39. 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:
a. exculpatory.
b. conscionable.
c. necessary to protect the employer’s legitimate interest.
d. in compliance with the state’s Blue Law.
40. 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 para delicto.
b. partial illegality.
c. substantive unconscionability.
d. procedural unconscionability.
41. Andrew owns a store in Polk County. His trade extends throughout River City, but not beyond the county limits. He
sells his store to Betty and, as part of the transaction, agrees not to engage in the same business anywhere within the
state for a period of three years. The agreement:
a. is reasonable.
b. is unreasonable, but enforceable since Andrew agreed to it.
c. unduly interferes with the interests of the public.
d. is reasonable, but only if Betty paid Andrew enough for the store to compensate him for lost business for
three years.
42. Andrew owns a store in Polk County. His trade extends throughout River City, but not beyond the county limits. He
sells his store to Betty and, as part of the transaction, agrees not to engage in the same business anywhere in River
City for a period of five years. The agreement:
a. is reasonable regarding the geographic restraint.
b. is unreasonable.
c. unduly interferes with the interest of the public.
d. is reasonable only if the agreement was made without duress.
43. The UCC provides that if a court as a matter of law finds a contract for the sale of goods or a clause of such a
contract to have been unconscionable at the time it was made, the court may:
a. refuse to enforce the contract.
b. enforce the part of the contract that is not unconscionable.
c. limit the application of any unconscionable clause in order to avoid an unconscionable result.
d. All of these.
44. Sarah is working hard on the mayoral campaign of Timothy. She thinks that just a few more votes could win the
election, so she promises to pay her friend Violet $50 to register and vote. Violet does so, but Timothy loses the
election, and Sarah now refuses to pay. The agreement is:
a. enforceable.
b. unenforceable and opposed to public policy.
c. one to obstruct the administration of justice.
d. an unconscionable contract covered by the UCC.
45. Which of the following would generally be considered to be a revenue-raising licensing law?
a. A statute requiring that doctors be licensed
b. A statute requiring that salespeople be licensed, but not establishing any educational or training requirements
c. A statute requiring public school teachers to be licensed
d. A statute that requires insurance agents to pass a test before selling insurance in a state
46. Numerous states impose no limit on the rate of interest that may be charged on:
a. loans to corporations.
b. credit card transactions.
c. loans made by certain designated types of lenders.
d. All of these.
47. Non-compete agreements drafted for employees of Internet companies:
a. are interpreted no differently in terms of standards of reasonableness than are agreements for other types of
companies.
b. are subject to larger geographic restrictions than for other types of companies.
c. are subject to longer periods of reasonable duration.
d. are irrelevant.
48. Patrick agrees to sell two different goods to his friend Ron, a retailer. One item is legal, and one item is illegal. The
contract price is $2,000. In this case:
a. Patrick may not recover payment for either of the items, or in some cases, he may recover for the legal item,
but not for the illegal item.
b. Patrick may only recover for the legal item, and he may not recover for the illegal item.
c. the contract is unconscionable under the UCC.
d. Patrick may not recover payment for either of the items.
49. A contract prepared on a standard form and offering terms on a take–it–or–leave-it basis is called:
a. exculpatory.
b. a usurious contract.
c. an illegal restraint of trade.
d. an adhesion contract.
50. Custom Sales and Rentals uses a four-page contract with important contract terms buried in the fine print. This is an
example of:
a. procedural unconscionability.
b. a reasonable, legal business practice.
c. a “Blue law.”
d. substantive unconscionability.
51. R&R, Inc. entered into a contract with Scott, an agent, under the terms of which Scott would receive $20,000 if he
stole trade secrets from the leading competitor of R&R. Scott performed his end of the agreement by delivering the
trade secrets. If R&R now refuses to pay Scott for his services, Scott:
a. may recover based upon the express contract of the parties.
b. may recover based upon a quasi-contractual theory in order to prevent the unjust enrichment of R&R.
c. will be unable to recover, because this is an illegal contract.
d. will be able to recover based upon promissory estoppel, because he has detrimentally relied upon the promises
made by R&R.
52. Which of the following is correct with regard to an enforceable restraint of trade?
a. The restraint should be no more extensive than is required to protect a specified property interest.
b. Restraints typically arise in connection with the sale of a business.
c. A typical restraint is a covenant not to compete.
d. All of these.
