Business law discussion questions

Multiple Choice

1. Which of the following types of agreements is not a type of agreement that is generally illegal in many states?

a. Agreements regarding usurious loans.

b. Agreements for the sale of a used product.

C. Agreements to commit a crime.

d. Agreements regarding gambling.

e. Agreements to commit a tort.

2. A door-to-door hearing aid salesman specifically targets elderly clients. When the clients ask questions about the contract, the salesman is not truthful with them entirely. The answers to their questions are usually found on the tiny, hard-to-read print on the very back of the long contract the clients must sign. The salesman knows that his clients have poor vision and hearing, and uses this to his advantage in his sales techniques and with the small contractual terms.

The scenario above is a possible example of which type of agreement?

  • In pari delicto
  1. Substantive unconscionability
  2. Covenant not to compete
  3. Procedural unconscionability
  4. Exculpatory clause

3. In some states, courts consider the purpose of the licensing statute when determining the effect of the agreement. If a licensing statute is intended simply to generate revenue, then the contract of an unlicensed person is _________.

  • valid
  1. void
  2. nullified
  3. illegal
  4. unenforceable

4.Covenants not to compete in conjunction with the sale of a business are generally __________ if they are for a reasonable length of time and involve a reasonable location.

  • invalid
  1. illegal
  2. enforceable
  3. unenforceable
  4. hurtful to the public interest

5.A(n) __________ releases one of the contracting parties from all liability, regardless of who is at fault or what injury is suffered.

  • substantive unconscionability clause
  1. severable contract
  2. procedural unconscionability clause
  3. indivisible contract
  4. exculpatory clause

6. Suppose Bekah agrees to do bodywork on Fatima’s car. In exchange, Fatima agrees to be a poker dealer at Bekah’s underground casino. In the state where Bekah and Fatima live, there is a gaming statute that says all games of chance other than slot machines and the state lottery are illegal.

Would the agreement between Bekah and Fatima be enforceable?

  • Yes, because all types of gambling are not illegal in the state.
  1. No, because part of this agreement violates a law and therefore, the agreement calls for crime.
  2. Yes, if they conduct the poker game in secret.
  3. No, because this agreement violates usury regulations.
  4. No, because this action does not violate a criminal statute.

7. Technically, minors can disaffirm contracts for necessaries, but they will still be held liable for the reasonable value of the necessary. Which of the following is generally an example of a necessary?

a.Medical services

  1. Shelter
  2. Clothing
  3. Food
  4. All of these

8. Suppose a 17-year-old, Kendall, enters into an agreement to purchase a Harley Davidson from an ad she saw in the paper. She will pay $1,000/month until the bike is paid off. After making the third payment, Kendall turns 18 and decides to move out of state. She e-mails the seller of the motorcycle and tells him not to worry because even though she is moving, she still intends to make her monthly payments to purchase the bike. The above scenario is an example of what legal concept?

  • Express ratification
  1. Minor’s right to disaffirm
  2. Emancipated minor contract
  3. Implied ratification
  4. Contract for necessaries

9._________ is the possession of a mental or physical defect that prevents a natural person from being able to enter into a legally binding contract.

  • Implied ratification
  1. Incapacity
  2. Disaffirmance
  3. Mental capacity
  4. Emancipation

10. The minor’s right to disaffirm is designed to protect the minor from competent parties who might otherwise take advantage of him or her. But most states have determined that the minor should not have the right to disaffirm which of the following types of contracts?

  • Educational loan contracts.
  1. Enlistment in the armed services.
  2. Marriage contracts.
  3. Minors should not have the right to disaffirm all of these types of contracts.
  4. Health insurance contracts.

11.After a football game, Tyler and Austin want to enter into a contract together. Tyler is completely sober, but he knows Austin is very intoxicated and is so impaired that he is unable to understand the terms of the contract. If they enter into a contract, the contract would be ________.

  • legally binding
  1. voidable
  2. void
  3. valid
  4. an implied ratification

12.A person has _________ to enter into a contract if she suffers from a mental illness or deficiency that prevents her from understanding the nature and obligations of the transaction.

  • full capacity
  1. void capacity
  2. limited and full capacity
  3. no capacity
  4. limited capacity

13. The following contracts would be deemed illegal by a state or federal statute EXCEPT:

  • Agreements to commit a crime or tort are illegal in all states.
  1. Agreements regarding usurious loans may be illegal in some states.
  2. Agreements where an intoxicated person is so impaired that he is unable to understand his legal obligations under the contract he is entering into.
  3. Agreements regarding gambling are illegal in most states.
  4. Agreements that violate Sabbath or Sunday laws are illegal in some states.

14. In which of the following situations would the contract in question be void?

  • A person suffers from delusions, but can understand that she is entering into a contract, with certain obligations.
  1. A minor enters into a contract with a psychology counselor who is not a minor.
  2. An intoxicated individual with poor judgment enters into a contract.
  3. An individual who has been adjudicated insane enters into a contract.
  4. A minor enters into a contract with a health insurance agency.

15. Usury occurs when:

  • a party gives a loan at an interest rate below the legal minimum.
  1. a party gives a loan at an interest rate above the legal maximum.
  2. a party gives a loan at the market interest rate or above.
  3. a party gives a loan at an interest rate below the market interest rate.
  4. a party gives a loan at an interest rate below the market rate, yet above the legal maximum.
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