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Exam 12: Legality

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Question 1

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Mabel,an 85-year-old widow who is in poor health,signs a contract with the only nursing home in Anytown (the nearest alternative facility is 75 miles away).The contract obligates Mabel to pay $4,000 per month for the rest of her life and for her estate to pay the same amount for the period of time that the unit sits empty upon her death.Mabel's daughter believes this agreement amounts to an adhesion contract.What is an adhesion contract? What factors will a court look at in determining whether an adhesion contract exists?

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An adhesion contract is a standard form ...

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Question 2

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Elias sold a auto body shop to Ben for $295,000.As part of the agreement,Elias promised not to open another auto body shop for five years within a 75-mile radius of the one sold.Is this agreement enforceable against Elias?

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Noncompete clauses are often upheld when...

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In many states it is legal to lend money to help someone gamble as gambling is legal.

When Jeff accepted a job with Gast Electrics,he signed the following agreement,"Upon termination of my employment with Gast Electrics,I agree never to work for another employer as an electrician." If Jeff resigns from Gast Electrics,this agreement would be unenforceable as it is an illegal restraint of trade.

Barb has been a children's day care provider for several years in the small town of Sallton.She has decided to give it all up and move to the big city for excitement and adventure.She sells her business to Ken,agreeing not to open a competing business within five miles of Sallton for a period of nine months.After five months of the big city life,Barb is broke and moves back to Sallton.She opens a small day care business.Ken sues on the noncompete clause.What is the most likely result?

Cherise contacted her insurance agent and said she was interested in purchasing several life insurance policies: (a)a policy on her own life for $100,000,naming her son and daughter as beneficiaries; (b)a policy on her neighbor's life for $100,000,since she had observed him engaging in reckless behavior,naming herself as beneficiary; (c)a $5,000 policy on another neighbor to cover a loan Cherise made to him,naming herself as beneficiary; and (d)a $250,000 policy on her business partner,naming herself as beneficiary.Discuss the legality of each of these potential contracts.

Virginia borrowed money from G & L Lending at 35% interest per year.The state maximum interest rate is 20% per year.Virginia defaulted on the loan.What amount can G& L collect from Virginia?

An exculpatory clause is generally unenforceable when:

Jane and Aaron were friends.Aaron has always loved dangerous sports and activities.Jane has always thought that he wasn't long for this life.Jane purchased a life insurance policy on her friend's life.One day,as he was rock climbing,Aaron fell 100 feet and died.Since Jane and Aaron were friends,Jane had an insurable interest in his life and will be entitled to the insurance proceeds.

Johnny has the largest tire selling business in the city.He learns that Hank is thinking of opening a competing tire selling business.Johnny gives Hank $25,000 to not open his proposed business in the same city.Which statement is correct?

Judith is a CPA with an excellent reputation and client base.She sells her tax preparation business to Shawn,and the sales contract includes a noncompete clause restricting Judith from opening a similar business for two years within a 10-mile radius of her former office.If she opens a tax preparation office five miles away after one year,a court would probably:

To be valid,an agreement not to compete must be ancillary to a legitimate bargain.

A gambling contract is legal unless it is specifically prohibited by state statute.

The UCC deals with unconscionability in a contract by providing that a court may:

AAA and XXX companies are both major international conglomerates.They are negotiating a contract whereby AAA will install a computer system for XXX.One clause in the contract states that AAA will not be liable for damages caused by the negligent installation of the computer system,except that AAA warrants the system and will fix any problem for a period of two years following installation.AAA completes the installation of the computer system.XXX loads extensive amounts of information on the system,but all of it is destroyed because AAA negligently installed the memory chips.AAA fixes the memory,but XXX incurred significant expenses in recreating the lost information.XXX sues for these expenses.AAA defends with the noted clause in the contract.

Wendell,new to the area,selects a doctor from the telephone book and visits that doctor to have a splinter extracted.Unbeknownst to Wendell,the doctor has never passed the state licensing exams.Later,when Wendell discovers the truth,he refuses to pay his bill.If the doctor sues for recovery of the fee,will the court support the doctor's claim?

Morality plays no part of gambling contract legality.

Roger parked his car at a garage that has a large sign at the entrance saying,"This garage is not liable for items stolen from a car." This type of notice is referred to as an exculpatory clause.

Mike owns a house in a poor area of a large city.Mike is on disability and his total monthly income is $700.A sales representative visits his home,selling a water purification system.Mike buys and signs a contract that calls for monthly payments of $500 for the next 10 years.The water system is worth no more than $1000.Mike did not understand what he was signing and thought it was a permission slip allowing the salesman to conduct a free water test to determine the number of toxins in the water.How would a court most likely describe this contract?

An insurance contract is not considered to be a legalized form of gambling because: