1. CHAPTER 10 Legal Purpose and Proper Form
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CHAPTER 10 Legal Purpose and Proper Form
10-1 Illegal Agreements
10-2 The Statute of Frauds
Chapter 10
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2. 10-1 Illegal Agreements GOALS
Identify various forms of unenforceable illegal agreements
Specify agreements that, although illegal, the courts will enforce
Agreements that involve contracting for an illegal act generally are void and unenforceable.
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3. Illegal Agreements Wager—bet on the uncertain outcome of an event.
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Illegal Agreements
Illegal lotteries
Lottery—3 elements
a prize
Chance—winner determined solely by luck
Consideration—a payment is required to win
Wager—bet on the uncertain outcome of an event.
Under lottery: speak of “door prizes” for golf outing.
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4. Regulated Gambling Casinos
Must be run for the benefit of a charitable organization in the State of Indiana.
Only a qualified organization can conduct charitable gaming in the State of Indiana

5. Regulated gambling (con’t)
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Regulated gambling (con’t)
Casinos (con’t)
“Qualified organization”
Religious
Educational
Senior citizens
Veterans
Civic organizations
Been in existence in state for 5 or more years
Non-profit by IRS standards
Way money is distributed
Paperwork is filed with the state. At the end of the lottery, casino, gaming, etc. forms must be filed with the state and 10% of whatever was collected (not earned) must be paid as a tax.
The money must be distributed to a third party. The party who raised the money is not able to spend it but must give it to a third party. This is why Saints Alive is separate from Bishop Dwenger and LuersKnight is separate from Luers even though both schools benefit.
Talk about 50/50 Athletic Association Raffle; Saints Alive separating raffle from dinner and auction.
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6. Regulated gambling (con’t)
Pari-mutuel betting
Those who bet on the winner of a horse race share the total prize after taxes and other expenses have been removed.

7. Regulated Gambling (con’t)
State-Run Lotteries
Hoosier Lottery
Voted in by voters in November, 1988
Ratified by general assembly in May 1989
73% to Build Indiana Fund
13.5% to local police and firefighters pensions
13.5% to public school teachers pensions

8. Regulated Gambling Bingo Games and Pull-Tab Betting
Card Rooms—Poker Rooms

9. Winning: Life after the Lottery

10. Lottery winners

11. Illegal Agreements Agreements to pay usurious interest
Usury interest rates: lending money at a rate higher than allowed by state law.
Currently no usury rate law in Indiana
Principal: the primary part of the loan. The part of the loan that you’ve actually borrowed.
“Payday” Loans: charge much higher interest rates.
Higher risk to lender means higher interest charged to borrower
No interest rate stated = legal rate of interest

12. Illegal Agreements Agreements involving illegal discrimination
Violate anti-discrimination laws
May also be unconstitutional

13. Illegal Agreements Agreements that obstruct legal procedures
Pay for non expert testimony or pay for false testimony (perjury)
Bribe jurors
Compounding a crime: accepting something of value for a promise not to inform on or prosecute a suspected criminal

14. Illegal Agreements
Agreements made without a required competency license
Competency license: state requirements for certain occupations. Must pass exams to receive a license.
Cannot enforce the contract unless you have the correct license.
Revenue license:
State of Indiana: must have license from state to collect state sales tax and food/beverage tax

15. Illegal Agreements Agreements that affect marriage negatively
Agreements that harm or interfere with marriage are unenforceable

16. Illegal Agreements Agreements that restrain trade unreasonably
Free trade is encouraged in a free market economy
Anti-Trust Laws: laws that prohibit competing companies from price fixing or dividing up sales regions
Sherman Act
Clayton Act
Federal Trade Commission Acts

17. Sherman Act Passed in 1890. First anti-trust act passed
It provides that no person shall monopolize, attempt to monopolize or conspire with another to monopolize interstate or foreign trade or commerce.

