1 / 23

illegality - PowerPoint PPT Presentation

  • Updated On :

Illegality. “In a free society the state does not administer the affairs of men. It administers justice among men who conduct their own affairs.” Walter Lippman . Learning Objectives. Meaning of illegality Types of illegal agreements Effect on contracts Special doctrines. 15 - 2.

I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
Download Presentation

PowerPoint Slideshow about 'illegality' - paul2

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.

- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
Illegality l.jpg


“In a free society the state does not administer the affairs of men. It administers justice among men who conduct their own affairs.”

Walter Lippman

Learning objectives l.jpg
Learning Objectives

  • Meaning of illegality

  • Types of illegal agreements

  • Effect on contracts

  • Special doctrines

15 - 2

Slide3 l.jpg


  • An agreement will be unenforceable because of illegality if the agreement involves an act or promise that violates a law or is against public policy

    • Even if there was voluntary consent between two parties who have capacity to contract

  • Effect: no remedy for breach of an illegal agreement

15 - 3

Slide4 l.jpg

Types of Illegal Agreements

  • Agreements that violate a statute

  • Agreements that violate public policy:

    • Agreements to commit a crime

    • Agreements promoting an illegal purpose

    • Agreement to perform an act for which the person is not properly licensed

      • Example: Riggs v. Woman to Woman P.C.

    • Agreements in restraint of competition

15 - 4

Slide5 l.jpg

Agreements in Restraint of Competition

  • If sole purpose of an agreement is to restrain competition, it violates public policy

  • A non-competition clause restrains competition, but courts enforce the clause if:

    • It serves a legitimate business purpose,

    • Restriction is reasonable in time, scope, and geographic area

    • It does not impose an undue hardship

15 - 5

Slide6 l.jpg

Unconscionable Agreements

  • In general, courts refuse to enforce and unconscionable contract

    • A contract with the absence of meaningful choice and terms unreasonably advantageous to one of the parties

  • UCC 2–302 gives courts power to refuse to enforce or modify unconscionable contracts for sale of goods

    • See Circuit City Stores, Inc. v. Mantor

15 - 6

Slide7 l.jpg

Adhesion & Exculpatory Clauses

  • A contract of adhesion, usually a contract on a standardized form, is offered by a party who is in a superior bargaining position on a “take-it-or-leave-it” basis

  • An exculpatory clause(release, liability waiver) in a contract attempts to protect one party from liability for damages

  • Courts enforce these contracts unless effect is overly harsh or oppressive

15 - 7

Writing l.jpg


“A verbal contract isn’t worth the paper it’s written on.”

Samuel Goldwyn, quoted in The Great Goldwyn (Alva Johnson, 1937)

Learning objectives9 l.jpg
Learning Objectives

  • Significance of a writing in contract law

  • The Statute of Frauds

  • Contracts covered by the Statute of Frauds and the requirements

  • The UCC & the Statute of Frauds

  • The Parole Evidence Rule

16 - 9

Slide10 l.jpg


  • In general, a writing is not required to create a legally enforceable contract

  • Writing may be required by Statute of Frauds

    • Enacted in 17th century England to prevent fraud by requiring written evidence

    • American states adopted similar statutes

  • A contract is unenforceable if it does not satisfy the statute of frauds

16 - 10

Slide11 l.jpg

Covered Contracts

  • Collateral contracts

  • Contracts for real estate

  • Contracts for more than one year

  • Contracts for sale of goods over $500

  • Executor’s promise

  • Marriage as consideration

16 - 11

Slide12 l.jpg

Collateral Contracts

  • Collateral contracts in which a guarantor promises to perform an obligation of a principal debtor to a third person (obligee)

    • Exception: under the main purpose or leading objectrule, no writing required if guarantor makes a collateral promise for main purpose of obtaining personal economic advantage

    • See Wintersport Ltd. v., Inc.

16 - 12

Slide13 l.jpg

Real Estate & Sale of Goods

  • A writing is required for contracts for the transfer or sale of an interest in real estate

    • Some states require a writing for leases and certain easements on real property

  • UCC 2-201 requires a writing for contracts for the sale of goods for a price of $500 or more

16 - 13

Slide14 l.jpg

The One Year Rule

  • A writing is required for bilateral contracts that cannot be performed within a year from the date of their formation (one year rule)

    • Likelihood of full performance is irrelevant

  • Test: is performance possible within year?

    • Example: If Jack signs contract to consult with Company X on a 13 month project, the contract must be in writing to be enforceable

16 - 14

Slide15 l.jpg

Satisfying the Statute of Frauds

  • Most states require signed memorandum of parties’ agreement stating essential terms:

    • (a) identity of parties, (b) subject matter identified with reasonable certainty, and (c) signed by the party to be charged

    • Need not be made at time contract is made

  • Convention on International Sale of Goods does not require writing to enforce a contract

16 - 15

Slide16 l.jpg

The Parol Evidence Rule

  • Parol evidence rule provides that, when parties enter a written contract they intend as a complete integration(final statement of agreement), a court will not allow evidence of prior or contemporaneous statements to alter or contradict terms of written contract

  • Parol evidence is admissible to explain ambiguities or allegations of fraud

16 - 16

Rights of third parties l.jpg

Rights of Third Parties

“The best minute I spend is the one I invest in people.”

Kenneth Blanchard, The One Minute Manager (1993)

Learning objectives18 l.jpg
Learning Objectives

  • Assignment of Contracts

  • Delegation of Duties

  • Third-Party Beneficiaries

17 - 18

Slide19 l.jpg


  • Sometimes a person who entered into a contract must transfer contract rights or duties to another person (third party)

  • Transfer of a right under a contract is called an assignment

  • Appointment of another person to perform a duty under a contract is called a delegation

17 - 19

Slide20 l.jpg

Limitations on Assignment

  • Assignment will not be effective if it:

    • Is contrary to public policy

    • Violates a non-assignment clause in a contract

      • See Managed Health Care Associates v. Kethan

    • Adversely affects obligor in significant way

    • Involved a personal relationship or element of personal skill or character

17 - 20

Slide21 l.jpg

Limitations on Delegation

  • Assignment extinguishes assignor’s right and transfers it to assignee, but delegation of a dutydoes not extinguish the duty owed by delegator to obligee

    • Delegator remains liable to the obligee unless obligee agrees to substitute new party for delegator by novation

    • In an effective delegation, performance by the delegatee will discharge the delegator

17 - 21

Slide22 l.jpg

Limitations on Delegation

  • Duties not delegable if delegation:

    • Is contrary to public policy

    • Violates non-assignment clause in contract

    • Adversely affects obligee in significant way

    • Involved a personal relationship or element of personal skill or character

17 - 22

Slide23 l.jpg

Third-Party Beneficiaries

  • If parties to a contract intended to benefit a third party, courts permit third party (third-party beneficiary) to enforce the contract

    • Referred to as third-party beneficiary

    • See Locke v. Ozark City Board of Ed.

  • Incidental beneficiaryis one obtaining a benefit as unintended by-product of a contract

    • No rights under contract

17 - 23