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Essentials Of Business Law Chapter 10 Legal Purpose Of Contracts McGraw-Hill/Irwin Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

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Presentation on theme: "Essentials Of Business Law Chapter 10 Legal Purpose Of Contracts McGraw-Hill/Irwin Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved."— Presentation transcript:

1 Essentials Of Business Law Chapter 10 Legal Purpose Of Contracts McGraw-Hill/Irwin Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

2 Essentials of Business LawChapter 10-2 Illegal Agreements Agreements that are contrary to the common law Agreements that have been declared illegal by statute Agreements against the security or welfare of the general public

3 Essentials of Business LawChapter 10-3 Effect Of Illegality Agreement with an illegal purpose  Usually void and unenforceable Divisible contracts  Contracts with several unrelated parts Parts with legal purpose are enforceable Parts with illegal purpose are not enforceable

4 Essentials of Business LawChapter 10-4 Agreements That Violate Statues Not enforceable by the courts Agreements made on Sundays or legal holidays Gambling and wagering agreements Usurious agreements Unlicensed transactions

5 Essentials of Business LawChapter 10-5 Gambling And Wagering Agreements All states have legislation that regulates gambling  Performance by one party depends on the occurrence of an uncertain event  Examples: horse or dog races, state-run lotteries Closely regulated Some states allow legal gambling on Native American reservations

6 Essentials of Business LawChapter 10-6 Usurious Agreements Interest  Charged for the use of borrowed money  Percentage of the amount of the loan Usury  Charging interest higher than the law permits  Agreements are illegal and void  Usually apply to retail installment credit sales and credit card transactions

7 Essentials of Business LawChapter 10-7 Unlicensed Transactions Some businesses, professions, and occupations require licenses  Typically have to paying an annual fee and pass an examination Ensures competency  Examples include: doctors, dentists, lawyers, nurses, certified public accountants, and teachers Unlicensed transactions  Agreements with a person who does not have the required license  Generally illegal

8 Essentials of Business LawChapter 10-8 Agreements That Violate Public Policy Agreements to obstruct or pervert justice  Conceal a crime or not to prosecute a criminal  Champerty Lawsuit in which one or more party has no legitimate interest  Give false testimony or suppress evidence  Bribe a juror or a court official  Refrain from testifying as a witness in a legal action Agreements to restrain marriage  A promise to pay money to ones child if they do not marry would be unenforceable

9 Essentials of Business LawChapter 10-9 Agreements That Violate Public Policy Agreements that interfere with public service  Bribe or interfere with public officials  Obtain political preference in appointments to office  Pay an officer for signing a pardon  Require one of the parties to break a law  Influence a law-making body for personal gain Agreements to defraud creditors and other persons

10 Essentials of Business LawChapter Illegal Restrains Of Trade Restraint of trade  Agreements to suppress or eliminate competition are illegal and unenforceable  Exception is when specifically permitted by law Monopoly power  One or more people or firms control the market in a particular area or product  Results in a restraint of trade

11 Essentials of Business LawChapter Sherman Antitrust Act Federal Antitrust Act passed In 1890 Enforced against large and small businesses Disallows agreements that:  Unreasonably inhibit competition  Fix prices  Allocate territories  Limit production Punished by heavy fines and imprisonment Federal government can require dominant firms to be split into smaller businesses  Most states also have antitrust statues

12 Essentials of Business LawChapter Robinson-Patman Act Passed in 1936 to amended earlier antitrust legislation Makes it unlawful to discriminate  Product pricing, advertising, and promotion No one customer has an advantage over others Does allow large buyers to retain advantages resulting from greater efficiency  Limits the use of the economic power that may result from large size

13 Essentials of Business LawChapter Legal Restrains Of Trade Government-granted franchise  State or the federal government grants a firm or person a license to conduct a specific business  Form of legal monopoly  Bus line  Railroad In the public interest to limit the number of companies operating in an area Subject to a greater degree of regulation than other businesses  Electric power co  TV cable service

14 Essentials of Business LawChapter Legal Restrains Of Trade Private franchise  Contractual relationship Franchisor – parent firm Franchisee – independent company  Examples: fast-food chains, motels, automobile dealerships, gasoline stations

15 Essentials of Business LawChapter Zoning regulations  Community designates certain areas for specific purposes  Examples: light industrial, industrial, commercial, and residential  Restrict where and how businesses may operate Environmental and safety regulations  Protect the health and welfare of the general population from pollution  Limit how firms may operate Legal Restrains Of Trade


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