Question 1

Many states impose no limit on the rate of interest that may be charged on loans to corporations.

Accepted Answer

A) True 
 B)False

Question 2

An exculpatory clause attempts to excuse one from liability for her own tortious conduct.

Accepted Answer

A) True 
 B)False

Question 3

Many states impose no limit on the rate of interest that may be charged:

Accepted Answer

A)   on loans to corporations.
B)   on consumer credit card transactions.
C)   on any consumer loan.
D)   All of the above.
E)   Two of the aboe.

Question 4

Some states require the lender to forfeit two or three times the amount of usurious interest charged.

Accepted Answer

A) True 
 B)False

Question 5

An adhesion contract is offered on a "take-it-or-leave-it" basis.

Accepted Answer

A) True 
 B)False

Question 6

Sam, a student, promises to act as a guide on a fishing trip for a group of visiting dignitaries.The dignitaries agree to pay him $200 for his services.Sam guides them, but when they discover that Sam does not have a fishing license, they refuse to pay him.The agreement is an illegal one, which is not enforceable.

Accepted Answer

A) True 
 B)False

Question 7

In some states, a lender who charges a usurious rate forfeits both the principal and interest on the loan.

Accepted Answer

A) True 
 B)False

Question 8

Identify five exceptions to the general rule that illegal contracts are unenforceable.

Accepted Answer

The rule of unenforceability is subject ...

Question 9

Bargains are illegal if they violate a crime or tort but not if they are merely against public policy.

Accepted Answer

A) True 
 B)False

Question 10

Abner 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:

Accepted Answer

A)   in pari delicto .
B)   partial illegality.
C)   substantive unconscionability.
D)   procedural unconscionability.

Question 11

Specific lender usury statutes rather than the general usury statute generally apply to real estate mortgages and small consumer loans.

Accepted Answer

A) True 
 B)False

Question 12

Divided Parcel (DP)  includes the following on its mailing receipts: "We are not responsible for any damages to packages whether or not through the intentional or reckless fault or negligence of our employees.Send packages at your own risk." Mary reads this clause but sends her watch back to the manufacturer to be repaired anyway.The watch is destroyed when the DP driver uses the package for a ball and tosses it to his buddy.Mary is:

Accepted Answer

A)   out of luck because the clause was communicated to her.
B)   out of luck because she should have insured the package.
C)   likely to collect from DP since exculpatory clauses always violate public policy.
D)   likely to collect from DP because it attempted to excuse intentional and reckless behavior.

Question 13

Nell gives Big 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 is true?

Accepted Answer

A)   Nell can get the money back from Al through litigation.
B)   Nell can get the money back and force Al to do as he promised.
C)   Legally, Nell can neither get the money back nor force Al to do as he promised.
D)   Nell can force Al to act through an appeal to the courts, but Al gets to keep the $50.

Question 14

The sole nursing home in the county offers a long-term care agreement.The contract is prepared on a standard form and offers terms on a take-it-or-leave-it basis.Such a contract is called:

Accepted Answer

A)   exculpatory.
B)   a usurious contract.
C)   an illegal restraint of trade.
D)   an adhesion contract.

Question 15

Before granting an injunction enjoining a former employee from competing in a described territory, the courts insist that the employer demonstrate that the restriction is __________ to protect the employer's legitimate interest.

Accepted Answer

A)   exculpatory
B)   unconscionable
C)   necessary
D)   usurious

Question 16

An agreement to refrain from a particular trade, profession, or business is enforceable if:

Accepted Answer

A)   the purpose of the restraint is to protect a property interest of the promisee.
B)   the agreement is for no longer than two years.
C)   the restraint is no more extensive than is reasonably necessary to protect the promisee's property interest.
D)   Two answers are correct but not all three. D

Question 17

State and local governments require licenses for certain businesses and professional activities.
a.Explain the difference between a regulatory licensing statute and a licensing statute enacted to raise revenue.
b.Explain the significance in contract law between a regulatory license and a revenue raising license.
c.Give an example of each type of licensing statute.

Accepted Answer

a.A regulatory licensing statute is enacted to protect the public against unqualified persons.A revenue-raising statute does not seek to provide protection against the unqualified but is enacted merely to collect a licensing fee as revenue.
b.In the case of a regulatory license, an unlicensed person may not collect for his or her services.In the case of a revenue-raising license, an unlicensed person may collect for his or her services.
c.Regulatory: Doctors, lawyers, CPA's and other professionals who must prove their competency based on established criteria of education and/or examinations.Revenue-raising: Individuals and businesses who merely complete a form and pay a fee to obtain a license, such as a bartender or a salesperson who need not pass a competency exam.

Question 18

American courts generally will enforce a gambling agreement.

Accepted Answer

A) True 
 B)False

Question 19

Philip has been in training for several months and now plans to run in the school-sponsored, 10-mile, fun-run mini-marathon.He completes and signs an entry blank which contains the statement, "I hereby agree to hold the sponsors harmless for any injury sustained as a result of participation in this event no matter how such injury may be caused." 
a.What is the legal term for this clause in the agreement? 
b.Is the clause valid and legally enforceable? Explain its legal effect.

