1. Week 05 Contracts and Agreements

2. Illegal Contracts Contracts usually void because the act to be performed has been statutorily declared illegal are: gambling contracts Sunday contracts (in certain states) usurious contracts contracts of an unlicensed operator contracts for the sale of restricted articles contracts in unreasonable restraint of trade.

3. Usurious contracts Usurious contracts consist of charging a higher rate of interest than that allowed by law. The maximum contract rate is the highest rate that may be charged. The legal rate applies to all situations in which interest may be charged but in which the parties were silent as to rate.

4. Null Contracts Any contract intended to restrain trade unreasonably is null and void. Examples are: Contracts not to compete Contracts to restrain trade Contracts to fix the resale price Unfair competitive practices Contracts contrary to public policy are void and include: Contracts limiting freedom of marriage Contracts obstructing the administration of justice Contracts injuring the public service

5. The Statute of Frauds The Statute of Frauds, passed in England in 1677, listed classes of contracts which had to be in writing. Most states have adopted with but slight variations the sections containing the lists of such contracts.

6. The Statute of Frauds requires the following agreements to be in writing: Agreements to sell land or any interest in land, or to lease land for more than one year Agreements in which the terms cannot be performed within one year from the time the contract is made Agreements to become responsible for the debt or default of another. If such a promise is really made to gain some advantage for the promisor, it need not be in writing. Agreements of executors or administrators to pay the debts of the estate from personal funds Agreements containing a promise of one person in consideration of marriage

7. Parole evidence rule The parole evidence rule does not permit any testimony to be introduced to vary, add to, modify, or contradict the terms of a written contract unless there is evidence of fraud, accident, or mistake so that the writing is in fact not a contract or is incomplete or ambiguous.

8. Generally, the rights under a contract may be assigned. The party making the assignment is the assignor. The one to whom the right is transferred is the assignee.

9. There are some restrictions upon assignment: Laws prohibit assignment of future pay of those in the armed services. A contract involving personal services cannot be assigned. Rights transferred by assignment and duties transferred by delegation cannot be modified by the assignment or transfer. The parties may include a provision that prohibits assignment.

10. Joint Contract A joint contract is one in which two or more persons jointly promise to carry out an obligation or in which two or more persons are jointly entitled to the performance. A several contract arises when two or more persons individually agree to perform the same obligation. A joint and several contract is one in which two or more persons are bound both jointly and separately.

11. Contracts may be terminated by: performance operation of law voluntary agreement of the parties impossibility of performance acceptance of breach of contract.

12. Contracts may be terminated by operation of law. Bankruptcy releases the debtor from most contracts to pay creditors. If the innocent party in a breached contract delays too long in instituting court action, the contract is terminated by the statute of limitations. If one party to a written contract intentionally alters a written contract in a material manner without the consent of the other party, the other party is released from the contract.

13. Breach of Contract When one of the parties fails or refuses to perform the obligations assumed under the contract, there is a breach of contract. If a contract is breached by one party, the other party may: Sue for damages. Damages may be nominal, compensatory, punitive, or liquidated. Rescind the contract. If the innocent party has executed the contract, anything parted with may be recovered.