoke the offer to sell his motorcycle to Julian

as long as Julian has not yet accepted the offer.

at no time, because offers to sell merchandise are irrevocable.

anytime, whether or not Julian has accepted the offer.

even after Julian has accepted but before Julian has delivered the money to Owen.

Answer 48

as long as Julian has not yet accepted the offer.

Question 49

Ellen offers to sell her 1997 Mustang convertible to Fred for $2,000. Fred agrees to pay $2,000 for Ellen’s Mustang. Before Fred picks up the Mustang, Ellen discovers that the Mustang is considered a classic car and is worth much more than $2,000. Ellen refuses to sell the Mustang to Fred, stating that the consideration is insufficient. If Fred tries to enforce the deal by taking Ellen to court

the court would probably enforce the deal because there was valid consideration on both sides.

the court would not enforce the deal because $2,000 is too low to be valid consideration.

the court would probably not enforce the deal because there is no consideration flowing from Ellen to Fred.

the court would probably enforce the deal because the amount of consideration is never an issue.

Answer 49

the court would probably enforce the deal because there was valid consideration on both sides.

Question 50

Lupita enters into a contract with Faith to purchase a used car. At the time they sign the contract, Lupita appears to be very intoxicated. Faith notices this but signs the contract anyway. If Lupita later decides she wants to get out of the contract

Lupita cannot get out of the contract if both parties signed it.

Lupita cannot get out of the contract even though she had been drinking excessively.

Lupita can raise the issue of undue influence, because Faith took advantage of Lupita while she was drinking.

Lupita can raise the defense of lack of contractual capacity due to intoxication.

Answer 50

Lupita can raise the defense of lack of contractual capacity due to intoxication.

Question 51

Ruby, a 17-year-old, purchases a car from Smitz Used Auto Sales and agrees to pay for it over a period of 24 months. Ruby makes the payments for 4 months but then decides the car payment is too much for her limited budget. Ruby tells Smitz that she wants to stop making payments and that she wants out of the contract completely. The contract between Ruby and Smitz can be canceled by

Ruby, because she is a minor, but Ruby must return the car.

Smitz or Ruby, because Ruby is a minor, and Ruby may keep the car.

Smitz, because Ruby is a minor, but Smitz must allow Ruby to keep the car.

Ruby, because she is a minor, and Ruby may keep the car.

Answer 51

Ruby, because she is a minor, but Ruby must return the car.