Mike Owns a House in a Poor Area of a Large

question 18

Multiple Choice

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?

• A)The contract is fully enforceable as written.
• B)The contract is unenforceable because it is unconscionable.
• C)The contract is unenforceable because it is illusory.
• D)The contract is unenforceable because it is exculpatory.

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Definitions:

Limited Liability Company

An enterprise structure that fuses the tax handling advantages of partnerships or sole proprietorships with the limited liability feature of corporations.

Corporation

A legal entity that is separate and distinct from its owners, who are shareholders. Corporations enjoy many of the rights and responsibilities that individuals possess.

Corporate Double Taxation

A tax principle where a corporation's income is taxed at both the corporate level and again as shareholder dividends at the personal level.

Personal Liability

The responsibility of an individual to bear the loss or to repay the debt from their own assets.