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LEGALITY

LEGALITY. Chapter 9. The Nature and Consequences of Illegality. A contract must involve many elements. Even if a contract contains all of these elements, however, it may still be invalid if it lacks legal purpose . Illegality in Entire Agreement.

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LEGALITY

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  1. LEGALITY Chapter 9

  2. The Nature and Consequences of Illegality A contract must involve many elements. Even if a contract contains all of these elements, however, it may still be invalid if it lacks legal purpose.

  3. Illegality in Entire Agreement • Occurs when it is impossible to separate a contract into isolated promises and acts, each of which can be formed independently of each other, then the contract is rendered illegal. • If any part of an agreement is contaminated by illegality, a valid contract cannot result.

  4. Divisible Contracts • If certain promises and acts can be performed by themselves, then the contract is said to be divisible. • Courts may enforce those parts of the agreement that are legal and revoke the parts that are not.

  5. EXAMPLE Mike Connery, a truck driver, agreed to drive non-stop from Maine to Nevada to deliver a shipment. Regulations established by the Interstate Commerce Commission prohibit drivers from driving more than 8 hours without layover and rest. Mike’s nonstop trip would take longer than that 8-hour limit. Main purpose of delivery goods = legal and can be separated from the illegal part.

  6. Agreements that Violate Statutes • Civil and Criminal Statutes • Committing a tort or a crime • Usury Statutes • States set maximum interest rates that lenders can charge • Gambling Statutes • Many states changed laws to allow some types of regulated gambling

  7. Agreements that Violate Statutes • Sunday Statutes • A.k.a. Blue Laws • No contracts can be made on Sundays • Many states are doing away with these laws • Licensing Statutes • For certain trades or professions • Doctors, Lawyers, Nurses, Truck Drivers, Plumbers, Auctioneer

  8. Violations of Public Policy • If an activity harms the health, safety, welfare, or morals of the public, it violates public policy

  9. Unreasonably Restrain Trade • Outright Contracts Not to Compete • RestictiveConvenant – an agreement to promise not to compete • Price Fixing • When competitors agree on certain price ranges within which to set their prices • To Defeat Competitive Bidding • Rivals submit bids for a project – cannot secretly fix bids

  10. Violations of Public Policy Continued • Agreements to Obstruct Justice • Interfering with the law is illegal • Agreements inducing Breach of Duty or Fraud • People who hold positions of trust cannot be influenced for private gain • Agreements to Interfere with Marriage • Contracts that discourage, harm or interfere are illegal

  11. In Conclusion • In general, a court will NOT aid either party to an illegal contract. Instead it will leave the parties where they placed themselves. Neither party can enforce the agreement, nor can they receive aid from the court.

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