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Quote of the Day “Gambling is the child of avarice, the brother of iniquity, and the father of mischief.” George Washington, United States President

Contracts that May Violate a Statute  Wagers Investments Insurance  Licensing Statutes  Usury These types of contracts will be discussed further on the next slides.

Wagers  A gambling contract is illegal unless it is specifically authorized by state statute.  In some cases, wagers have been disguised as “investments” where the gambler places a bet on the price of stock, but never actually buys the stock.  Someone taking out a policy on the life of another must have an insurable interest in that person -- or else it becomes a “wager” on their life.

Licensing Statutes  When a licensing requirement protects the public, any contract made by an unlicensed worker is unenforceable.  When a licensing requirement is designed merely to raise revenue, a contract made by an unlicensed person is generally enforceable. Usury  Usury laws prohibit charging excess interest on loans.

Contracts that May Violate Public Policy  Restraint of Trade  Exculpatory Clauses  Bailment Cases  Unconscionable Contracts  Adhesion Contracts These types of contracts will be discussed further on the next slides.

Restraint of Trade  To be valid, an agreement not to compete must be ancillary to a legitimate bargain.  Sale of a Business When a noncompete agreement is ancillary to the sale of a business, it is enforceable if reasonable in time, geographic area, and scope of activity.  Employment

Exculpatory Clauses  Generally enforceable when the affected activity is in the public interest, such as medical care, public transportation, or some essential service.  Generally unenforceable when it attempts to exclude an intentional tort or gross negligence. the parties have generally unequal bargaining power. it is not clearly written and readily visible. Part of a contract that attempts to release you from liability for injury to another party.

Bailment Cases  Bailment means giving possession and control of personal property to another person.  The person giving up possession is the bailor, and the one accepting possession is the bailee.

Unconscionable Contracts  An unconscionable contract is one that a court refuses to enforce because of fundamental unfairness.  The two factors that most often led a court to find unconscionability were: oppression -- meaning that one party used its superior power to force a contract on the weaker party; and surprise --meaning that the weaker party did not fully understand the consequences of its agreement.

Adhesion Contracts  Adhesion contracts are standard form contracts prepared by one party and given to the other on a “take it or leave it” basis.  They are generally enforced when the two parties are of equal power, but when the parties are unequal, the contract may be ruled unconscionable.

“No matter how profitable a particular contract clause may appear to be, it is worthless if it is illegal. Make sure your agreement is lawful.” “No matter how profitable a particular contract clause may appear to be, it is worthless if it is illegal. Make sure your agreement is lawful.”