Essentials of Business Law 8th Edition Liuzzo Test Bank 1

Chapter 011 Competent Parties
Essentials of Business Law 8th Edition

Liuzzo
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True / False Questions
1. The UCC specifies that a competent party is a person of legal age, but fails to take into
account the mental state of the individual.
True False
2. An incompetent party to a contract is not denied the opportunity to benefit from their legal
rights.
True False
3. The responsibility of determining whether a person is competent to contract rests on

everyone who enters into a contract with such a person.
True False
4. The legal age of majority varies from state to state.

True False
11-1
5. The exact time for disaffirmance will vary depending on the nature of the contract and
current legislation.
True False
6. Disaffirmance may be implied by the acts of the person who has reached legal age and
wishes to disaffirm.
True False
7. The law that protects minors from their contractual commitments intends to deny them the
opportunity to enter into contracts for necessaries that are not provided by their parents or a
guardian.
True False
11-2
8. The law regards actions on the part of minors that result in emancipation as abandonment.
True False
9. Emancipated minors are generally liable for necessaries purchased for themselves or
supplied to a spouse, just as if they were adults.
True False
10. A minor is not liable even for the reasonable value of necessaries purchased by him or
her.
True False
11. Minors are always protected against their own wrongdoing.

True False
12. A minor can be held liable for both crimes and torts.
True False
13. Persons of unsound mind are considered emancipated.

True False
14. A mentally ill person may sometimes have lucid periods during which he or she may
exercise sound judgment.
True False
15. If a person makes a contract for necessities under intoxication then such person must pay
the reasonable value of necessities received.
True False
11-3
16. Contracts with people who have been declared insane by the courts are void even if the
sane people who contracted with them do not know that they had been declared insane by the
courts.
True False
17. Even if a person makes a contract while so intoxicated by alcohol or affected by drug use
that he or she is unable to understand the nature and effect of the contract, it is still considered
a valid contract.
True False
Multiple Choice Questions
18. Minors, insane persons, and mentally impaired persons are usually considered
incompetent and lacking in:
A. contractual capacity.
B. educational qualifications.
C. social culture.
D. ethics.
19. A competent party is said to have contractual capacity, that is, the ability to:
A. amend the contract.
B. disaffirm the contract.
C. make a valid contract.
D. impose undue influence.
20. A person who is of legal age, of at least normal mentality, and capable of understanding a
contract is known as a:
A. competent party.
B. contracting party.
C. valid participant.
D. contractor.
11-4
21. A person who has not yet reached the age of majority is considered a:
A. minor.
B. contractor.
C. competent party.
D. participant.
22. Most contracts made by persons who have not reached the age of majority are:
A. void.
B. valid.
C. voidable.
D. enforceable.
23. According to the interesting coming of age rule in common law, a person who was born
on and celebrates his or her 18th birthday on April 26 in a state where the age of majority is
18, becomes an adult at:
A. 12:01 a.m. April 25.
B. 12:01 a.m. April 26.
C. 12.00 a.m. April 25.
D. 12:00 a.m. April 26.
24. As per the _________, a person attains the age of majority on the anniversary date of his
or her birth.
A. coming of age rule
B. astrology predictions
C. modern birthday rule
D. choice of that person
25. The status of a contract between a minor and an adult is generally:

A. subject to the minor's disaffirmance.
B. voidable at the instance of either party.
C. voidable at the instance of a third party.
D. subject to the adult's ratification.
11-5
26. Once a minor reaches the age of majority, in order to make the contracts entered into by
the minor enforceable, it must be:
A. avoided.
B. validated.
C. disaffirmed.
D. ratified.
27. Disaffirming a contract would amount to:

