Week 6 - Test 1

Question 1

remainder of agreement can be enforced without unenforeceable provision contained in the agreement

Answer 1

severable

Question 2

court edits out part of an agreement

Answer 2

blue-penciling

Question 3

the parties are equally at fault

Answer 3

in Pari Delicto

Question 4

Statute violation; inherently bad

Answer 4

malum per se

Question 5

statute violation; not inherently bad; less serious – enforceability may vary

Answer 5

malum prohibitum

Question 6

If a licensing law is intended to (1), agreements in violation of the law are unenforceable.

Answer 6

protect the public

Question 7

charges an illegal rate of interest on a loan

Answer 7

usurious contract

Question 8

(1) and loans that do not involve (2) are most often regulated.

Answer 8

1. consumer loans

2. regulated banks

Question 9

loan for personal or family purposes

Answer 9

consumer loan

Question 10

a clause that permits immediate entry of judgment without notice of an opportunity to present defenses

Answer 10

confession of judgment (“cognovits”)

Question 11

legitimate financial interest in a person–without this, most states allow insuring a person (form of gambling)

Answer 11

insurable interest

Question 12

multilevel arrangement in which money is made by recruiting new people

Answer 12

pyramid scheme

Question 13

prohobits certain transactions on Sundays

Answer 13

Blue Law (Sunday statute)

Question 14

a civil wrong that is sometimes based in statute and sometimes based in common law

Answer 14

tort

Question 15

false statements that hurt the reputation of another

Answer 15

slander

Question 16

not good for society – determinable by courts’ discretion

Answer 16

contrary to public policy

Question 17

provision that attempts to excuse a party from liability for that party’s torts (generally unenforceable if involving intentional or reckless conduct)

Answer 17

exculpatory clause

Question 18

constituting a tort

Answer 18

tortious

Question 19

3 things a court will look at in determining whether an exculpatory clause should be enforceable for negligent actions

Answer 19

1. Was the clause conspicuous and clear?
2. What is the relationship between the parties and the relative “need” of the parties? (power to negotiate?)
3. To what degree can the parties protect themselves? (obvious hazard? Control?)

Question 20

relationship where parties have equal power to negotiate terms

Answer 20

arms-length transactions

Question 21

one party agrees to compensate the other for losses arising from the contract

Answer 21

hold harmless clause (indemnification clause)

Question 22

Contract provision that inhibits (1) is subject to scrutiny in court; the most common of these is the (2), which is enforceable only as part of a larger, legitimate agreement (not independently).

Answer 22

1. free trade

2. covenant not to compete

Question 23

provision under which party agrees to refrain from engaging in specified business activities

Answer 23

covenant not to compete (noncompete)

Question 24

When a noncompete clause appears in a contract for the (1), it is generally enforceable, as long as it is reasonable in terms of (2), (3) and (4). What is reasonable is determined based on what is necessary to protect the (5).

Answer 24

1. sale of a business
2. time limit
3. geographic limitations
4. scope of activity covered
5. buyer’s legitimate interests

Question 25

Court are careful in scrutinizing noncompete restrictions in (1), and these must be related to the (2).

Answer 25

1. employment contracts

2. employer’s legitimate interests

Question 26

Another noncompete restriction is (1), which risk violating antitrust laws and should be examined carefully.

Answer 26

1. exclusive dealing agreements

Question 27

Legality asks whether contracts are in compliance with (1) and (2)–basically, whether they are (3).

Answer 27

1. law
2. public policy
3. enforceable

Question 28

A bargain is illegal if either the (1) OR its (2) is (3), (4) or (5).

Answer 28

1. formation
2. performance
3. criminal
4. tortious
5. contrary to public policy

Question 29

If a bargain is illegal, the courts leave the parties (1)

Answer 29

1. where it finds them

Question 30

If an agreement is illegal when made and subsequently becomes legal because the law is changed, the change (1), UNLESS the law says it is (2)

Answer 30

1. does not validate the agreement

2. retroactive

Question 31

An illegal contract is void, which means if executed, (1), and if executory, (2). The exception is (3). Another exception is (4), in which courts examine the fault of each party and try to avoid problems like unjust enrichment.

Answer 31

1. there is nothing you can do
2. neither party can enforce the contract
3. Doctrine of Severability (allows for illegal part of the contract to be severed and the remainder enforced)
4. In Pari Delicto (in equal fault)

Question 32

If an attorney reaps the benefit of paralegal work and then refuses to pay because the work was illegal, the court upholding the contract is acting under (1)

Answer 32

In Pari Delicto

Question 33

(1) leads to judicial policy.

Answer 33

public policy

Question 34

1. inherently bad - not enforced

2. kind of bad, maybe bad - may be enforced

Answer 34

1. malum in se

2. malum prohibitum

Question 35

For determining the badness of a license violation, courts will ask whether the licensing exists to (1) or for (2)

Answer 35

1. protect the public

2. income

Question 36

excessive rate of interest. Malum prohibitum, so rest of contract may be ok.

Answer 36

usury

Question 37

(1) are void contracts even in states where gambling is legal. But a (2) is ok.

Answer 37

1. Casino loans

2. lottery split

Question 38

Life insurance requires an (1)

Answer 38

1. insurable interest

Question 39

Covenants not to compete will be upheld according to reasonableness of which 3 criteria?

Answer 39

1. duration
2. geographical area
3. scope/subject matter

Question 40

Courts usually strike sneaky exculpatory clauses because you can’t absolve yourself from (1) OR (2). However, if the clause makes it into the contract after (3) and it is (4), the court will probably uphold it.

Answer 40

1. negligence
2. intentional/reckless conduct
3. negotiation
4. reasonable

Question 41

3 questions to ask when determining whether an exculpatory clause overreaches

Answer 41

1. Does the clause go against long-established common law rules?
2. Does the clause absolve the party in total?
3. Does the state have an interest in protecting a large class of citizens who cannot protect themselves? (public policy)

Question 42

clause relating to interest rates

Answer 42

acceleration clause

Question 43

There can be no noncompete clauses between (1) because clients have a right to choose.

Answer 43

lawyers

Question 44

Lawyers may (1) for clients–in which case the client pays them back if he loses. However, lawyers may not engage in (2)–“sponsorship” regardless of win or loss–or (3), in which the “sponsor” gets the payout in case of a win (not the same thing as a contingency fee)

Answer 44

1. advance fees
2. maintenance
3. champerty