legality
contracts to do something prohibited by law or against public policy are void.
usury
parties cannot contract to make loans charging interest above the lawful maximum rate
gambling
off track betting, traditionally all states held gambling contracts void
sabbath laws (blue laws)
in certain states contracts entered into or performed on sundays are void (sale of alcohol)
licensing statutes
validity depends on type of license at issue. void if license is to ensure proper skills or character, and party is unlicensed.
- example: doctors lawyers plumbers, brokers accountants-to ensure proper skills, may require proof of good character - licensed in va, hire in pa, void
2. contracts with unlicensed party are enforceable if purpose of license is to raise revenue for state/locality - liquor license - more of a tax
contracts to commit crimes or torts
void, eg sell drugs, bribe jurors, commit fraud
anti-competitive agreements
price fixing, monopolies, etc.. although between private parties, have such a negative impact on society that they are deemed illegal (usually also violate antitrust statute)
covenants not to compete
contracts that restrict outgoing owner/employee from engaging in similar business
- court will look at restriction in terms of time, geography and scope of activity
- must protect legitimate business purpose
exculpatory clauses
provisions releasing a party from liability regardless of fault
- unenforceable if party who benefits has business necessary for society, utilities, public transportation, banks, want these things to protect us
- unenforceable if violates public policy- one party is dependent on other, resulting in unequal bargaining power. example. employers, landlords, cannot insulate themselves against liability from employees, tenants
- enforceable if between parties with equal bargaining power- not dependent on them
unconscionable contracts/clauses
contracts/terms that are so grossly unfair as to shock the confidence of the court, looking for unfair bargaining power
a. should the court decide whether a contracts terms are unfair? when it looks like a person being taken advantage of, court will step in
b. concept of unconscionability derives from UCC; applying it is up to discretion of courts
procedural unconscionability/substantive
procedural: drafter makes it difficult for other party to know terms, whether due to language, form or lack of opportunity for review
substantive-harsh contract terms, often if deprive one party of remedy if other party breaches. applied on case by case basis
effect of illegality
illegal contracts generally cannot be enforced by either party
a. no contract or quasi contract recovery for unjust enrichment
- exception: if one party is justifiably ignorant of illegality, or if forced into contract by fraud, duress or undue influence, court will allow restitution
- if contract is divisible(cross off one section), the court will enforce the rest of the contract without the illegal terms
