Chp. 12 - Capacity Quiz

1. Skippy, who is 17, buys a TV for $1,000. On the way home, he drops it and breaks the picture tube. The tube will cost $500 to replace. He returns the TV to the store and demands a refund. In a majority of states, how much cash must the store return to Skippy?

a. $0
b. $500
c. $750
d. $1,000
> d
EXPLANATION: In most states, a minor is entitled to a full refund upon disaffirming a contract, even if the goods have been damaged. The lesson to retailers is clear--don't sell valuable merchandise to minors.
Clarks15 Ch 15 #3 (MC #3)

2. Ann is 17, and rents an apartment for two months for $500 total. The reasonable value of the apartment for that time is only $400, but Ann rents it anyway because it is near the store where she works. After signing the contract and paying the $500, Ann decides to disaffirm the contract. How much of her $500 is she entitled to?

a. $0
b. $250
c. $100
d. $500
> c
EXPLANATION: A minor is usually entitled to a full refund, but not if the contract is for a necessary like food and shelter. In the case of a necessary, a minor must pay the reasonable value of the thing purchased, and can only get a refund for any amounts that are above a reasonable price.
Clarks15 Ch 15 #6 (MC #6)

3. Don enters into a contract with Emma, who does not have contractual ca­pacity. The law will permit Don to enforce the contract only if Emma

a. elects not to avoid the contract.
b. is a minor.
c. is intoxicated or men­tally incompetent.
d. is a minor, is intoxicated, or is mentally incompetent.

answer: A PAGE: 240 TYPE: =

4.Sue, a minor, signs a contract to buy a computer from Tom, the owner of United Computer Store. Sue’s right to disaffirm the contract

a. does not change the fact that Tom is bound by the contract.
b. does not yet exist because Sue is still a minor.
c. gives Tom, an adult, the right to disaffirm the contract.
d. is not valid because a computer is a “necessary.”

ANSWER: A PAGE: 241 TYPE: N
5. Julie's parents are wealthy, and Julie's allowance is $100 per week. She buys a $200 sweater at Foley's. She is 14, and later tries to disaffirm the contract. Who will ultimately be responsible for the reasonable cost of the sweater?

a. Julie
b. Julie's parents
c. Foley's
d. none of the above
> b
EXPLANATION: If parents are able to buy necessaries but fail to do so, they are ultimately responsible for payment if their child tries to disaffirm a contract.
Clarks15 Ch 15 #8 (MC #8)

6.Alan buys a car when he is 17, and agrees to make monthly payments for two years. The two years pass, and Alan makes all the payments. Which of the following has taken place?

a. an express ratification
b. an implied ratification
c. no ratification
d. promissory estoppel
> b
EXPLANATION: An implied ratification takes place when a person's conduct after they turn 18 indicates that they intend to honor a contract.
Clarks15 Ch 15 #10 (MC #10)

7. Tony, a minor, attempts to return to its former owner, a car that he re­cently purchased and subsequently wrecked, in a state in which a duty of restitution is imposed. Tony

a. can return the car in its present condition and avoid any further liability.
b. is not required to return the car due to his or her minority.
c. must return the car and pay for the damage.
d. will not be able to return the car unless it can be fully restored to its original condition.

answer: C PAGE: 241 TYPE: =

8. Doug, a minor, signs a contract to buy a truck from Eagle Autos by mis­representing his age to be twenty-one. When Doug fails to make the pay­ments, Eagle sues, and Doug tries to disaffirm the contract. Doug

a. can return the truck and avoid any further liability.
b. can return the truck but must make any outstanding payments
c. cannot return the truck.
d. is not required to return the truck due to his minority.

answer: A PAGE: 241 TYPE: N

9. Assume that in this case a car is not a necessary. Tom, a minor, buys a car by himself for $1,000. He makes no payments, and is allowed to drive the car home. He wrecks the car, returns it to the dealer, and disaffirms his contract. The damage is estimated at $500. If this state is like the majority of states, who must pay the car dealer and how much?

a. His parents must pay $1,000.
b. His parents must pay $500.
c. Tom must pay $500.
d. Neither Tom nor his parents must pay anything.
> d
EXPLANATION: In most states, a minor need only return the goods, even if they are damaged. If the contract is not for a necessary, and the parents have not signed co-signed the agreement, they have no payment responsibilities either.
Clarks15 Ch 15 #13 (MC #13)

10. Jess is 15, and rents a Jet Ski. He signs a rental agreement agreeing to follow safety rules. Later, he gets very drunk and attempts to ride the Jet Ski which doing a handstand. He crashes into Morgan's boat, and injures him. To who will Jess be liable?

a. to the rental store for breach of contract
b. to Morgan for in tort
c. both A and B
d. none of the above
> b
EXPLANATION: A minor is liable for torts that harm a third party, but not for contractual damages. Whether Jess would be liable to the rental store in tort remains unclear.
Clarks15 Ch 15 #14 (MC #14)

11. While intoxicated, Tim contracts to buy a bicycle for double its normal price. Regarding this contract, Tim is

a. liable even if he did not understand its legal consequences.
b. liable only if he understood its legal consequences.
c. not liable because the contract obviously favors the other party.
d. not liable under any circumstances.

