Bar Exam (US) Contracts: Question below is based on the following fact situation. In 1994, Bart ...

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Question below is based on the following fact situation.

In 1994, Bart Reynolds started to work for the Farmingham Hardware Co., in their only store, which was located in Armourville, a town with a population of 30,000. Bart was paid a monthly salary of $300. In 2004, Mr. Farmingham appointed Bart as manager of the store and paid him an additional $400 monthly. Although all prior employment arrangements had been made orally, in February 2005, Mr. Farmingham and Reynolds both signed a written agreement drafted by Farmingham, whereby Reynolds agreed to work for a salary of $700 per month. The agreement further specified that either party had a right to terminate the contract by giving sixty days notice to the other. Moreover, the agreement stipulated that if Reynolds's employment at the hardware store should be terminated, he would not be able to engage in any aspect of the hardware business, for a period of two years, within a fifty-mile radius of Armourville. If Reynolds should violate this agreement, he will be liable to the Farmingharn Co. for $1,500.

In 2006, Farmingham made a $100 donation to the local Senior Citizen's Center. He also handed the Center's Director the following signed agreement: "If Bart Reynolds should breach his covenant with me, he will be liable to me for $1,500. I hereby assign this to the Center's trustees to use as they so desire."

In September 2007, Farmingham sold his hardware store to United Hardware Stores, Inc., a nationwide chain of hardware stores. As part of this sales agreement, Farmingham assigned all assets, claims, and contracts relating to the hardware business to United. On February 1, 2008, United notified Reynolds that his employment with the company was being terminated as of April 1, 2008. Two months later, Reynolds secured a job as manager of a small hardware store in Milltown, which was located about twenty-five miles from Armourville. Then, in November 2008, Mr. Farmingham died.

The contract provision making Reynolds liable for violating the covenant not to compete may best be described as a (an)

AnswerChoose the correct answer.Choose all that apply. Correct Partially correct Incorrect Don't Know

  1. A
    Correct Answer
    liquidated damage clause.
  2. B
    Correct Answer
    unliquidated damage clause.
  3. C
    Correct Answer
    penalty and forfeiture clause.
  4. D
    Correct Answer
    aleatory clause.
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