LESSON 10-1 ILLEGAL AGREEMENTS OUTLINE
What are the rules of contract interpretation?
(1) Analysis (2)conflicting terms (3) words (4) authors of ambiguity (5) implied reasonableness.
On what occasions does the Statute of Frauds require a writing?
(1) Contracts to buy and sell good for a price of $500 or more (2) contracts to buy and sell real property or any interest in real property (3) contracts that require more than one year to complete (4) promises to pay the debt or answer for a legal obligation of another person (5) promises to give something of values in return for a promise of marriage.
Which key elements must be in a writing in order to satisfy the Statute of Frauds?
(1) Names of the parties (2) subject matter description (3) price (4) quantity (5) signature (6) other essential terms
Describe the three illegal agreements that unreasonably restrain trade.
(1) Price fixing: competing firms agree on the same price to be charged for a product of service, which injures consumers. (2) Resale price maintenance: manufacturers contract with retailers to sell their products at a particular price. (3) Allocation of markets: competitors divide markets between themselves. (4) Agreements not to compete: an employee has agreed not to compete with their employer after the employment terminates. These agreements become illegal if they are unreasonable in time period, geographic area, and the employer's interest protected by the limitations.
consideration
(a payment is required to participate)
real property
(land, buildings, and things permanently attached to them) must be evidenced by a writing and signed by the party against whom enforcement is sought.
prize
(something of value for one or more winners)
chance
(the winner determined solely by luck)
Agreements that Restrain Trade Unreasonably
1. Price fixing 2. Bid rigging 3. Resale price maintenance 4. Allocation of markets 5. Agreements Not to Compete
wager
A bet on the uncertain outcome of an event.
What is a quasi-contract? Is it enforceable?
A contact that is missing 1 of the required elements Yes, it is enforceable
integration clause
A contract clause stating that both parties agree that the terms in the written contract constitute the entire and final agreement.
quasi-contract
A contract in which some element of an enforceable contract is missing but the court enforces it as if it were a contract in order to prevent unjust enrichment of one party.
procedurally
A contract that contains very fine print or elements of fraud or duress is said to be _____________ unconscionable.
executed contract
A contract that has been fully performed.
executory contract
A contract that has not been fully performed.
Without
A contract that is not required to be in writing is said to be ________ the statute of frauds.
competency license
A license required by a state to ensure that persons in certain occupations and businesses are competent.
revenue license
A license required only to raise revenue rather than to protect the public.
lottery
A prize or something of value won by chance.
(5) Contract for which the consideration is marriage:
A signed writing is required for agreements in which one party promises to marry in return for something other than the other's promise to marry.
main purpose rule.
A third party is liable for an oral promise to pay another's debt if the main purpose of the promise serves the promisor's own interest
Agreements that Effect Marriage Negatively
Agreement to pay someone to marry so that person can obtain citizenship Parent's promise to pay daughter for not marrying
Which agreements, although illegal, are enforceable in court?
Agreements made with protected victims, the excusably ignorant, those parties who rescind prior to an illegal act, and divisible contracts.
When are agreements considered illegal?
Agreements that involve contracting for an illegal act generally are void and unenforceable. Almost any agreement to commit a felony will be an illegal agreement.
Agreements Involving Illegal Discrimination
Any agreement that violates: - anti-discrimination statutes - the Constitution These agreements would be unenforceable.
Does the parole evidence rule allow or bar testimony from initial proposals and negotiations?
Bars
Describe why the Statute of Frauds is necessary.
Because oral contracts may be subject to fraudulent claims, the law requires that some of the most important contracts be placed in writing in order to be enforced in court. These laws are known as the Statute of Frauds.
A license that professionals or people involved in trades must obtain
Competency License
price fixing
Competing firms agree on the same price to be charged for a product or service.
The act of refraining from informing the police of an alleged crime
Compounding a Crime
contracts of adhesion
Contracts such as credit purchases of life insurance policies that are prepared by the stronger party in the contract, usually the seller, with the help of skilled lawyers who favor the interest of their clients.
(4) Contract to pay a debt or answer for another's debt:
Contracts to pay a debt or answer for another's debt must be in writing, An exception is the primary promise in which one person orally agrees to a contract and payment on behalf another person.
(3) Contract that requires more than one year to complete:
Courts will not enforce a contact that takes more than one year to complete unless there is a signed writing to prove the agreement the year begins at the time the contract is made, not at the time the contractual performance is to begin.
If you pay for a product and receive it - what type of contract?
Ececuted
If you order a product on the Internet, but have not received it yet - what type of contract?
Executory
A contract to purchase a chair for $200 is within the statute of frauds.
False
A primary promise has to be in writing to be enforceable.
False
Franchising is an example of an agreement that would restrain trade.
