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CONTRACTS LEGALITY AND PUBLIC POLICY

BLAW 1 - CONTRACTS CHAPTER 16 LEGALITY AND PUBLIC POLICY Drexel University Prof. Kevin S. Anderson 215-977-1045 ksa@elliottgreenleaf.com

ELEMENTS OF CONTRACT
AN AGREEMENT BETWEEN COMPETENT PARTIES BASED ON GENUINE ASSENT SUPPORTED BY CONSIDERATION MADE FOR A LAWFUL PURPOSE IN FORM REQUIRED BY LAW
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CONTRACTS LEGALITY AND PUBLIC POLICY

CONTRACTS LEGALITY AND PUBLIC POLICY

GENERAL PRINIPCALS
AGREEMENT IS ILLEGAL WHEN ITS FORMATION OR PERFORMANCE IS A CRIME, A TORT, UNCONSCIONABLE OR CONTRARY TO PUBLIC POLICY EFFECT OF ILLEGALITY
ORDINARILY, ILLEGAL CONTRACT IS VOID
NEITHER PARTY CAN ENFORCE

EXCEPTIONS TO EFFECT OF ILLEGALITY

PROTECTION OF ONE PARTY
PERSON WHO BUYS SECURITIES SOLD ILLEGALLY CAN RECOVER WHAT HE PAID.

UNEQUAL GUILT
IF BORROWER AGREES TO PAY USURIOUS INTEREST RATE, HE STILL MAY BE ABLE TO KEEP THE LOAN AND JUST PAY AT A NONUSURIOUS RATE
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CONTRACT FOR PAYMENT IF YOU DO NOT POSSESS THE REQUISITE LICENSE

CONTRACTS LEGALITY AND PUBLIC POLICY

CONTRACTS LEGALITY AND PUBLIC POLICY PARTIAL ILLEGALITY

IF CONTRACT IS DIVISIBLE, THE LEGAL PARTS WILL BE ENFORCED
CONTRACT FOR (i) REAL ESTATE BROKERAGE SERVICES BY UNLICENSED PARTY AND (ii) EMPLOYMENT POST-CLOSING

KNOWLEDGE OF ILLEGAL PURPOSE

IF CONTRACT IS LAWFUL BUT BENEFIT OF CONTRACT IS GOING TO BE USED FOR UNLAWFUL PURPOSE, THE CONTRACT IS STILL ENFORCEABLE
I RENT A CAR TO SOMEONE WHO'S GOING TO USE IT FOR A CRIME BUT, WHAT IF I WANT TO BUY SYRINGES OR CIGARETTE ROLLING PAPER?

IF CONTRACT IS SUSCEPTIBLE TO 2 INTERPRETATIONS, ONE LEGAL AND ONE ILLEGAL, COURT WILL ASSUME LEGAL PURPOSE WAS INTENDED ABSENT CLEAR EVIDENCE TO CONTRARY
Engage an individual to steal you a Porsche Boxter.
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CONTRACTS LEGALITY AND PUBLIC POLICY

CONTRACTS LEGALITY AND PUBLIC POLICY UNCONSCIONABLE AND OPPRESSIVE CONTRACTS

GENERAL RULE IS THAT A COURT WILL NOT LOOK TO FAIRNESS OF A DEAL CLAUSES WHICH ARE TOO HARSH OR OPPRESSIVE MAY, NONETHELESS, NOT BE ENFORCED
PENALTY IN LIQUIDATED DAMAGES PROVISIONS

CRIMES AND CIVIL WRONGS

CAN'T CONTRACT TO KILL, OR SLANDER, OR FIX PRICES OR INFRINGE ANOTHER'S PATENT

GOOD FAITH AND FAIRNESS

LAW IS EVOLVING TO REQUIRE PARTIES TO ACT IN GOOD FAITH
UCC REQUIRES MERCHANTS TO ACT WITH "HONESTY IN FACT AND OBSERVANCE OR REASONABLE COMMERCIAL STANDARDS OF FAIR DEALING IN THE TRADE."
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DON'T NEED TO PROVE FRAUD REQUIRES GROSSLY DISPROPORTIONATE BARGAINING POWER SO THAT WEAKER PARTY CAN'T AFFORD RISK OF CONFRONTATION
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CONTRACTS LEGALITY AND PUBLIC POLICY

CONTRACTS LEGALITY AND PUBLIC POLICY

LIMITED WARRANTIES SIGNS IN GARAGES WHICH SAY THAT OWNER IS NOT RESPONSIBLE FOR DAMAGE TO CARS PROVISION IN LIFE INSURANCE CONTRACT THAT INSURED MUST BE IN "SOUND HEALTH" AT TIME OF CONTRACT PROVISION IN LEASE WHICH SAYS LANDLORD IS NOT RESPONSIBLE FOR ANY DEFECTIVE CONDITION OF BUILDING PROVISION IN A BROKERAGE AGREEMENT WHICH SAYS BROKER GETS PAID IF HE PRODUCES BUYER REGARDLESS OF WHETHER DEAL IS FINALLY CONSUMMATED.
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DETERMINATION OF UNCONSCIONABILITY
DETERMINED AT THE TIME THE CONTRACT IS MADE COURT MUST HOLD A HEARING TO DETERMINE FACTS EXAMPLES:
SHORT PERIOD TO RAISE CLAIMS FORM CONTRACTS WITH HARSH OR OPPRESSIVE FORMS
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CONTRACTS LEGALITY AND PUBLIC POLICY

