Chapter 13
Capacity and Legality
N.B.: TYPE indicates that a question is new, modified, or unchanged, as follows.
N A question new to this edition of the Test Bank.
+ A question modified from the previous edition of the Test Bank.
= A question included in the previous edition of the Test Bank.
TRUE/FALSE QUESTIONS
A1. When both parties to a contract are minors, neither of them may disaffirm the
contract.
A2. A minor’s right to disaffirm a contract terminates sixty days after the contract’s date.
A3. Contractual capacity includes the financial ability to pay for the benefits of a contract.
A4. The age of majority in most states is eighteen years.
A5. All contracts between adults and minors are void.
A6. A minor may disaffirm a contract only if the subject matter is illegal.
A7. Parents are required by law to provide necessaries for their minor children.
A8. Parents are always liable for the contracts made by their minor children.
A9. A contract is void if one of the parties was intoxicated at the time of its formation.
A10. A contract to do something that is prohibited by statutory law is void.
A11. A contract to commit a crime is a contract and therefore enforceable.
A12. A party who uses the benefits of a contract before paying for them commits usury.
A13. Federal law bars electronic payments, such as credit-card transactions, at online
gambling sites.
A14. Whether a contract with an unlicensed professional is enforceable depends on the purpose
of the statute that requires the license.
A15. In an employment contract, a covenant not to compete can be enforceable.
A16. The lack of an opportunity to read a contract may be unconscionable.
A17. An exculpatory clause in an employment contract is usually enforceable.
A18. If an illegal contract is executory, either party can enforce it.
A19. Portions of a divisible contract may be enforced.
A20. When a statute protects a certain class of people, a member of that class cannot
enforce an otherwise illegal contract.
MULTIPLE CHOICE QUESTIONS
A1. Dante enters into a contract with Rosalinda, who does not have contractual capacity.
Dante can enforce the contract if Rosalinda
a. does not choose to avoid the contract.
b. is a minor.
c. can obtain the funds to pay for the benefits of the contract.
d. is intoxicated or mentally incompetent.
A2. Yvon and Zach are minors who marry each other. Their minority status may be
terminated under the laws of
a. all states.
b. most states.
c. some states.
d. no states.
A3. Orin relinquishes the right to his daughter Neko’s control, care, custody, and earnings.
This act is
a. disaffirmance.
b. emancipation.
c. ratification.
d. severability.
A4. Chris, a minor, signs a contract to buy alcoholic beverages for Dine & Drink, his
parents’ restaurant. The contract is
a. valid but may be disaffirmed.
b. valid but may not be disaffirmed.
c. void as a matter of law.
d. void unless it is also signed by Ed, the manager of Dine & Drink.
A5. Olga, a minor, signs a contract to buy a computer from Phil, the owner of Quality
Computer Store. Olga’s right to disaffirm the contract
a. does not change the fact that Phil is bound by the contract.
b. does not yet exist because Olga is still a minor.
c. gives Phil, an adult, the right to disaffirm the contract.
d. is not valid because a computer is a “necessary.”
A6. Elmo, a minor, misrepresents his age to be twenty-one and contracts to buy a car
from Fine New Autos. Ordinarily, Elmo can disaffirm the contract
a. only if he can prove that Fine New Autos did not know his true age.
b. only if he can prove that Fine New Autos knew his true age.
c. under any circumstances.
d. under no circumstances.
A7. Jenna, a minor acting on her own, signs a contract to buy a horse and its tack from Field
Equine Ranch. Later, after taking possession of the horse and tack, Jenna disaffirms the
deal. She
a. can keep the horse and the tack.
b. can keep the horse but not the tack.
c. can keep the tack but not the horse.
d. must return both the horse and the tack.
A8. Ruth, a minor, charges groceries at Sam’s Mini-Mart. Two days later, Ruth disaffirms
the purchase. Ruth owes Sam’s
a. the reasonable value of the groceries.
b. the retail value of the groceries.
c. the wholesale value of the groceries.
d. nothing.
A9. Jacquie signs a contract to buy a car just before reaching the age of majority. After
reaching the age of majority, Jacquie does not take possession or make payments.
Most courts would hold, with respect to the contract, that this is
a. disaffirmance.
b. emancipation.
c. ratification.
d. rescission.
A10. Max, a minor subject to his parents’ care and control, signs a contract to rent an
apartment from Noel for one year. Before the end of the term, Max moves out. Noel
sues for the rent for the rest of the term. Max can
a. avoid liability for the rent but not disaffirm the contract.
b. disaffirm the contract and avoid liability for the rent.
c. disaffirm the contract but not avoid liability for the rent.
d. not disaffirm the contract nor avoid liability for the rent.