Accepted Answer

a.This is an exculpatory clause.
b.This type of clause is generally looked upon with disfavor since there is a policy to discourage overreaching and to assure that wrongdoers will pay the damages caused by their tortious conduct.However, Philip should not automatically assume that the clause will not be upheld, because the policy of freedom of contract is also a factor in determining the validity of contractual clauses exempting a party from liability for his tortious conduct, and thus not all such clauses are held to be against public policy.Exculpatory clauses relieving a party from harm caused intentionally or recklessly are unenforceable as violating public policy; however, clauses excusing a party from liability for harm caused by negligent conduct undergo careful scrutiny by the courts.To be upheld, the clause should be conspicuous and clearly written.If one party's superior bargaining position has enabled him to impose an exculpatory clause upon the other party, the courts are inclined to nullify the provision.In this case, the fun run is not a necessary or required activity, so the clause will probably not be viewed as being imposed by a stronger party.

Question 20

A contract of adhesion:

Accepted Answer

A)   is automatically unenforceable.
B)   consists largely of boilerplate provisions, such as a standard-form insurance policy.
C)   is a contract that exhibits either procedural or substantive unconscionability.
D)   is a contract containing multiple exculpatory clauses.

Exam 13: Illegal Bargains

Many states impose no limit on the rate of interest that may be charged on loans to corporations.

Correct Answer
verified

An exculpatory clause attempts to excuse one from liability for her own tortious conduct.

Correct Answer
verified

Many states impose no limit on the rate of interest that may be charged:

Correct Answer
verified

Some states require the lender to forfeit two or three times the amount of usurious interest charged.

Correct Answer
verified

An adhesion contract is offered on a "take-it-or-leave-it" basis.

Correct Answer
verified

Correct Answer
verified

In some states, a lender who charges a usurious rate forfeits both the principal and interest on the loan.

Correct Answer
verified

Identify five exceptions to the general rule that illegal contracts are unenforceable.

Correct Answer
verified
The rule of unenforceability is subject ...
View Answer

Bargains are illegal if they violate a crime or tort but not if they are merely against public policy.

Correct Answer
verified

Correct Answer
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Specific lender usury statutes rather than the general usury statute generally apply to real estate mortgages and small consumer loans.

Correct Answer
verified

Correct Answer
verified

Nell gives Big 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 is true?

Correct Answer
verified

The sole nursing home in the county offers a long-term care agreement.The contract is prepared on a standard form and offers terms on a take-it-or-leave-it basis.Such a contract is called:

Correct Answer
verified

Before granting an injunction enjoining a former employee from competing in a described territory, the courts insist that the employer demonstrate that the restriction is __________ to protect the employer's legitimate interest.

Correct Answer
verified

An agreement to refrain from a particular trade, profession, or business is enforceable if:

Correct Answer
verified
D

American courts generally will enforce a gambling agreement.

Correct Answer
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A contract of adhesion:

Correct Answer
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Exam 13: Illegal Bargains

Many states impose no limit on the rate of interest that may be charged on loans to corporations.

Correct AnswerverifiedShow Answer

An exculpatory clause attempts to excuse one from liability for her own tortious conduct.

Correct AnswerverifiedShow Answer

Many states impose no limit on the rate of interest that may be charged:

Correct AnswerverifiedShow Answer

Some states require the lender to forfeit two or three times the amount of usurious interest charged.

Correct AnswerverifiedShow Answer

An adhesion contract is offered on a "take-it-or-leave-it" basis.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In some states, a lender who charges a usurious rate forfeits both the principal and interest on the loan.

Correct AnswerverifiedShow Answer

Identify five exceptions to the general rule that illegal contracts are unenforceable.

Correct AnswerverifiedThe rule of unenforceability is subject ...View AnswerShow Answer

Bargains are illegal if they violate a crime or tort but not if they are merely against public policy.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Specific lender usury statutes rather than the general usury statute generally apply to real estate mortgages and small consumer loans.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Nell gives Big 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 is true?

Correct AnswerverifiedShow Answer

The sole nursing home in the county offers a long-term care agreement.The contract is prepared on a standard form and offers terms on a take-it-or-leave-it basis.Such a contract is called:

Correct AnswerverifiedShow Answer

Before granting an injunction enjoining a former employee from competing in a described territory, the courts insist that the employer demonstrate that the restriction is __________ to protect the employer's legitimate interest.

Correct AnswerverifiedShow Answer

An agreement to refrain from a particular trade, profession, or business is enforceable if:

Correct AnswerverifiedD

American courts generally will enforce a gambling agreement.

Correct AnswerverifiedShow Answer

A contract of adhesion:

Correct AnswerverifiedShow Answer

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The rule of unenforceability is subject ...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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D

Correct Answer
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Correct Answer
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