Question 1

In most illegal contracts, both parties are considered to be equally at fault, and neither party can enforce it.

Accepted Answer

This is known as the doctrine of illegality or illegality defense, where illegal contracts are deemed null and void and cannot be enforced in court. Both parties are usually considered to be equally at fault for entering into an illegal agreement.

Question 2

All collateral promises must be in writing to be enforceable.

Accepted Answer

While it is generally advisable for collateral promises to be in writing, they can be enforceable even if not in writing under certain circumstances, such as if there is partial performance or reliance on the promise. However, the Statute of Frauds requires certain contracts, including those involving the sale of goods for over $500, to be in writing to be enforceable.

Question 3

Reliance on a misrepresentation is justified if the misrepresentation is an obviously extravagant statement.

Accepted Answer

Reliance on a misrepresentation is not justified even if it is an obviously extravagant statement. It is still considered a misrepresentation and can lead to legal consequences. It is important to always verify any information before relying on it.

Question 4

To be enforceable, a contract for a sale of goods priced at $500 or more should be in writing.

Accepted Answer

This is known as the Statute of Frauds and is a requirement under the Uniform Commercial Code (UCC) for contracts involving goods priced at $500 or more to be in writing to be legally enforceable.

Question 5

A covenant not to compete included in the sale of an ongoing business is unenforceable.

Accepted Answer

A covenant not to compete included in the sale of an ongoing business is generally enforceable, as long as it is reasonable in scope, duration, and geographic area.

Question 6

Air Flo, Inc., and Banyan Grove Apartments enter into an oral contract in which Air Flo agrees to provide air-conditioning and heating maintenance for Banyan Grove's facilities for two years. This contract is enforceable by​
A)Air Flo.
B)Banyan Grove.
C)any third party, such as a HVAC supplies provider.
D)none of the choices.

Accepted Answer

Contracts that cannot be performed within one year must be in writing to be enforceable under the Statute of Frauds. Since this contract is for two years and is oral, it is not enforceable.

Question 7

Mica, a minor, signs a contract to pay National Health Club a monthly fee for twenty-four months to use its facilities. Six months later, after reaching the age of majority, Mica continues to use the club. This act is​
A)a disaffirmance.
B)an emancipation.
C)a ratification.
D)a restitution.

Accepted Answer

After reaching the age of majority, Mica's continuation of using the club without attempting to cancel or disaffirm the contract is an act of ratification, indicating that they intend to be bound by the terms of the contract.

Question 8

Because fraud actions necessarily involve wrongful conduct, courts may award punitive damages.

Accepted Answer

Punitive damages may be awarded in cases where there is evidence of intentional fraud or other egregious wrongdoing in order to punish and deter such behavior in the future.

Question 9

A statement of opinion is generally subject to a claim of fraud.

Accepted Answer

A statement of opinion is not considered a statement of fact, and therefore cannot be proven true or false. As such, it is not generally subject to a claim of fraud. However, if the opinion is stated as a fact, then it can be considered fraud.

Question 10

A contract that exculpates one party for negligence or other wrongdoing will often be viewed as unconscionable.

Accepted Answer

Exculpatory clauses that release one party from liability for their own negligence or wrongdoing are often found to be unconscionable because they are unfair and give the other party little bargaining power. Courts may refuse to enforce such clauses or interpret them narrowly to protect the interests of the non-exculpated party.

Question 11

Misrepresentation of law ordinarily entitles a party to relief from a contract.

Accepted Answer

The answer of Misrepresentation of law ordinarily entitles a party...

Question 12

William obtains a loan from a bank at 4.5 percent interest. The state where he obtains the loan has a usury statute that limits interest rates to a 3.5 percent maximum. William's contract with the bank is​
A)enforceable only if William does not attempt to disaffirm it.
B)enforceable only if the bank does not attempt to disaffirm it.
C)enforceable only if both William and the bank knew of the statute when the contract was signed.
D)not enforceable.

Accepted Answer

The contract is not enforceable because it violates usury laws, which limit the maximum interest rates that can be charged on loans. Even if both parties were unaware of the usury statute, the contract would still be unenforceable.

Question 13

Parents are always liable for the contracts made by their minor children.

Accepted Answer

Generally, minors do not have the legal capacity to enter into contracts, therefore, they cannot be held responsible for any contracts they make. However, parents may be responsible for contracts made on behalf of their minor children if they provide authorization, co-sign the contract or act as a guarantor.

Question 14

A threat to exercise a legal right ordinarily constitutes duress.

Accepted Answer

A threat to exercise a legal right is not considered duress unless it is made with the intention of causing the other party to enter into a contract against their will.

Question 15

A contract entered into by an intoxicated person is never valid.

Accepted Answer

The answer of A contract entered into by an intoxicated...

Question 16

To be enforceable, a writing evidencing an oral contract must have been signed by the party who seeks to enforce it.

Accepted Answer

For a contract to be enforceable, it generally must be signed by the party against whom enforcement is sought, not necessarily by the party seeking to enforce it.