18. Clayton Act
Passed in 1914
Regulates general practices that may be detrimental to fair competition
Price discrimination
Exclusive dealing contracts
Mergers and acquisition

19. Federal Trade Commission Act
Prevents unfair competition methods and unfair or deceptive business practices
Proven by showing bad faith, fraud, oppression, or violation of public policy

20. Definitions involved in Anti-trust legislation
Price fixing: when competing firms agree on the same price to be charged for a product or service.
injures competition
Bid rigging: competitors bid on the same project and agree which bidder will have the lowest bid for the job
Resale price maintenance: may not contract with a retailer to set the price for the product
Allocation of markets: competitors dividing a market between themselves.

21. Illegal Agreements Agreements not to compete
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Illegal Agreements
Agreements not to compete
Legal as part of an employment contract
Non-compete agreements are legal unless unreasonable in:
Length of time
Geographic area within which the limitations apply
Employer’s interest protected by the limitation to
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22. CHECKPOINT
  
Name four of the eight illegal agreements discussed in this section.
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23. WHEN WILL THE COURTS ENFORCE ILLEGAL AGREEMENTS?
Most illegal contracts are VOID and unenforceable.
If connection between the illegality and agreement is minor or a party is relatively innocent
Restitution is allowed
Agreement may be enforced
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24. WHEN WILL THE COURTS ENFORCE ILLEGAL AGREEMENTS?
Protected victims
Blue Sky laws: prohibits selling of worthless stocks and bonds
Victims would receive restitution
In pari delicto: “of equal guilt.”
Party at lesser fault may be able to receive restitution

25. WHEN WILL THE COURTS ENFORCE ILLEGAL AGREEMENTS?
The excusably ignorant
May be able to either enforce the contract or receive restitution
Described as
Not knowing the contract is illegal, however
The other party does know the contract is illegal and
The illegality is minor

26. WHEN WILL THE COURTS ENFORCE ILLEGAL AGREEMENTS?
Rescission prior to illegal act
Party rescinds before the illegal act, can receive restitution

27. WHEN WILL THE COURTS ENFORCE ILLEGAL AGREEMENTS?
Divisible contracts
Separate consideration is given for the legal and illegal parts of the contract
if the contract is divisible, the courts can uphold the legal part.
Unconscionable: UCC: contract is so grossly unfair that parties under ordinary circumstances would not accept it.

28. Unconscionable Presented with a “take it or leave it” contract
Other party had overwhelming bargaining power
There was no viable alternative in the marketplace
Injustice can only be avoided by holding certain terms or the whole contract void.

29. CHECKPOINT
  
Under what circumstances will the courts enforce illegal agreements?
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30. 10-2 The Statute of Frauds GOALS
Explain why the Statute of Frauds is necessary and what it requires
Identify the main instances when the Statute of Frauds requires a writing
Understand the rules of contract interpretation
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31. What is the Statute of Frauds
Law stating that certain agreements are not enforceable in court unless they are evidenced by a signed writing.

32. Must all contracts be in writing?
No; however, if a dispute comes up or if the contract is within the Statute of Frauds, the chances of enforcement by the court will be greatly increased if the contract is in written form.

33. WHY HAVE A STATUTE OF FRAUDS?
Contracts within the Statute of Frauds
If a contract is required to be in writing
Contracts without the Statute of Frauds
If the contract is not required to be in writing
What happens if the contract is within the Statute of Frauds, but not written?
Executed: leave parties alone
Executory: unenforceable
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34. Quasi-contract:
An obligation that is enforced as if it were a contract in order to prevent unjust enrichment of one party
Enforces restitution or other remedy against one of the parties to the contract

35. WHY HAVE A STATUTE OF FRAUDS?
Requirements of the writing-key elements
Statute of Frauds requirements (strictest)
Name of the parties
Description of the subject matter
Price
Quantity
Signature
Other essential terms

36. Special rules for signatures
UCC requirements
Not as strict
Only requires quantity of goods and that a contract had been formed.
Special rules for signatures
Only those who signed the contract will be held liable.
Form of signature doesn’t matter as long as it is intended as a signature or authentication of the writing.

