1. Legal Purpose and Proper Form
Business Law: Ch 10
Legal Purpose and Proper Form

2. Which Agreements are illegal
Agreements that involve contracting for an illegal act generally are void and unenforceable

3. Which Agreements are illegal
Illegal Lotteries
Three elements
Prize – something of value for one or more winners
Chance – winner decided solely by luck
Consideration – payment is required to participate
Wager – is a bet on the uncertain outcome of an event

4. Legalized forms of Gambling
Casinos – permits traditional games such as keno, blackjack, roulette and the like
Pari-mutuel betting – form of betting where the winner of the horse race share the total prize pool
State-run lotteries – winner split the jackpot
Bingo games and pull-tab betting

5. Which Agreements are illegal
Agreements to pay usurious interest
Lenders of money may not charge more than a specified interest rate
18% is the common maximum but it may vary from state to state
Usury – lending money at a rate higher then state allows
State allow higher rates for “payday” loans – under $1500.

6. Which Agreements are illegal
Agreements involving illegal discrimination
Agreements that obstruct legal procedures
Pay non-expert witnesses in a trial to testify or pay for false testimony
Bribe jurors
Compound a Crime – Refrain from informing on or prosecuting an alleged crime in exchange for money

7. Which Agreements are illegal
Agreements made without a required competency license
License required for people of certain occupations and businesses – must pass exam
Person who lacks license may not enforce the contracts that make
Revenue Raising License – license people who raise money
Contracts are valid

8. Which Agreements are illegal
Agreements that affect marriage negatively
Pay someone to promise to marry you
Pay someone not to marry
Pay someone to divorce

9. Which Agreements are illegal
Agreements that restrain trade unreasonably
Price Fixing – Competing firms agree on the same price
Unenforceable
Bid Rigging – Competitors agree that one bidder will have the lowest bid
Resale Price Maintenance
Allocation of Markets – divide the market are illegal and unenforceable

10. When will courts enforce illegal agreements
Protected Victims
The Excusably Ignorant – Can enforce legal part of contract or obtain restitution
Excusably ignorant is:
Does not know the contract is illegal
The other party knows the transaction is illegal
The illegality is minor
Rescission Prior to Illegal Act
Divisible Contracts – Contain combination of legal and illegal provisions

11. Unconscionability
Occurs when there is a grossly unfair contract parties under ordinary circumstances would not accept

12. To show Unconscionability
The victim must show:
He or she was presented with a take it or leave it contract
The other party had overwhelming bargaining power
There is no viable alternative in the marketplace
Injustice can only be avoided by holding certain terms or the whole contract unconscionable.

13. Contracts within Statute of Fraud
Required to be in writing
Contracts to buy and sell goods for a price over $500
Contracts to buy and sell real property or any interest in real property
Contracts that require more than one year to complete
Promises to stand good for the debts of another or of an estate
Promises to give something of value in return for a promise of marriage

14. Executed Contracts A contract that has been fully performed
Both parties have done all they promised to do

15. Executory Contracts Contract that has not been fully performed
Something agreed upon remains to be done
If the contract falls within statute of fraud in unenforceable
Any consideration exchanged can be recovered by suing based on Quasi-Contract

16. Quasi-Contract
Exists when some element of an enforceable contract is missing, yet the courts award money to prevent the unjust enrichment of one party

17. Requirements of the Writing
Writing need not utilize any special form to satisfy the Statute of Frauds as long as the writing contains certain key elements

18. Statute of Frauds Requirements
Names of the parties
A description of the subject matter
Prices
Quantity
Signature
Other essential terms
Time or method of delivery
Terms of payment
Method of financing
Date for transfer of possession

19. UCC Requirements The quantity of goods
That a contract has been created between the parties

20. Special Rules for Signatures
Under the Statutes of Frauds, only the parties whose signatures actually appear on the contract may be sued for enforcement
Under the UCC, a contract proposal in writing signed by one party and sent to the other is enforceable against the other party unless the other party objects to the terms within 10 days of receipt.

21. Statute of Frauds Contracts
Contract for the Sale of Goods for $500 or more
Modification of a contract that was below $500 and now the total price is above $500, then it must be in writing

22. Statute of Frauds Contracts
UCC exceptions to the Statute of Frauds:
When goods are ordered to be specially manufactured and they are not suitable to be sold to others
When goods have been ordered and paid for and the seller has accepted payment
When goods have been received and accepted by the buyer
When the party against whom enforcement is sought admits during legal proceedings that an oral contract was made

23. Statute of Frauds Contracts
Contracts to Sell an Interest in Real Property
Includes land and buildings permanently attached to the land
Transfer of title, ownership of real property, or of lesser interests, must be in a properly signed writing to be enforceable.
Exception:
Made partial or full payment
Occupied the land
Made substantial improvements to the land

24. Statute of Frauds Contracts
Contracts that require more than one year to complete
Begins at the time the contract is made, not at the time contractual performance is to begin

25. Statute of Frauds Contracts
Contracts to pay a debt or answer for another’s debt or the debt of an estate
Collateral Promise – Promise to pay a debt or default of another
Primary Promise – Promise to pay another’s debt that is not conditioned upon the other person’s failure to pay.
Exception: Main Purpose Rule – Third party is responsible for an oral promise that serves the promisor’s own interest

26. Statute of Frauds Contracts
Contracts for which the consideration is marriage
A signed writing is required for agreements in which one party promises to marry in return for something more than the other’s promise to marry.
If one party breaches either an oral or written contract to marry, the victim of the breach may successfully sue for damages

27. How are Contracts Interpreted
Acknowledgement of Final Agreement
Issues develop involving preceding oral agreements not reflected in the ultimate contract.
Contract clause stating both parties agree that the terms in the written contract constitute the entire and final agreement

28. How are Contracts Interpreted
Specific Rules of Interpretation
Court will interpret the contract in terms of the parties’ principal objective
Court can see which clauses should prevail over others
If agreement can be interpreted in two ways, the courts will choose the way that renders the agreement a contract

29. How are Contracts Interpreted
Conflicting Terms
If there is a conflict between a printed form contract and something typewritten or handwritten theron, the later writings, not the conflicting typeset print, determines the contracts meaning

30. How are Contracts Interpreted
Words
The plain and normal meaning of ordinary words will be used to determine the meaning of the contract
Prior relationships may indicate how the words should be interpreted

31. How are Contracts Interpreted
Ambiguities – Things that can be understood in two or more possible ways
Courts will interpret against the party who drafted the contract

32. How are Contracts Interpreted
Implied Reasonableness
Contracts often include implied terms as a matter of reasonableness
When no time for performance is mentioned, a reasonable time is allowed

33. How are Contracts Interpreted
Parol Evidence Rule
Makes the final writing the source of evidence about the terms of the contract

34. How are Contracts Interpreted
Exceptions to Parol Evidence Rule:
To clarify ambiguities in the written agreement
If the written contract was not intended to be a complete agreement
If a condition necessary to the existence of the contract never occurred
To show the parties reached another agreement or terminated the contract under consideration after executing the written contract
To show that the contract is voidable because a party lacked contractual capacity