What would render a contract illegal? - Answer-if it is contrary to that state's statutes, contrary to the public policy of that state, or any contract calling for the commission of a crime
What are some examples of contracts contrary to statute? - Answer-wagering agreements, usury, and some lic...
LEB 320F 13 Exam Questions with
Correct Answers
What would render a contract illegal? - Answer-if it is contrary to that state's statutes,
contrary to the public policy of that state, or any contract calling for the commission of a
crime
What are some examples of contracts contrary to statute? - Answer-wagering
agreements, usury, and some licensing agreements
What is a state-sponsored wagering contract? Why are companies able to do this
sometimes too? - Answer-Lottery; a scheme that does not require a purchase of goods
by the participant is not a lottery because consideration is lacking. That is why so many
contests state "no purchase necessary."
What is an exempted wagering contract? - Answer-"friendly bets" (those defined as not
producing substantial sources of income), and some lotteries operated by religious or
charitable organizations
Explain insurance contracts. When are they legal? What kind of contracts are they? -
Answer-risk-shifting contracts - contracts whose performance is dependent upon an
element of chance. An insurance policy is simply a contract by which an existing risk is
shifted to an insurance company for a consideration paid by the own .
Only legal if insured person has an "insurable interest" in the home prior to taking out
the policy
When is recovery allowed for unlicensed practitioners? - Answer-Most courts take the
view in such instances that if the statute is regulatory—its purpose being the protection
of the general public against unqualified persons—then the contract is illegal and
recovery is denied. On the other hand, if the statute is felt to be merely revenue raising,
recovery is allowed
What is usury? - Answer-Charging interest in excess of the permitted rate constitutes
usury
What loans often receive higher interest rates than are generally allowed? - Answer-
most states put no limit on the rate of interest that can be charged on loans made to
corporations
What is an examples of a contract contrary to public policy? - Answer-Contracts in
Restraint of Trade
What is a contract in restraint of trade? - Answer-unreasonably restrain trade or
competition in interstate commerce.
, What's an example of a legal restriction on trade? Under what conditions is it legal? -
Answer-"noncompetes", though they restrict trade, are not illegal and are lawful if
certain conditions are met: (1) The agreement must be of an "ancillary" nature. (2) The
promisee must have a legitimate business interest that warrants temporary protection
from competition. (3) The agreement must be reasonable in its scope so that it does not
limit competition more than is reasonably necessary
Systems and Software Inc. v. Barnes - premise - Answer-SSI hired Barnes. Barnes
signed a noncompetition agreement that prohibited him—during his employment and for
six months thereafter—from becoming associated with any business that competes with
SSI
Barnes left his position with SSI and started a partnership called Spirit Technologies
Consulting Group, which, like SSI, provides customer-information-systems software and
service to municipalities and utilities nationwide
SSI sued Barnes and requested an injunction to enforce the parties' noncompetition
agreement. The trial court held for SSI and granted an injunction that prohibited Barnes
from working as a consultant or otherwise with Utility Solutions or any other direct
competitor of SSI. Barnes appealed.
Systems and Software Inc. v. Barnes - outcome - Answer-the trial court found that SSI
had a legitimate protectable interest, and the evidence supports the court's finding.
Affirmed.
What is the "blue pencil" rule? - Answer-courts finding that a contract's restrictions on
competition serve an employer's legitimate interests but are unreasonably broad (either
in terms of geography or time), will simply rewrite the covenant so that the restrictions
are reasonable in scope and then will enforce them to that extent
What is an exculpatory clause? - Answer-purport to excuse companies from liability
resulting from their own negligence.
When are exculpatory clauses given effect? - Answer-Most courts will give effect to
exculpatory clauses where they involve only recreational activities, but only if it is
conspicuous
Seigneur v National Fitness Institute - premise - Answer-To apply for membership to
NFI, Seigneur had to sign a contract containing a clause that provided in emphasized
print: "Important Information: I, the undersigned applicant, agree and understand that I
must report any and all injuries immediately to NFI, Inc. staff. It is further agreed that all
exercises shall be undertaken by me at my sole risk and that NFI, Inc. shall not be liable
to me for any claims, demands, injuries, damages, actions, or courses of action
whatsoever, to my person or property arising out of or connecting with the use of the
services and facilities of NFI, Inc., by me, or to the premises of NFI, Inc. Further, I do
expressly hereby forever release and discharge NFI, Inc. from all claims, demands,
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