A. ratifying the contract.
B. avoiding the contract.
C. extending the contract.
D. disapproving a tripartite contract.
28. If a minor enters into a contract relating to food, shelter, clothing, employment, and
medical care, then such a contract is known as a:
A. contract of forbearance.
B. contract for service.
C. contract of service.
D. contracts for necessaries.
29. Once the minor reaches the legal age of majority, and if he or she agrees to the terms of
the contract, then the contract is said to be:
A. ratified.
B. disaffirmed.
C. attested.
D. stamped.
30. If a reasonable period of time passes after a minor reaches legal age and he or she has said
nothing about disaffirming the contract, then in the eyes of the law it is considered as:
A. disaffirmed.
B. ratified.
C. negligence.
D. a void contract.
11-6
31. In the case of minors' contracts, silence or inaction is the basis for a(n) ________ contract
becoming a valid, enforceable contract through ratification.
A. void
B. illegal
C. legal
D. voidable
32. With regard to minors' contracts, silence or inaction is the basis for a voidable contract
becoming a valid and enforceable contract through:
A. justification.
B. clarification.
C. ratification.
D. ramification.
33. Disaffirmance may be done by the minor:

A. before receiving the consideration.
B. within a day after reaching adulthood.
C. after receiving the consideration for the contract.
D. within reasonable time after reaching adulthood.
34. Once a minor reaches the legal age of majority, and if he or she disagrees to the terms of a
contract and expresses his or her unwillingness to continue with the contract within a
reasonable time, then the contract is said to be:
A. stamped.
B. attested.
C. disaffirmed.
D. approved.
11-7
35. The nature of a contract for necessaries must bear some relationship to a minor's
individual needs and to his or her:
A. legal understanding.
B. financial status.
C. professional status.
D. moral behavior.
36. In some states the minor may avoid the contract even if he or she falsely represented
himself or herself as:
A. being of age.
B. a minor.
C. being under force or duress.
D. being bankrupt.
37. Once a minor marries, or voluntarily separates from parents or guardians, he or she
assumes adult responsibilities and is considered to have:
A. matured.
B. been emancipated.
C. abated.
D. been appended.
38. If a minor has paid more than he or she should have been charged, then he or she can:
A. seek for specific performance.
B. not file a civil suit against the other party.
C. recover punitive damages.
D. recover the overcharged amount.
39. In some cases, the courts have held that contracts made by minors who are nearly adults or
that deal with a business are:
A. enforceable contracts.
B. voidable contracts.
C. void contracts.
D. invalid contracts.
11-8
40. In some cases, the courts have held that contracts made by minors who are nearly adults or
that deal with a business are:
A. unenforceable by the minors.
B. enforceable by the minors.
C. enforceable by the parents or the guardians of the minors.
D. not enforceable by the parents or the guardians of the minors.
41. A minor can be held liable if he or she makes damaging statements in writing for the act
of:
A. libel.
B. slander.
C. conversion.
D. nuisance.
42. Persons of unsound mind are considered incompetent to make binding contracts because
they are assumed to lack the mental capacity to safeguard:
A. other's interests.
B. administrative affairs.
C. their own affairs.
D. political affairs.
Short Answer Questions
43. Describe competent parties, and how they relate to the capacity to contract.
11-9
44. Explain and elaborate on the following statement: The law that protects minors from their
contractual commitments is not intended to deny them the opportunity to enter into contracts
for necessaries that are not provided by their parents or a guardian.
45. In a contract between a minor and an adult, the minor has the privilege of disaffirmance.
Are there circumstances under which the minor may not cancel the contract?
46. Are mentally incompetent persons eligible to enter into a contract? Why or why not?
47. Is a contract made by a person under the influence of drugs binding? Explain.
aa
11-10
Chapter 011 Competent Parties Key
True / False Questions
1. (p. 172) The UCC specifies that a competent party is a person of legal age, but fails to take
into account the mental state of the individual.
FALSE
Bloom's: Knowledge
Learning Outcomes: 11.1 Explain what is meant by contractual capacity and define competent parties.
2. (p. 172) An incompetent party to a contract is not denied the opportunity to benefit from their
legal rights.
TRUE
Bloom's: Knowledge
3. (p. 172) The responsibility of determining whether a person is competent to contract rests on
everyone who enters into a contract with such a person.
TRUE
Bloom's: Comprehension
4. (p. 172) The legal age of majority varies from state to state.
TRUE
Bloom's: Knowledge
Learning Outcomes: 11.2 Discuss minors' contracts and how the age of majority impacts the legality of contracts.
11-11
5. (p. 172) The exact time for disaffirmance will vary depending on the nature of the contract
and current legislation.
TRUE
Bloom's: Knowledge
6. (p. 172) Disaffirmance may be implied by the acts of the person who has reached legal age
and wishes to disaffirm.
TRUE
Bloom's: Knowledge
7. (p. 172) The law that protects minors from their contractual commitments intends to deny
them the opportunity to enter into contracts for necessaries that are not provided by their
parents or a guardian.
FALSE
Bloom's: Knowledge
8. (p. 174) The law regards actions on the part of minors that result in emancipation as
abandonment.
TRUE
Bloom's: Knowledge
9. (p. 174) Emancipated minors are generally liable for necessaries purchased for themselves or
supplied to a spouse, just as if they were adults.
TRUE
Bloom's: Knowledge
11-12
10. (p. 174) A minor is not liable even for the reasonable value of necessaries purchased by him
or her.
FALSE
Bloom's: Knowledge
11. (p. 175) Minors are always protected against their own wrongdoing.
FALSE
Bloom's: Knowledge
Learning Outcomes: 11.3 Describe the operation of the law as it relates to liability for a minor's torts and crimes.
12. (p. 175) A minor can be held liable for both crimes and torts.
TRUE
Bloom's: Knowledge
13. (p. 177) Persons of unsound mind are considered emancipated.