Question 17

On Victor's eighteenth birthday, he decides that he no longer wants to keep a fishing boat he bought from Water Craft, Inc., when he was seventeen. His right to disaffirm the deal will depend on​​
A)why Victor no longer wants to keep the boat.
B)why Victor entered into the contract to buy the boat.
C)whether Victor acts within a reasonable period of time.
D)whether Water Craft has the right to disaffirm.

Accepted Answer

Victor's right to disaffirm the deal depends on whether he acts within a reasonable period of time. As he is only eighteen, he has the right to disaffirm the contract because he is a minor. However, he must do so within a reasonable period of time after reaching the age of majority, which is typically eighteen. The reasons for his decision to disaffirm and the reasons for entering into the contract are irrelevant as long as he acts within a reasonable time. Water Craft's right to disaffirm is also irrelevant to this situation.

Question 18

An innocent party can rescind a fraudulent contract and be restored to his or her original position.

Accepted Answer

This is because a fraudulent contract is voidable at the option of the innocent party, who has the right to rescind the contract and be restored to the position they were in prior to the contract.

Question 19

Carl and Debra orally agree on the sale of Carl's Electrical Supplies Company to Debra and jot down the terms on the back of one of Carl's blank invoices, which they both sign. A written memorandum evidencing an oral contract that would otherwise be unenforceable must contain​
A)all terms.
B)the essential terms.
C)the preliminary terms.
D)the qualitative terms.

Accepted Answer

A written memorandum must contain the essential terms of the contract to be enforceable, such as the parties involved, the subject matter, and the consideration.

Question 20

A person who enters into a contract when he or she is intoxicated can void the contract under any circumstances.

Accepted Answer

While being intoxicated can affect a person's ability to understand and agree to the terms of a contract, not all contracts signed while intoxicated will automatically be void. The level of intoxication, whether the other party knew about the intoxication, and whether the person had a legal guardian at the time can all impact the enforceability of the contract.

Quiz 9: Capacity, Legality, and Enforceability

In most illegal contracts, both parties are considered to be equally at fault, and neither party can enforce it.

All collateral promises must be in writing to be enforceable.

Reliance on a misrepresentation is justified if the misrepresentation is an obviously extravagant statement.

To be enforceable, a contract for a sale of goods priced at $500 or more should be in writing.

A covenant not to compete included in the sale of an ongoing business is unenforceable.

Air Flo, Inc., and Banyan Grove Apartments enter into an oral contract in which Air Flo agrees to provide air-conditioning and heating maintenance for Banyan Grove's facilities for two years. This contract is enforceable by​

Mica, a minor, signs a contract to pay National Health Club a monthly fee for twenty-four months to use its facilities. Six months later, after reaching the age of majority, Mica continues to use the club. This act is​

Because fraud actions necessarily involve wrongful conduct, courts may award punitive damages.

A statement of opinion is generally subject to a claim of fraud.

A contract that exculpates one party for negligence or other wrongdoing will often be viewed as unconscionable.

Misrepresentation of law ordinarily entitles a party to relief from a contract.

William obtains a loan from a bank at 4.5 percent interest. The state where he obtains the loan has a usury statute that limits interest rates to a 3.5 percent maximum. William's contract with the bank is​

Parents are always liable for the contracts made by their minor children.

A threat to exercise a legal right ordinarily constitutes duress.

A contract entered into by an intoxicated person is never valid.

To be enforceable, a writing evidencing an oral contract must have been signed by the party who seeks to enforce it.

On Victor's eighteenth birthday, he decides that he no longer wants to keep a fishing boat he bought from Water Craft, Inc., when he was seventeen. His right to disaffirm the deal will depend on​​

An innocent party can rescind a fraudulent contract and be restored to his or her original position.

Carl and Debra orally agree on the sale of Carl's Electrical Supplies Company to Debra and jot down the terms on the back of one of Carl's blank invoices, which they both sign. A written memorandum evidencing an oral contract that would otherwise be unenforceable must contain​

A person who enters into a contract when he or she is intoxicated can void the contract under any circumstances.

Air Flo, Inc., and Banyan Grove Apartments enter into an oral contract in which Air Flo agrees to provide air-conditioning and heating maintenance for Banyan Grove's facilities for two years. This contract is enforceable by

Mica, a minor, signs a contract to pay National Health Club a monthly fee for twenty-four months to use its facilities. Six months later, after reaching the age of majority, Mica continues to use the club. This act is

William obtains a loan from a bank at 4.5 percent interest. The state where he obtains the loan has a usury statute that limits interest rates to a 3.5 percent maximum. William's contract with the bank is

On Victor's eighteenth birthday, he decides that he no longer wants to keep a fishing boat he bought from Water Craft, Inc., when he was seventeen. His right to disaffirm the deal will depend on

Carl and Debra orally agree on the sale of Carl's Electrical Supplies Company to Debra and jot down the terms on the back of one of Carl's blank invoices, which they both sign. A written memorandum evidencing an oral contract that would otherwise be unenforceable must contain