Chapter 9 Legality

Conspiracy Individuals who agree to commit crimes for a promised consideration

When is a contract divisible? Contracts may contain legal and illegal parts; if those parts can be separated, then the contract would be enforceable Pari Delicto: parties are equal in fault if both parties knew that the agreement was illegal The court will help neither party

Agreements That Violate Statutes

Civil and Criminal Statutes Agreements that require one party to commit a tort or a crime are illegal i.e. Slander, Libel, Fraud, Murder, Arson

Usury Statutes Each state sets a maximum interest rate that lenders can charge for loans Usury: Charging more than the maximum rate Truth in Lending Act: the lender must clearly convey the APR on each loan

Gambling Statutes Agreements where one party wins and another party loses Exceptions: Giveaway games by stores or businesses are legal; as long as they do not require a purchase to enter. Lotteries give states income Racetrack (IL, NY, CA, MA, OH)

Sunday Statutes (Blue Laws) In many states it is illegal to make or perform contracts on Sundays Rules: An agreement made on Sunday is void. An offer made on a day other than Sunday, but accepted on Sunday voids the agreement. An agreement made on Sunday, but with a date other than Sunday placed on the paper voids the agreement. Sunday laws often apply to holidays.

Licensing Statutes License: a legal document stating that the holder has permission from the proper authorities to carry on a certain trade/profession. i.e.: funeral directors, teachers, hair/nail technicians

Agreements Contrary to Public Policy No person should be allowed to perform an act that harms the public benefit. This act may not be illegal, but the contract is usually void and unenforceable.

Agreements in Unreasonable Restraint of Trade Restraint of Trade: a limitation on the full exercise of doing business with others

Not to Compete (Restrictive Covenant) Goodwill: the continued public approval and patronage of business It will be upheld if it is a reasonable time frame and geographic area. Also found in employment contracts

Price Fixing When competitors agree on a certain price Discourages competition, raises prices and cannot be enforced.

Competitive Bidding Bid: an offer to buy or sell goods or services at a stated price. Rivals submit bids for a project. Lowest bid wins the contract. Bidders cannot confer ahead of time.

Obstruction of Justice Any contract that interferes with the administration of justice is illegal. i.e.: Protecting someone from arrest Encouraging lawsuits Giving false testimony Bribery

Breach of Duty or Fraud If a person holds a position of trust, they have a responsibility for the well being of other people. i.e.: Congress, Public Officials

Interference With Marriage Contracts that discourage, harm, or interfere with good family relationships are illegal and unenforceable.

Effect of Illegality The court will not aid either party to an illegal contract. Neither party can enforce the contract. Exceptions occur when parties are not equally at fault. The court will help the party who did not know of the illegality.