B Law Legality & Public Policy Ch. 16 Module 13

*In Pari-Delicto

"In Equal Guilt" When parties are not "in pari-delicto" the courts may grant equitable relief to the lesser guilty party (not equally in guilt)

*Contract of Adhesion

- Doctrine of unconscionability - Clause is unconscionable - Contract is unconscionable -> Contract of Adhesion Contract offered by a dominant party with inferior bargaining power on a take-it-or-leave-it basis.

Exceptions to the Effect of Illegality

1. Protection of one party 2. Unequal Guilt (not in pari delicto)

2 Types of Licenses

1. Raise a fee (main function) 2. Insure competence (involves a test)

*Unconscionability

A UCC doctrine wherein some contracts will be unenforceable if they contain unfair or oppressive terms. A contract containing an unconscionable clause may be unenforceable as a contract of adhesion. - A provision in a contract that gives what the court believes is too much of an advantage over a buyer may be held void as unconscionable

*Covenants Not to Compete

A promise to not compete. It is enforceable if it is reasonable in scope. Are allowed in (where): 1. Employment contracts 2. Sale of business Scope (what): 1. Breadth 2. Time 3. Distance (realistic in order to protect the nature of the business)

Good Faith

Absence of knowledge of any defects or problems

Agreements Affecting Public Welfare

Agreements that may harm the public welfare are condemned as contrary to public policy and are not binding. Agreements that interfere with with public service or the duties of public officials, obstruct legal processes, or discriminate against classifications of individuals may be considered detrimental to public welfare and are unenforceable

Crimes and Civil Wrongs

An agreement is illegal and void (and unenforceable) when it calls for the commission of any act that constitutes a crime or civil wrong (ex. slander).

Partial Illegality

An agreement may involve the performance of legal and illegal promises. The legal parts of the agreement may be enforced provided that they can be separated from the illegal parts. If the illegal provision of a contract may be ignored without defeating the contract's basic purpose, the court will ignore it and enforce balance of the contract. - Legal meaning is assumed if there are legal and illegal interpretations of a contract

Contracts in Restraint of Trade

An agreement that unreasonably restrains trade is illegal and void because it is contrary to public policy.

Lottery

Any plan by which a consideration is given for a chance to win a prize; consists of 3 elements 1. There must be a payment go money or something of value for an opportunity to win 2. A prize must be available 3. The prize must be offered by lot or chance

Public Policy

Certain objectives relating to health, morals, and integrity of government that the law seeks to advance by declaring invalid ant contract that conflicts with those objectives even though there is no statute expressly declaring such a contract illegal.

Gambling

Gambling contracts are illegal. Gambling is when the result is solely a matter of luck. An activity is not gambling when the result is solely or predominately a matter of skill.

Purpose of Registration/License

If a person is not licensed and make a contract/agreement: - If it is to raise revenue, it does not make the contract voidable. - If it is there to ensure competence (usually requires a test/exam), the agreement is void.

General Rule of Illegality

Illegal agreements are void - It works a hardship because many frauds are based on illegal agreements - An agreement is illegal either when its formation or performance is a crime or a tort or when it is contrary to pubic policy or unconscionable. - When an agreement is illegal, the parties are usually not entitled to the aid of courts

*Usury

Lending money at an interest rate that is higher than the maximum rate allowed by law. - When a lender incurs expenses in making a loan, the lender will require the borrower to pat the amount of such expenses. Any fee charged by a lender that goes beyond the reasonable expense of making the loan constitutes "interest" for the purposes of determining whether the transaction is usurious.

Floating Lien

Quality bargaining position for businesses

Licensed Callings or Dealings

Statutes requires that a person obtain a license, certificate or diploma before practicing certain professions.

Statutory Usury

The charging of an Illegal Rate of interest on Consumer Loans (cars, furniture, etc.)

*Time-Price Differential

The difference between a cash price and a credit price. It does NOT involve the lending of money and is frequently not treated as usury.