CHAPTER 11. Legality. Wednesday, May 23, :03:55 PM ET

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Ronald Newman
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1 CHAPTER 11 Legality

2 LEGALITY v The agreement must have legal purpose.

3 AGREEMENTS THAT VIOLATE STATUTES Civil and Criminal Statutes v Agreements that require one party to commit a tort or a crime are illegal. v So are agreement that protect one party from the consequences of torts or crimes. v P. 144 Example 1 v P. 144 Example 2

4 AGREEMENTS THAT VIOLATE STATUTES Usury Statutes v Interest is the fee the borrower pays to the lender for using the money. v Usury is charging more than the maximum legal interest rate is (varies from state to state). v P. 144 Example 3

5 AGREEMENTS THAT VIOLATE STATUTES Gambling Statutes v A lottery is a game in which prizes, usually money, are awarded by the chance drawing of a set of numbers. v Only regulated types of gambling are legal. v Illegal gambling could include cards, wagers or bets, or sports pools.

6 AGREEMENTS THAT VIOLATE STATUTES Sunday Statutes v Passed by certain states making contracts on Sunday illegal. v Agreements made on Sunday are void. v An offer accepted on Sunday voids the contract. v Changing the date of an agreement when made on Sunday, makes the contract void. v Sunday laws often apply to legal holidays.

7 AGREEMENTS THAT VIOLATE STATUTES Licensing Statutes v A license is legal document stating that the holder has permission from the proper authorities to carry on a certain trade or profession--contract is void if person is not licensed. v Some states may also require a seller to have a vendor's license-contract is enforceable, but a seller without a license is subject to penalty.

8 AGREEMENTS CONTRARY TO PUBLIC POLICY v One that requires the performance of an act harmful to the public benefit. v A restraint of trade is a limitation on the full exercise of doing business with others. If unreasonable, the contract is void.

9 AGREEMENTS CONTRARY TO PUBLIC POLICY Outright Contracts Not to Compete v When buying a business you also buy the seller's goodwill-continued public approval and patronage of the business. v May also include a restrictive covenant--promise not to compete in a certain area for a certain time--legal if not unreasonable. v Also found in employment contracts (again, can't be unreasonable or it's illegal).

10 AGREEMENTS CONTRARY TO PUBLIC POLICY Price Fixing v Occurs when competitors agree on certain price ranges in order to discourage competition. v Raises overall prices and contracts cannot be enforced.

11 AGREEMENTS CONTRARY TO PUBLIC POLICY Agreements to Defeat Competitive Bidding v A bid is an offer to buy or sell goods or services at a stated price. v In competitive bidding, rivals submit bids for a project and the lowest bid wins. v Competitors getting together to determine bids or fix the high/ low is illegal.

12 AGREEMENTS CONTRARY TO PUBLIC POLICY Agreements to Obstruct Justice v Agreements to protect someone from arrest, encouraging lawsuits, giving false testimony, or bribing a juror are illegal.

13 AGREEMENTS CONTRARY TO PUBLIC POLICY Agreements Inducing Breach of Duty or Fraud v Contracts trying to influence a public official or others of trust are unenforceable.

14 AGREEMENTS CONTRARY TO PUBLIC POLICY Agreements Interfering with Marriage v Contracts to pay someone to marry or divorce or to not marry or divorce are unenforceable. v If a contract is illegal, neither party can enforce the agreement, nor receive aid from the court.

CONTRACTUAL CAPACITY

CONTRACTUAL CAPACITY Contractual Capacity: The minimum mental capacity the law requires to bind a party who enters into a contract. The law presumes that the following classes of persons lacked contractual