FALSE
Bloom's: Knowledge
Learning Outcomes: 11.4 Assess the legal status of contracts made by persons who are incompetent.
14. (p. 177) A mentally ill person may sometimes have lucid periods during which he or she may
exercise sound judgment.
TRUE
Bloom's: Knowledge
11-13
15. (p. 177) If a person makes a contract for necessities under intoxication then such person must
pay the reasonable value of necessities received.
TRUE
Bloom's: Knowledge
16. (p. 177) Contracts with people who have been declared insane by the courts are void even if
the sane people who contracted with them do not know that they had been declared insane by
the courts.
TRUE
Bloom's: Knowledge
17. (p. 177) Even if a person makes a contract while so intoxicated by alcohol or affected by
drug use that he or she is unable to understand the nature and effect of the contract, it is still
considered a valid contract.
FALSE
Bloom's: Knowledge
Multiple Choice Questions
18. (p. 172) Minors, insane persons, and mentally impaired persons are usually considered
incompetent and lacking in:
A. contractual capacity.
B. educational qualifications.
C. social culture.
D. ethics.
Bloom's: Knowledge
11-14
19. (p. 172) A competent party is said to have contractual capacity, that is, the ability to:
A. amend the contract.
B. disaffirm the contract.
C. make a valid contract.
D. impose undue influence.
Bloom's: Knowledge
20. (p. 172) A person who is of legal age, of at least normal mentality, and capable of
understanding a contract is known as a:
A. competent party.
B. contracting party.
C. valid participant.
D. contractor.
Bloom's: Knowledge
21. (p. 172) A person who has not yet reached the age of majority is considered a:
A. minor.
B. contractor.
C. competent party.
D. participant.
Bloom's: Knowledge
22. (p. 172) Most contracts made by persons who have not reached the age of majority are:
A. void.
B. valid.
C. voidable.
D. enforceable.
Bloom's: Knowledge
11-15
23. (p. 172) According to the interesting coming of age rule in common law, a person who was
born on and celebrates his or her 18th birthday on April 26 in a state where the age of majority
is 18, becomes an adult at:
A. 12:01 a.m. April 25.
B. 12:01 a.m. April 26.
C. 12.00 a.m. April 25.
D. 12:00 a.m. April 26.
24. (p. 172) As per the _________, a person attains the age of majority on the anniversary date
of his or her birth.
A. coming of age rule
B. astrology predictions
C. modern birthday rule
D. choice of that person
25. (p. 172) The status of a contract between a minor and an adult is generally:
A. subject to the minor's disaffirmance.
B. voidable at the instance of either party.
C. voidable at the instance of a third party.
D. subject to the adult's ratification.
Bloom's: Knowledge
11-16
26. (p. 173) Once a minor reaches the age of majority, in order to make the contracts entered into
by the minor enforceable, it must be:
A. avoided.
B. validated.
C. disaffirmed.
D. ratified.
Bloom's: Knowledge
27. (p. 173) Disaffirming a contract would amount to:

