1. Legality

2. Agreements that Violate Statutes
Civil & Criminal Statutes
Agreements to commit a crime/tort are illegal
Usury Statutes
State sets a max interest rate
Interest
Fee the borrower pays to the lender for using the money
Usury
Charging too high of an interest rate

3. Truth in Lending Act Gambling Statutes Sunday Statutes
Lender is required to make clear the annual percentage rate (APR).
Gambling Statutes
Discuss state laws
Lottery vs Poker
Sunday Statutes
Illegal to perform certain contracts on Sunday

4. Licensing Statutes
License - legal document stating that the holder has permission from the proper authorities to carry a certain trade or profession
(Example) - If license is only to raise revenue (not to show competence) contracts made are valid not void (Person w/out license subject to arrest )

5. Agreements Contrary to Public Policy
Agreement in unreasonable restraint of trade
Types:

6. Agreements Contrary to Public Policy
1) Outright contracts not to compete - seller of a business may sign a restrictive covenant which would be upheld by the court
Restrictive covenant - agreement not to compete in a region for a period of time
*Only legal for a short period of time and small geographic region

7. Agreements Contrary to Public Policy
2) Price Fixing - competitors agree on certain price ranges within which they will sell their on prices
Competitors may agree to sell a product at a particular price
Manufacturers may set a price at which a product must be sold
Price fixing is NOT enforced by the court

8. Agreements Contrary to Public Policy
3) Agreements to defeat competitive bidding
Bid - offer to buy or sell goods or services at a stated price
Law often requires govt to contract public works or buy goods or services through competitive bidding
Agreement to bid above a certain price is illegal

9. Agreements Contrary to Public Policy
4) Agreements to obstruct justice - any agreement to interfere with administration of justice (Example - protect someone from arrest; giving false testimony; bribing)

10. Agreements Contrary to Public Policy
5) Agreements Inducing Breach of Duty or Fraud - contracts that try to influence public officials
6) Agreements Interfering with Marriage - contracts that discourage, harm, or interfere with good family relations

11. Effect of Illegality
If the legal part can be separated from illegal part, the court will separate
If the legal part can’t be separated from illegal part, the contract is void