A11. Lindsey, an emergency medical technician, is called to an accident scene by Nicole and
renders medical care to Marvin, a minor. Lindsey may recover the cost from
a. the state.
b. Marvin.
c. Nicole.
d. no one.
A12. On Tim’s eighteenth birthday, he decides that he no longer wants to keep a car he
bought from Woody’s Autos, Inc., when he was seventeen. His right to disaffirm the
deal will depend on
a. the car’s condition when Tim bought it.
b. the car’s current condition.
c. whether Tim acts within a reasonable period of time.
d. whether Woody’s has the right to disaffirm.
A13. Delia enters into, and fails to disaffirm soon after reaching the age of majority, a
contract with Electronics Stores, Inc. (ESI). Later Delia attempts to disaffirm the
contract. ESI files a suit against her. The court will most likely consider the contract
ratified if it is
a. executed.
b. exculpatory.
c. disaffirmed.
d. rescinded.
A14. Intoxicated but fully aware of the consequences, Uri agrees to a two–year cell-phone
service contract with Wander Talk, Inc., at more than the average market price. This
contract is
a. enforceable.
b. not enforceable because contracting parties can change their minds.
c. not enforceable because the contract clearly favors Wander Talk.
d. not enforceable because Uri was intoxicated when he agreed to it.
A15. Fay is mentally incompetent but has not been so adjudged by a court. Any contract
Fay enters into is
a. voidable if Fay has a lucid interval at the time of contracting.
b. voidable if Fay lacks the capacity to comprehend the consequences.
c. voidable if the other party does not realize that Fay is incompetent.
d. unavoidable.
A16. Fernando obtains a consumer loan from Greater Regional Credit Union at an interest
rate that exceeds the state’s maximum. Greater Regional has
a. created a risk for the purpose of assuming it.
b engaged in a restraint of trade.
c. violated a licensing statute.
d. committed usury.
A17. Jolie signs a contract with Keaton, an unlicensed physician, to perform plastic surgery—a
medical procedure. This contract is enforceable by
a. Jolie.
b. Jolie’s medical insurance company.
c. Keaton.
d. no one.
A18. Brasilia, a real estate broker licensed only in Connecticut, concludes a land sale in Delaware.
She can
a. collect the commission if it has not been paid.
b. keep the commission if it has already been paid.
c. foreclose on the property to obtain any unpaid amount.
d. not collect the commission, keep it, or foreclose on the property.
A19. Cross-Country Trucking Company contracts with Baldwin to transport crated goods to a
certain destination for $5,000. Cross-Country delivers the crates, but Baldwin does not pay.
Cross-Country learns that the crates contained stolen goods. Cross-Country can
a. do nothing with respect to the contract.
b. recover $5,000 from Baldwin.
c. recover the goods but not the $5,000 from Baldwin.
d. recover the goods or the $5,000 from Baldwin.
A20. Smitty enters into an illegal bargain with Taylor. Smitty can enforce the contract or recover
for its value if he has been induced to enter into the bargain as a result of
a. fraud.
b. his desire to obtain the object of the deal.
c. a persuasive “sell” by Taylor.
d. his belief that Taylor would do right by him.
ESSAY QUESTIONS
A1. In State X, persons must be at least eighteen years old before they can purchase
alcoholic beverages. The state also has passed a law requiring that persons who
prepare and serve liquor in the form of drinks in commercial establishments be
licensed. The only requirement for obtaining a yearly license is that the person be at
least eighteen years old. Moffitt, aged thirty-five, is hired as a bartender for the Lone
Star Restaurant. Bekins, a staunch alumnus of a nearby university, brings twenty of
his friends to the restaurant to celebrate a football victory. Bekins has ordered four
rounds of drinks, and the bar bill exceeds $200. Bekins learns that Moffitt has failed to
renew his bartender’s license, and Bekins refuses to pay, claiming the contract is
unenforceable. Is Bekins correct?
A2. Baby Products, Inc., hires Cole to develop and implement an e-commerce strategy for
marketing Baby’s products. Cole signs a contract that includes a clause prohibiting him
from competing with Baby during and after the employment. Before the strategy is
implemented, Cole resigns from Baby’s employ and opens a business to compete with
Baby. In Baby’s suit against Cole, to determine whether Cole may compete with Baby,
what is the most important factor the court should consider?