ANSWER: B PAGE: 243 TYPE: N


12. Linda is adjudicated incompetent by a court and a guardian is appointed, but she subsequently purchases a new car. The contract is

a. binding and enforceable.
b. binding and enforceable to the extent that the car is a “neces­sary.”
c. unenforceable, because persons de­clared to be mentally incompe­tent are not permitted to drive cars.
d. void.

answer: d PAGE: 245 TYPE: =


13. Assume that in this case a car is not a necessary. Tom, a minor, buys a car for $1,000. His father co-signs the contract. He makes no payments, and is allowed to drive the car home. He wrecks the car, returns it to the dealer, and disaffirms his contract. The damage is estimated at $500. If this state is like the majority of states, who must pay the car dealer and how much?

a. His parents must pay $1,000.
b. His parents must pay $500.
c. Tom must pay $500.
d. Neither Tom nor his parents must pay anything.
> a
EXPLANATION: Since the father signed the contract, he is personally liable for the full contract amount. The contract cannot be disaffirmed by either Tom or his father.
Clarks15 Ch 15 #16 (MC #16)

14. What is the most a person can possibly drink and still make a valid contract?

a. zero drinks
b. one drink
c. enough drinks to meet the legal definition of drunk in their state
d. there is no absolute limit.
> d
EXPLANATION: So long as a person can understand the legal consequences of their actions, they can make a valid contract. If they are too drunk to drive, or even too drunk to walk, their understanding of the agreement is the determinative factor.
Clarks15 Ch 15 #18 (MC #18)

15. Bill and Carol attend a hockey game at which gambling is illegal and make a bet on the outcome of the game. Carol’s decision to withdraw from the wager in the third period is

a. not valid because it is too late in the game.
b. not valid unless Carol’s team was ahead when she withdrew from the wager.
c. not valid without Bill’s consent.
d. valid.

ANSWER: D PAGE: 246 TYPE: N

16. Annie voluntarily drinks 14 shots of tequila at a bar. She has no idea what is happening. At some point during the night, she signs a contract with Tom to buy Tom's car. What is the status of this contract?

a. valid
b. void
c. voidable
d. unenforceable
> c
EXPLANATION: An intoxicated person who does not understand his/her actions forms voidable contracts. They have the option to honor the contract or disaffirm it when they sober up. The fact that the drunkenness was voluntary does not change the analysis.
Clarks15 Ch 15 #19 (MC #19)

17. Troy is crazy, but has never been declared legally insane in the state of Idaho. One day, he buys a Sega. He knows exactly what he is doing--he wants to go home and play "Mortal Combat." What is the status of this contract?

a. valid
b. void
c. voidable
d. unenforceable
> a
EXPLANATION: An insane person has capacity to make a valid contract if they have not been adjudicated insane and have an awareness of what it means to make a contract.
Clarks15 Ch 15 #23 (MC #23)

18. Mike obtains a consumer loan from a bank at an interest rate of 35 per­cent. The bank has

a. obviously decided that Mike is a poor credit risk.
b. probably violated the usury laws.
c. unlawfully engaged in a restraint of trade.
d. none of the above.

ANSWER: B PAGE: 246 TYPE: +


19. Nick represents himself as a contractor in Ohio, but he is not licensed in that state. A contract between Pat and Nick by which Nick agrees to build a warehouse for Pat in Ohio is

a. enforceable only if Pat does not object after learning of Nick’s status.
b. enforceable only if Pat knows that Nick is unlicensed.
c. enforceable only if the outcome is successful.
d. not enforceable.

ANSWER: D PAGE: 247 TYPE: +

20. Which of the following is a court likely to consider in determining whether or not a person was "intoxicated"?

a. the person's opinion of how drunk they were
b. a third party's opinion of how drunk a person appeared
c. both A and B
d. none of the above
> b
EXPLANATION: Generally, a person's subjective statement that, "They were soooo drunk," is not taken into account. A bystander's objective report on a person's behavior will be considered.
Clarks15 Ch 15 #20 (MC #20)

21. Which of the following contracts may not be disaffirmed by minors?

a. contracts to enlist in the military
b. marriage contracts
c. both A and B
d. Neither A or B--a minor may disaffirm any contract.
> c
EXPLANATION: Both of these are exceptions to the general rule. Minors may not disaffirm them for public policy reasons.
Clarks15 Ch 15 #15 (MC #15)

22. Raul is 16, and contracts to buy a car. What is the earliest he may ratify this contract and become bound by it?

a. immediately
b. after he makes the first payment
c. on his 18th birthday
d. on his 21st birthday
> c
EXPLANATION: Children who sign contracts may not ratify them until they reach the age of 18.
Clarks15 Ch 15 #9 (MC #9)

23. Under almost any circumstances, an exculpatory clause could not be en­forced by

a. First National Bank only.
b. Regional Power Utility Corporation only.
c. First National Bank and Regional Power Utility Corporation.
d. neither First National Bank nor Regional Power Utility Corporation.

ANSWER: C PAGE: 251 TYPE: +

24. A contract between Kim and Larry to lease real property contains an ex­cul­patory clause. This clause is

a. enforceable only if either party is in a business important to the pub­lic interest.
b. enforceable only if the lease involves residential property.
c. generally enforceable as a matter of public policy.
d. generally unenforceable.

ANSWER: D PAGE: 251 TYPE: N

25. Owen signs a covenant not to compete with his employer, Peak Sales Company. A court decides that the covenant is overly restrictive. The court will likely

a. enforce it as written so as not to interfere with the parties’ freedom of contract.
b. enforce it but evaluate its effects over time.
c. reform its terms to prevent any undue burdens.
d. refuse to enforce it unless Peak pays additional consideration.

ANSWER: C PAGE: 249 TYPE: +