37. CHECKPOINT
  
Name the six essential elements in a writing required by the most demanding Statutes of Frauds standards.
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38. TYPES OF CONTRACTS WITHIN THE STATUTE OF FRAUDS
Contract for the sale of goods for $500 or more
Exceptions:
Specially ordered and manufactured goods that are not suitable to be sold to others in the normal course of business
Goods were ordered and payment was accepted by seller
Goods have been received and accepted by the buyer
When the party against whom enforcement is sought admits during legal proceedings that an oral contract was made.
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39. TYPES OF CONTRACTS WITHIN THE STATUTE OF FRAUDS
Contract to sell an interest in real property
Exceptions
The seller has delivered the deed or if the buyer has
Made partial or full payment and
Occupied the land and
Made substantial improvements to the land.

40. TYPES OF CONTRACTS WITHIN THE STATUTE OF FRAUDS
Contracts that require more than one year to complete
Is there a possibility of performance within the year?
Contract to pay a debt or answer for another’s debt or the debts of an estate
Collateral promise: promise to pay the debt of another—must be in writing
Primary promise: promise to pay another’s debt that is not conditioned upon the other person’s failure to pay
Exception—main purpose rule. Main purpose of the promise serves the promisor’s own purpose.

41. TYPES OF CONTRACTS WITHIN THE STATUTE OF FRAUDS
Contract for which the consideration is marriage
Pre-nuptial agreements: must be signed

42. CHECKPOINT
  
What amount must be exceeded to require a contract for the sale of goods to be in writing to be enforceable?
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43. HOW ARE CONTRACTS INTERPRETED?
Acknowledgement of final agreement
Clause stating that both parties agree that the terms in the written contract are complete and constitute the entire agreement
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44. HOW ARE CONTRACTS INTERPRETED?
Specific rules of interpretation
Analysis: principal objective
Conflicting terms
Typewritten and/or handwritten notes on contract take precedence over printed forms
Words: plain and normal meaning of words will prevail

45. HOW ARE CONTRACTS INTERPRETED?
Specific rules of interpretation
Ambiguities
Not clear
Rule against party who formulated the contract
Implied reasonableness

46. HOW ARE CONTRACTS INTERPRETED?
Parol Evidence Rule
Oral testimony cannot be used to contradict terms in a complete, final, written contract
Inadmissible in court proceedings
Keeps out preliminary inquiries, initial proposals, negotiations, etc.

47. Exceptions to Parol Evidence Rule
To clarify ambiguities in the written agreement
If the written contract was not intended to be a complete agreement
If a condition necessary to the existence of the contract never occurred.
If fraud, forgery, illegality, mistake or misrepresentation occurred.
To show the parties reached another agreement or terminated the contract under consideration after executing the written contract
To show that the contract is voidable because a party lacked contractual capacity.

48. CHECKPOINT
  
Explain the parol evidence rule.
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49. PREVENT LEGAL DIFFICULTIES
In making contracts . . .
Deal only with persons who are reputable and properly licensed when contracting for professional or skilled services.
Do not rush into a decision. Take time to review and understand the advantages and disadvantages of the contract. Legitimate proposals usually will survive a delay.
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50. PREVENT LEGAL DIFFICULTIES
If the contract is complex or involves much time or money, put it in writing even when the Statute of Frauds does not require this. Try to anticipate and provide for all possible problems. If needed, obtain the assistance of a qualified lawyer.
If a prepared contract is presented to you for your signature read it carefully, especially if it is a contract of adhesion. If the contract involves a large sum of money, or if it is complex, have your lawyer review it before you sign.
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51. PREVENT LEGAL DIFFICULTIES
Insist that all terms of the contract that you do not understand be defined and explained. Make necessary changes, or reject the entire contract.
Make sure that all changes are written into a contract on all copies as well as on the original, and that all changes are initialed by both parties. Retain a copy with the other party’s signature on it.
Be sure all desired terms are expressed in writing or included by specific reference to any other relevant document(s).
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52. PREVENT LEGAL DIFFICULTIES
When any payments have been made in cash, be sure to get a receipt if payment is not acknowledged in the contract.
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