53. A court would be likely to enforce an illegal contract:
a. under certain circumstances in which the aggrieved party was unaware of the illegality.
b. where, although the contract is unconscionable, there is only procedural unconscionability.
c. where the agreement is with an unlicensed attorney.
d. under no circumstances.
54. 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, negative statements about a competitor‘s product
d. An agreement which contains an exculpatory clause
55. Which of the following would be considered a valid and legally enforceable agreement?
a. An agreement to pay a legislator to vote for a particular bill
b. An agreement under which Arthur agrees to pay Barbara $3,000 to disparage the product of Arthur’s
competitor
c. An agreement by the seller of a service station not to enter the service station business in Ohio for a period of
30 years after the sale of his business
d. An agreement by a car salesman not to sell automobiles or automobile parts in Marin County for a period of
one year after terminating his employment
56. Bill bets his friend $100 that the Patriots will win the next Super Bowl. This is an:
a. unconscionable contract and therefore illegal.
b. illegal wagering agreement.
c. agreement to obstruct justice and therefore illegal.
d. illegal restraint of trade.
57. Carl and Rob are both engaged in road construction work. They know that several jobs are going to be up for public
bids, and agree between themselves that Carl will bid on one job and Rob will bid on the other, so that they both have
work for the summer. When the bids are opened, Carl realizes that Rob has bid on both jobs. Rob is awarded both
contracts. If Carl now wants to sue Rob for breach of contract:
a. Carl would probably win on the basis of promissory estoppel since he has detrimentally relied upon Rob’s
representation that he would not bid.
b. the court will likely award Carl damages since Carl is less at fault than Rob.
c. the agreement is in violation of public policy and will not be enforced by the courts.
d. the agreement obstructs the administration of justice and will not be enforced by the courts.
58. Al has a tax service and accounting business in Redwood City. He decides to move to Center City, which is 150
miles away and sells his accounting practice to Able and Baker, a CPA firm. In the sales contract, he agrees that he
will refrain from practicing accounting anywhere within a 20-mile radius of Redwood City for a period of two years.
However, on weekends he returns to his house in Redwood City, and when clients call him, he meets with them in his
home. The sales agreement:
a. is being violated by Al.
b. is invalid, because it is an illegal restraint of trade.
c. is illegal, because it is a violation of public policy.
d. will be divided into an enforceable, valid portion and an unenforceable, invalid portion, which is the time
provision, because the two-year period is too long.
59. Theresa is a travel agent at the Fly Away Travel Agency. She has signed an agreement with her employer which
prohibits her from working in any similar business in any town within a 100–mile radius of where she works. If she
wants to quit her job and go to work for another travel agency, it is likely that:
a. a court would uphold these restrictions.
b. if no trade secrets are involved, and she has no dominion over customers, a court would rule the restrictions to
be invalid.
c. if the period of time of the agreement is under five years, it will be upheld by the court.
d. a court would rule the restrictions invalid unless her work is done predominantly online.
60. Mel owns a neighborhood grocery store that he would like to sell. Katrina is interested in purchasing the business,
but she is concerned because she knows that Mel has built up a lot of goodwill over the years, and she wonders
whether Mel might not just open another store down the block and take all of the business from the old store with
him. Katrina asks for and receives from Mel a clause in the sales agreement that Mel will not open another grocery
store within a 150-mile radius of the old store for a period of at least ten years.
a. What is this agreement called?
b. Is the negotiated clause a valid one? Explain why or why not.
c. What guidelines would a court ordinarily use in determining whether to enforce such a clause?
61. Philip has been in training for several months and now plans to run in the school-sponsored, ten-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.
62. Answer the following:
a. What is an illegal wagering contract?
b. Larry takes out a $100,000 life insurance policy on his business partner, because his partner
hasn’t been well lately, and Larry thinks he might die. Is this a wagering contract? Explain.
c. Shiloh’s Department Store has a special promotion whereby anyone who buys $10 in
merchandise is eligible to register for a trip to Europe. Is this an illegal lottery? Explain.
63. What does it mean that an agreement is void because it violates public policy?
a. Explain the meaning of “public policy” in this context.
b. List the most common forms of agreements that violate public policy.
64. Answer the following:
State and local governments require licenses for certain business 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.
65. Courts usually will require evidence of what factors for a transaction to be usurious?
66. What is the legal effect of an agreement that is criminal, tortious, or otherwise contrary to public policy, and why
does it have that effect?
67. Define “unconscionability” and distinguish between procedural and substantive unconscionability.