A. ratifying the contract.
B. avoiding the contract.
C. extending the contract.
D. disapproving a tripartite contract.
Bloom's: Knowledge
28. (p. 172) If a minor enters into a contract relating to food, shelter, clothing, employment, and
medical care, then such a contract is known as a:
A. contract of forbearance.
B. contract for service.
C. contract of service.
D. contracts for necessaries.
Bloom's: Knowledge
11-17
29. (p. 173) Once the minor reaches the legal age of majority, and if he or she agrees to the terms
of the contract, then the contract is said to be:
A. ratified.
B. disaffirmed.
C. attested.
D. stamped.
Bloom's: Knowledge
30. (p. 173) If a reasonable period of time passes after a minor reaches legal age and he or she
has said nothing about disaffirming the contract, then in the eyes of the law it is considered
as:
A. disaffirmed.
B. ratified.
C. negligence.
D. a void contract.
Bloom's: Knowledge
31. (p. 173) In the case of minors' contracts, silence or inaction is the basis for a(n) ________
contract becoming a valid, enforceable contract through ratification.
A. void
B. illegal
C. legal
D. voidable
Bloom's: Knowledge
11-18
32. (p. 173) With regard to minors' contracts, silence or inaction is the basis for a voidable
contract becoming a valid and enforceable contract through:
A. justification.
B. clarification.
C. ratification.
D. ramification.
Bloom's: Knowledge
33. (p. 173) Disaffirmance may be done by the minor:

