1. Chapter 16: Legality and Public Policy

2. Illegality Defined
The term illegality embraces situations in which a statute declares that certain conduct is unlawful or a crime:
contracts requiring the commission of a tort
contracts that are contrary to public policy
contracts that are unconscionable
to some extent, contracts that are oppressive, unfair, or made in bad faith

3. Illegal Agreements
When an agreement is illegal, it is ordinarily void, and no contract arises from it.
Courts will not allow one party to an illegal agreement to bring suit against the other party.
There are some exceptions to this, such as when the parties are not equally guilty or when the law’s purpose in making the agreement illegal is to protect the person who is bringing suit.

4. Exceptions to Effect of Illegality
Protection of
One Party
Unequal
Guilt
Knowledge of Illegal
Purpose of
Other Party
Relief
Society,
speaking through
lawmakers or judges,
deems voiding illegal contract
unjust when the party meant to be
protected is harmed or harshly treated.

5. Effect on Society
The question of the legality of an agreement is not considered in the abstract, but the effect of the decision on the rest of society is considered.
Whether a contract is contrary to public policy may be difficult to determine because public policy is not precisely defined.
That which is harmful to the public welfare or general good is contrary to public policy.

6. Non-Enforceable Agreements
Prejudice to Public Policy
Illegal Wagers and Lotteries
Evasions of Statutory Protection
Agreements
Negatively
Affecting
Society
Illegal Discrimination
Injuries to Public Service
Obstructions to Legal Process
Illegal Lobbying
Conflicts of Interests

7. Non-Enforceable Agreements
Contracts with Unlicensed Persons in Licensed Callings or Dealings
Agreements
Negatively
Affecting
Business
Fraudulent Sales
Usurious Agreements
Agreements Restraining Trade
Obstructions to Legal Process
Agreements Not to Compete
Conflicts of Interests

8. Examples of Illegal Agreements
agreements injuring public service, such as an agreement to buy a government job for an applicant
agreements involving conflicts of interest, such as when the purchasing officer of a government buys from a company that the officer privately owns
agreements obstructing legal process, such as an agreement with a witness to disappear
illegal discrimination contracts
wagers and private lotteries

9. Restraints of Trade
Contracts in restraint of trade are generally illegal as violating federal or state antitrust laws.
An agreement not to compete is illegal as a restraint of trade except when reasonable in its terms and when it is incidental to the sale of a business or to a contract of employment.

10. Usury
The charging by a lender of a higher rate of interest than allowed by law is usury.
Courts must examine transactions carefully to see if there is a usurious loan disguised as a legitimate transaction.
When sellers of goods offer their buyers one price for a cash sale and another, higher price for a credit sale, the higher price is lawful in most cases.