Chapter 11: Legality
I. Legality: the sixth and final requirement of a contract that states that an agreement must have a legal purpose.
A. Contracts are illegal if their purpose or manner in which they are carried out illegal, violates a statute, or is contrary to public policy.
- Agreement that Violate Statutes: These agreements are illegal and void because they violate individual state statutes such as…
- Civil and Criminal Statutes
- Usury Statutes
- Any contract the charges over the maximum allowable interest rate is illegal.
- Gambling Statutes
- Any contract that participates in games of chance or risk that is not sanctioned by the state is illegal.
- Sunday Statutes
- Licensing Statutes
- Agreements Contrary to Public Policy: An agreement that requires the performance of an act harmful to the public benefit.
- Agreements in unreasonable restraint or trade
- Contracts not to compete
- Price fixing
- Competitive bidding.
- Agreements to obstruct injustice
- Agreements interfering with marriage.
- Agreements in unreasonable restraint or trade
- agreements in unreasonable restraint of trade- if a contract arises that deprives an individual rights even if the contract seems legal; cannot conduct business because someone restrained you from doing so
- contracts not to compete-
- goodwill- along with the purchase of the business, you are buying the reputation/customers
- restricted covenant- promise not to compete, reasonable time, place, and the geographic distance
- price fixing-
- competitors-set prices
- manufacturers- set prices
- discourages competition, innovation, and economic growth
- competitive bidding- when the bidders have knowledge of each other’s bids and join to set the bid price
- contracts not to compete-
- agreements to obstruct justice- any contract that interferes with the administration of justice is illegal; ex. protecting someone from arrest,encouraging law suits, giving false testimony or bribing a juror. Includes agreements to pay a non expert to testify in trial or agreement to not prosecute a person in return for money
- agreements interfering with marriage- unenforceable, goes against public policy
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