Bell Ringer What is legality? What makes something legal/illegal? What could make a contract illegal?

CH 9: Legality

Legality Legality is the last of the 6 elements that makes a legally binding contract For a contract to be binding it must be legal A contract can be illegal if – The agreement violates the law – The agreement results in criminal penalty – Making an agreement that would be illegal is in itself illegal

In Pari Delicto & Divisible Contract If certain aspects of a contract can be successfully performed by themselves the contract is said to be divisible The court can therefore rule on certain parts of a contract but not on others If both parties enter into a contract known to be illegal they are said to be in pari delicto (In equal fault)

Agreements that Violate Statutes Criminal Statutes – Agreements that require one party to commit a tort or a crime Usury Statute – Charing more than the legally allowable amount of interest (Usury)

Gambling Statutes – Gambling when it is illegal (or the sport is illegal), or when gambling is illegal using something that gives one side an unfair advantage Sunday Statutes – When a certain activity is illegal to perform on a Sunday. (Blue light Laws) Selling Alcohol on a Sunday (before a certain time)

Agreements Contrary to Public policy Some agreements are not illegal because of the action, however they may be illegal because they are contrary to public policy Examples of violating public policy – Unreasonable restraint of trade – Obstruct Justice – Commit Fraud – Interfere with marriage

Contract Not to Compete In certain situations owners or employees could agree to not seek active employment in a field or area for a certain amount of time This is known as a restrictive agreement, or a non-compete clause, and will be upheld by a could if the time limit and other restrictions are reasonable.

Price Fixing Free market economies allow for prices to rise and fall as necessary. Price fixing is when competitors agree on a price range, and only sell that item within that specific range. This is often against some state and federal law

Agreement to Obstruct Justice & Agreements for Breach of Duty/Fraud Agreement to Obstruct Justice – Any contract that interferes with justice is illegal. Preventing someone from arrest, encouraging a lawsuit, or lying under oath Agreements for Breach of Duty/Fraud – When a public official fails to administer their office in the best interest of their constituents, often for private personal gain.

Effect of Illegality Courts tend to not aid either party in an illegal contract The parties are on their own to solve the problem As the party is not enforceable a court will not rule on it – The exception is when parties are not found to be at equal fault for the situation.