Chapter 10: Legal Purpose and Proper Form
1. A gambling agreement on the uncertain outcome of an event is termed a wager.
2. If no interest rate is specified in a loan agreement, the “legal rate of interest” as defined by state statute will
be utilized.
3. An agreement to pay a non-expert witness to testify in your behalf at a trial is illegal.
4. Small loan rates of interest, such as that charged by a pawnshop, cannot exceed the usurious rate and be
legal.
5. Manufacturers may identify to retailers a “suggested retail price” and refuse to sell to retailers who will not
charge that amount.
6. Generally, a contract “within the Statute of Frauds” does not have to be in writing to be enforceable.
7. If the illegality and agreement of a contract is slight or if one of the parties is relatively innocent of
wrongdoing, the law will allow restitution or for the agreement to be enforced in court.
8. A court will award money to prevent the unjust enrichment of one party or another to a quasi-contract.
9. When both the written dollar amounts and the dollar amounts expressed in figures in a contract are
unambiguous but in conflict, the dollar amount expressed in figures will be selected by the court as the correct
amount.
10. The rule that makes the final written version of the contract the ultimate source of evidence as to the
contract’s terms is called the written evidence rule.
11. A lottery involves
C. down payment, risk, and a guaranteed award.
D. none of these.
12. Which of the following would not be an agreement that would restrain trade unreasonably?
A. allocation of markets
B. bid rigging
13. As an incentive to stop illegal acts, restitution is available
C. for performed illegal acts that do not involve violence.
D. all of these.
14. Courts may enforce all or part of an illegal agreement and may grant relief to one of the parties when
A. the contract is divisible into legal and illegal parts.
B. the parties are not equally blameworthy.
15. When the court finds a contract illegal for unconscionability, it can
A. enforce the legal part and refuse to enforce the illegal part.
B. refuse to enforce the contract.
16. The practice of competing firms agreeing to and charging customers the same price is known as
A. price rigging.
B. usury.
17. Five competing major oil- and gas-producing companies agree to divide the United States markets between
themselves, each agreeing not to open gas stations in the others’ markets. This agreement is an example of
A. price fixing.
B. bid rigging.
18. Lending money at a rate higher than a state’s maximum rate is
C. adhesion.
D. none of the above.
19. George and Mandy paid $25 to obtain their marriage license. What type of license did they purchase?
C. both a and b
D. none of the above
20. Which of the following contracts would be within the Statute of Frauds?
C. contracts requiring less than a year to complete
D. all of the above are within the Statute of Frauds
21. Courts will enforce an oral contract for the purchase of real property if the buyer has
A. occupied or possessed the land.
B. made substantial improvements to the land.
22. A contract that contains a typewritten term that conflicts with a term handwritten into the same contract will
be
C. considered illegal and unenforceable.
D. voided and a new contract written.
23. Under the Statute of Frauds in most states the writing must
A. show the existence of a contract.
B. contain all the essential terms as defined by the Statute of Frauds of the state.
24. When a contract is so grossly unfair that parties under ordinary circumstances would not accept it, the
contract is said to be
C. divisible.
D. none of the above.
25. Which of the following is a contract without the Statute of Frauds?
A. a promise to pay for your sister’s debt if she cannot
26. The law found in most jurisdictions in which certain agreements are not enforceable unless written and
signed by the party against whom the contract is to be enforced is usually called the
C. statute of limitations.
D. none of the above.
27. Jean enters into a contract in which she will perform nail care services in Monique’s beauty shop for a
monthly fee payable to Monique plus 3 percent of Jean’s retail business. By definition which of the following is
not an essential term to the contract?
A. names of parties
B. signatures
28. Which of the following is meant to prevent unjust enrichment by enforcing restitution or some other
obligation against one or another of the parties to a case?
C. adhesion contract
D. executory contract
29. Under the UCC, in which of the following cases is a writing not required?
A. where ordered goods are specially manufactured and cannot be resold
30. Agreements that delay or prevent justice are
A. valid.
B. voidable.
31. Dennis was hired as an employment counselor at World Wide Staffing. He signed an agreement in which he
agreed to not open his own staffing business within a 20-mile radius of World Wide Staffing for a period of one
32. Darius and several other building contractors in Allensburg routinely bid on municipal construction projects.
They have agreed that one bidder of the group will make the lowest bid and will, therefore, win the latest
municipal building contract. Throughout the year each one of the contractors takes a turn being the lowest
bidder but sets the bid price higher than if there were real competition on the bid. This form of price fixing is
known as ____________________.
33. Janet operates a home-based business. To generate revenue her community requires her to annually
purchase a license for $30. One year she forgets to renew her license but continues operating her business. In
any lawsuit where the enforceability of the contracts she makes that year is called into question, the courts will
34. When separate consideration is given for the legal and illegal parts of a contract, the contract is said to be
____________________.
35. A third party is liable for an oral promise to pay another’s debt if the main purpose of the promise serves the
promisor’s own interest. This is called the ____________________.
36. Brian wants to rent Randy’s motorcycle for one week each month for the next four months. They agree to a
price of $100 per week payable in advance. Brian’s father tells Randy that if Brian should default on the
agreement, that he will pay the lease amount. This is an example of a(n) ____________________ promise.
37. Although Chuong and Steve have been in extended contract negotiations and other discussions, the
____________________ rule will prevent the presentation of the content of these discussions in court to
contradict the writing once a written contract has been executed.
38. In some states, if one party breaches either an oral or written contract to marry, the victim of the breach may
successfully sue for damages. The trend, however, is to ban such ____________________ suits.
39. Making an agreement that calls for one party to refrain from informing on or prosecuting an alleged crime in
exchange for money or other valuable consideration is called ____________________.
40. An exception to the parol evidence rule is made if it becomes necessary to show that a contract is voidable
because a party lacked ____________________.
41. Joe made an agreement with Fred to steal Joe’s truck and set it afire in order to collect the insurance money.
The agreement was that Joe would pay Fred $500 up front and the balance of $1,500 after Joe collected his
insurance. However, when the truck was taken, Joe called the police and had Fred arrested for auto theft and
claimed that the $500 was in the truck when it was stolen. Can Fred countersue? Explain your answer.
42. Brian is a commercial retail site developer who enters into an agreement with a local sales consultant
agreeing not to rent commercial retail space to prospective female clients. Is this contract enforceable? Why or
why not?
43. George was doing some extensive landscaping and needed about three acres of Pete’s property to completely
finish the project. Pete agreed to sell George that portion of ground, and they shook hands on it. After George
had finished the project, which included a paved driveway and a drainage system on the portion of land from
Pete, Pete insisted that because there was nothing in writing, the property was still his. Can George get title to
the land in question?
Pete’s silence during the execution of the oral agreement implies acceptance. In addition, George has occupied
44. Sherm is the owner and operator of Billiards & Cues, a wholesale dealer for various brands of pool tables.
Michelle meets with Sherm on several occasions to discuss pricing and delivery of ten pool tables for Michelle’s
restaurants. At one point during negotiations, Sherm offers a price of $34,000 for ten pool tables. Michelle
counteroffers with a price of $30,000, to which Sherm agrees. The day the contract is to be signed, however,
Michelle breaks both of her wrists and is unable to sign the contract. Instead, Michelle uses a stamped signature.
A few days later, Sherm sues Michelle on the basis that the contract is invalid because of the missing element of
her signature. Sherm now believes that the original $34,000 offer was fair and reasonable and wants to bring
evidence from the contract negotiations to the court hearing. What do you believe will be the outcome of this
trial and why?
Answers may vary. Because the contract was one for the selling and purchasing of goods more than $500 in