A. before receiving the consideration.
B. within a day after reaching adulthood.
C. after receiving the consideration for the contract.
D. within reasonable time after reaching adulthood.
Bloom's: Knowledge
34. (p. 173) Once a minor reaches the legal age of majority, and if he or she disagrees to the
terms of a contract and expresses his or her unwillingness to continue with the contract within
a reasonable time, then the contract is said to be:
A. stamped.
B. attested.
C. disaffirmed.
D. approved.
Bloom's: Knowledge
11-19
35. (p. 173) The nature of a contract for necessaries must bear some relationship to a minor's
individual needs and to his or her:
A. legal understanding.
B. financial status.
C. professional status.
D. moral behavior.
Bloom's: Knowledge
36. (p. 174) In some states the minor may avoid the contract even if he or she falsely represented
himself or herself as:
A. being of age.
B. a minor.
C. being under force or duress.
D. being bankrupt.
Bloom's: Knowledge
37. (p. 174) Once a minor marries, or voluntarily separates from parents or guardians, he or she
assumes adult responsibilities and is considered to have:
A. matured.
B. been emancipated.
C. abated.
D. been appended.
Bloom's: Knowledge
11-20
38. (p. 175) If a minor has paid more than he or she should have been charged, then he or she
can:
A. seek for specific performance.
B. not file a civil suit against the other party.
C. recover punitive damages.
D. recover the overcharged amount.
Bloom's: Knowledge
39. (p. 175) In some cases, the courts have held that contracts made by minors who are nearly
adults or that deal with a business are:
A. enforceable contracts.
B. voidable contracts.
C. void contracts.
D. invalid contracts.
Bloom's: Analysis
40. (p. 175) In some cases, the courts have held that contracts made by minors who are nearly
adults or that deal with a business are:
A. unenforceable by the minors.
B. enforceable by the minors.
C. enforceable by the parents or the guardians of the minors.
D. not enforceable by the parents or the guardians of the minors.
Bloom's: Knowledge
11-21
41. (p. 176) A minor can be held liable if he or she makes damaging statements in writing for the
act of:
A. libel.
B. slander.
C. conversion.
D. nuisance.
Bloom's: Knowledge
42. (p. 177) Persons of unsound mind are considered incompetent to make binding contracts
because they are assumed to lack the mental capacity to safeguard:
A. other's interests.
B. administrative affairs.
C. their own affairs.
D. political affairs.
Bloom's: Knowledge
Short Answer Questions
43. (p. 172) Describe competent parties, and how they relate to the capacity to contract.
Parties to a contract must be competent as to both age and mentality. A competent party is a
person of legal age and at least normal mentality who is considered by law to be capable of
understanding the meaning of a contract. A competent party is said to have contractual
capacity, that is, the ability to make a valid contract. Minors, insane persons, and mentally
impaired persons are usually considered incompetent and lacking contractual capacity. As a
result, they cannot make legally binding contracts.
Bloom's: Knowledge
11-22
44. (p. 174) Explain and elaborate on the following statement: The law that protects minors from
their contractual commitments is not intended to deny them the opportunity to enter into
contracts for necessaries that are not provided by their parents or a guardian.
The law does not bar minors from entering into contracts for necessaries that are not provided
by their parents or a guardian. But the nature of the contract must bear some relationship to
the minor's individual needs and to his or her social and financial status.
Emancipated minors are generally liable for necessaries purchased for themselves or supplied
to a spouse, just as if they were adults.
Bloom's: Knowledge
45. (p. 174) In a contract between a minor and an adult, the minor has the privilege of
disaffirmance. Are there circumstances under which the minor may not cancel the contract?
As a result of a minor's emancipation, he or she assumes many of the rights and obligations of
a person of legal age. Emancipated minors are generally liable for necessaries purchased for
themselves or supplied to a spouse, just as if they were adults.
Bloom's: Knowledge
46. (p. 177) Are mentally incompetent persons eligible to enter into a contract? Why or why
not?
Persons of unsound mind are considered incompetent to make binding contracts because they
are assumed to lack the mental capacity to safeguard their own affairs. Most of their contracts
are considered voidable and cannot be enforced against them if they do not carry them out. A
mentally ill person may sometimes have lucid periods during which he or she can exercise
sound judgment. If the person entered into a contract during a lucid interval and the other
party can prove it, such mentally ill person will be held to the contract. The cause of the
incompetence does not matter.
Bloom's: Knowledge
11-23
47. (p. 177) Is a contract made by a person under the influence of drugs binding? Explain.
The law considers the person impaired by drugs to have been mentally incompetent at the
time the contract was made and, hence, not bound by it.
Bloom's: Knowledge
11-24

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Chapter 011 Competent Parties

Essentials of Business Law 8th Edition

Test bank: https://testbankpack.com/p/test-bank-for-essentials-of-

Solution manual: https://testbankpack.com/p/solution-manual-

True / False Questions

3. The responsibility of determining whether a person is competent to contract rests on

4. The legal age of majority varies from state to state.

11. Minors are always protected against their own wrongdoing.

13. Persons of unsound mind are considered emancipated.

Multiple Choice Questions

25. The status of a contract between a minor and an adult is generally:

27. Disaffirming a contract would amount to:

33. Disaffirmance may be done by the minor:

Short Answer Questions

True / False Questions

13. (p. 177) Persons of unsound mind are considered emancipated.

Multiple Choice Questions

27. (p. 173) Disaffirming a contract would amount to:

33. (p. 173) Disaffirmance may be done by the minor:

Short Answer Questions

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