Contracts, Fall 2008

1. Contracts, Fall 2008 Class 25

2. Agreements Against Public Policy • Covenants not to compete • Other • Illegality • ‘gross’ illegality – murder, gambling, etc. • Agreements involving some illegality, often only on one side (next slide)

3. Agreements against public policy • Agreements involving some illegality, often only on one side • innocent party (homeowner who contracts with unlicensed plumber) may be able to enforce • even ‘non-innocent’ party (unlicensed plumber who did work and didn’t get paid for it) may be able to get quasi-contractual relief • no bar to enforcement if license requirement is for revenue raising and not for public interest • example of bar dues

4. b) Other Grounds: Reasons why A Party’s Performance Might not be Due • Mistake • Present is not what one or both parties thought • Bilateral mistake • Unilateral mistake • Changed Circumstances • Future is not what one or both parties thought • Impossibility • Impracticability • Frustration of purpose

5. Mistake: present in not what one or both parties thought • Bilateral mistake: both parties are mistaken as to basic assumption on which contract was made, and mistake has a material effect on agreed exchange of performances. • Adversely affected party can void unless it bears the risk of mistake

6. Mistake: present in not what one or both parties thought • Unilateral mistake – one party is mistaken. • mistake-maker can void if it doesn’t bear the risk of mistake and • enforcement would be unconscionable or • it’s the other’s fault or the other had reason to know of the mistake

7. When does a party bear the risk of mistake? • Allocation by agreement • Party treats limited knowledge as sufficient • Court allocates risk to the party