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Exam 13: Illegal Bargains

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Question 1

Multiple Choice

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John 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:

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

E) A) and B)
F) A) and C)

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Question 2

Multiple Choice

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Which of the following would always be considered to be contrary to public policy?

A) A contract which contains a covenant not to compete.
B) A contract offered on a take-it-or-leave-it basis.
C) An agreement to pay someone to make false statements about a competitor's product.
D) An agreement which contains an exculpatory clause.

E) A) and D)
F) All of the above

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Question 3

Multiple Choice

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

Where parties to a failed agreement are in pari delicto , a court will provide a remedy to the injured party.

Edward, an engineer, is working on a new design for some highly technical equipment which Martus, Inc. hopes to market within the next five years. The employment agreement between Edward and Martus states that Edward will not go to work for another company in the same business for a period of two years after termination of his employment with Martus, Inc. This agreement is void and unenforceable because, although Martus is a very specialized company, it would make it difficult for Edward to find other employment.

Bill is currently enrolled in law school. He expects to graduate and take the bar exam in order to be able to practice law. Before Bill becomes a lawyer, he promises to represent his friend, Tom, in a breach of contract action if Tom will pay him 25% of the settlement. Bill negotiates and the case settles for $50,000. Tom refuses to pay Bill. Bill then graduates and attempts to sue Tom. Bill has a legal right to enforce the agreement.

The usual means of enforcing an agreement prohibiting an employee from competing in a described territory for a stated period of time is by injunction.

Courts will never limit freedom of contract.

Maximum rates of interest that are permitted under usury statutes are uniform from state to state.

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

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

The courts readily enforce a covenant not to compete during the period of employment.

Permissible lender's expenses, which would not be considered in determining the rate of interest under usury statutes, include all but which of the following?

An agreement to refrain from a particular trade, profession, or business is enforceable if two requirements are met: that the purpose of the restraint is to protect a property interest of the promisee and the restraint is no more extensive than is reasonably necessary to protect that interest.

a. Explain the meaning of "public policy" in the context that an agreement is void because it violates public policy. b. List the most common forms of agreements that violate public policy.

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

A(n) __________ is a measure designed to protect the public from unqualified practitioners.

B& B, Inc. pays an attorney to draft and lobby for a bill which will greatly lessen B & B's tax liability to the state and federal governments. B&B gives the attorney $20,000 in cash to pay legislators for taking the time to listen to him. This is an agreement which is a violation of public policy.

Which of the following is true with regard to an exculpatory clause?

Distinguish between procedural and substantive unconscionability.