False
A serious crime
Felony
(1) Contract for the sale of goods for $500 of more:
If parties agree to buy and sell goods for a price or $500 dollars or more their contract must be evidenced by writing. If a modification to a sell of under $500 dollars brings the price above $500 dollars then a contract must be signed in writing.
Agreements that Obstruct Legal Procedures
If they delay or prevent justice Examples: - pay for false testimony - pay for testimony from non-expert witnesses - bribe jurors - refrain from informing on an alleged crime for money (compounding a crime)
What writing in a contract states that the contract contains the complete agreement of the parties?
Integration Clause
collateral promise
It must be in writing to be enforceable
What is composed of prize, chance, and consideration?
Lottery
Illegal Lotteries (Gambling)
Lottery involves 3 elements: 1. Prize 2. Chance (based on luck) 3. Consideration (requires a payment) Legal forms of gambling: 1. State-run lotteries 2. Casinos, OTB (licensed) Illegal forms: 1. Private wagers/bets 2. Office pools
unconscionability
Occurs when there is a grossly unfair contract that parties under ordinary circumstances would not accept.
Explain how parties to an illegal agreement are often not equally to blame.
Parties to an illegal agreement are often not equally to blame when one party lies to another person to enter an illegal agreement. If the illegal agreement was created by fraud, duress, misrepresentation, or undue influence, the victim may obtain restitution.
Illegal forms of Gambling
Private wagers, office pools
The ability to recover payments made in illegal contracts
Restitution
A license used to raise money or operate a business
Revenue License
Agreements Made Without a Required Competency License
Someone lacking appropriate license can't enforce contracts Contracts made by unlicensed party (no business license) are generally valid
legal rate of interest
Sometimes a person borrows money for which interest will be charged but no exact rate is stated.
Statute of Frauds
Statutes that require certain contracts to be evidenced by a signed writing in order to be enforceable in court.
bid rigging
The act when competing firms who bid on jobs agree that one bidder will have the lowest bid for a particular job.
allocation of markets
The same injury to competition produced by price fixing can be achieved if competitors divide markets between themselves
What are the various forms of illegal agreements?
The various illegal agreements include those in which there may be a specific statute forbidding a contract, agreements that obstruct legal procedures, agreements that are made without a required competency license, agreements that affect marriage negatively, and agreements that unreasonably restrain trade.
Agreements to Pay Usurious Interest
There is a maximum rate of interest that can be charged on loans Exceptions (can charge higher rates of interest): 1. Payday loans 2. Pawn shop loans
A primary promise
This agreement is enforceable without a writing
indivisible
This contract probably would not be divisible because labor, wiring, terminals, and other costs were not broken out as separate items.
parol evidence rule
This rule makes the final writing the source of evidence about the terms of the contract.
compounding a crime
To refrain from informing on or prosecuting an alleged crime in exchange for money or other valuable consideration.
(2) Contract to sell an interest in real property:
Transfers of real property or of lesser interest such as a lease or the right to pump oil or cut timber, must be in a properly signed writing to be enforceable. In most states oral leases for one year or less are enforceable. Some states require that contracts employing real estate brokers satisfy the Statute of Frauds.
A collateral promise has to be in writing to be enforceable.
True
An executory contract, within the statute of frauds, must be in writing to be enforceable.
True
Agreements that are grossly unfair are known to be
Unconscionable
What are the special rules regarding signatures?
Under Statute of Frauds requirements only the parties whose signatures actually appear on the contract may be sued for enforcement. The signature may be written, stamped, engraved, or printed. It may consist of any mark that is intended as a signature or authentication of the writing.
The lending of money at a higher rate than the maximum allowed by the state
Usury
Usury
Usury is lending money at higher than the maximum rate
An agreement involving an illegal act (something other than 'not renewing a business license') is
Void and Unenforceable
parol evidence
Words spoken prior to the execution of the final writing at the time of signing. Parol evidence generally is inadmissible in court.
Pari-mutuel betting
a form of betting in which those who bet on the winner of a horse race share the total prize pool
Parol evidence
consists of words spoken prior to the execution of the final writing or at the time of signing.
quasi-contract
exists when some element of an enforceable contract is missing (such as a signed writing), yet courts award money to prevent the unjust enrichment of one party.
Divisible
generally means that separate consideration is given for the legal and illegal parts of the contract
without the Statute of Frauds
if it is not required to be in writing
within the Statute of Frauds
if it is required to be in writing
executory contract
is one that has not been fully performed. Something agreed upon remains to be done by one or both of the parties.
executed contract
is one that has been fully performed.Both parties have done all they promised to do.
State-run lotteries
often with millions in the jackpot to be split between the winner(s) and state educational institutions
blue-sky laws
prohibit sales of worthless stocks and bonds
resale price maintenance
refuse to sell to retailers who will not charge that amount and still be legally proper in so doing
. For 'contracts that take more than 1 year to complete', the courts look at what date to make that determination
the date the contract was made
personal property
y (any property other than real property) that are tangible.