CONTRACTS LEGALITY AND PUBLIC POLICY AGREEMENTS EVADING STATUTORY PROTECTION

EXAMPLE - INSURANCE CONTRACT WHICH DOESN'T PROVIDE FOR COVERAGE REQUIRED BY STATUTE

AGREEMENTS AFFECTING PUBLIC WELFARE

CONTRARY TO PUBLIC POLICY
PROTECTION FROM THAT WHICH TENDS TO BE INJURIOUS TO THE PUBLIC OR CONTRARY TO THE PUBLIC GOOD.
CONTRACTS THAT PROHIBIT MARRIAGE CONTRACTS IN RESTRAINT OF TRADE (RESTRICTIVE COVENANTS)
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AGREEMENTS INJURING PUBLIC SERVICE

AGREEMENT TO PROCURE AWARD OF A PUBLIC CONTRACT BY CORRUPT MEANS IS NOT ENFORCEABLE - YOU BRIBE THE OFFICIAL
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CONTRACTS LEGALITY AND PUBLIC POLICY AGREEMENTS INVOLVING CONFLICTS OF INTEREST

PUBLIC OFFICIAL HIRING HIS FORMER LAW FIRM

CONTRACTS LEGALITY AND PUBLIC POLICY

WAGERS AND LOTTERIES

GENERALLY ILLEGAL UNLESS AUTHORIZED BY STATE
REQUIREMENTS ARE (i) PRIZE, (ii) CHANCE AND (iii) CONSIDERATION IF PARTICIPATION IS FREE, THERE'S NO CONSIDERATION AND THERE IS NO LOTTERY ACTIVITY IS NOT GAMBLING WHEN THE RESULT IS SOLELY OR PREDOMINANTLY A MATTER OF SKILL THEREFORE, YOU CAN RUN GOLF TOURNAMENT
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AGREEMENTS OBSTRUCTING LEGAL PROCESSES

AGREEMENTS TO PAY MONEY TO ABANDON A CRIMINAL PROSECUTION OR FOR THE SUPPRESSION OF EVIDENCE.
AGREEMENT TO PAY WITNESS MORE IF THE CASE IS WON

ILLEGAL DISCRIMINATION CONTRACTS

AGREEMENT THAT HOMEOWNER WON'T SELL TO A CERTAIN MINORITY
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CONTRACTS LEGALITY AND PUBLIC POLICY

CONTRACTS LEGALITY AND PUBLIC POLICY STATUTORY REGULATION OF CONTRACTS

SOME CONTACTS MUST CONTAIN SPECIFIED PROVISIONS (INSURANCE CONTRACTS) USURY RIGHT TO RESCIND AGREEMENTS
TRUTH IN LENDING ON REFINANCE OF MORTGAGE DOOR TO DOOR SALES - 3 DAY COOLING OFF PERIOD LOAN DISCLOSURE FORMS IF PERSON PERSISTS IN ENTERING INTO THESE CONTRACTS, STATE MIGHT GET AN INJUNCTION

REGULATION OF BUSINESS
EFFECT OF VIOLATION
NOT ALL CONTRACTS IN VIOLATION OF LAW ARE VOID; DEPENDS ON HOW STRONGLY THE PUBLIC POLICY IS
CONTRACT WITH FICTITIOUS NAME IS STILL ENFORCEABLE SO LONG AS THE NAME IS REGISTERED BEFORE SUIT Trading as (T/A)and Doing business as ( D/B/A) SIMILAR WITH COPYRIGHT
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CONTRACTS LEGALITY AND PUBLIC POLICY

CONTRACTS LEGALITY AND PUBLIC POLICY FRAUDULENT SALES

TRANSACTIONS IN VIOLATION OF GOVERNMENT REGULATIONS ARE VOID
IMPROPERLY CALIBRATED SCALES IMPROPERLY LABELED GOODS THIS IS GENERALLY FRAUD

LICENSED CALLINGS OR DEALINGS

PROTECTIVE LICENSE - PROTECTS PUBLIC FROM UNQUALIFIED PERSONS
NON-LICENSES PARTY CAN'T SUE FOR FEE EVEN IF HE'S PROVIDED THE SERVICES PERSON WOULD STILL BE HELD TO THE STANDARD OF THE PROFESSIONAL RELATIVE TO NEGLIGENCE

ADMINISTRATIVE AGENCY REGULATION

OPERATING UNDER COMMERCE CLAUSE OF THE CONSTITUTION REGULATIONS MUST BE ADHERED TO - FTC REQUIREMENT RELATIVE TO WARRANTIES
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REVENUE-RAISING LICENSE
FAILURE TO OBTAIN MERCANTILE LICENSE PROBABLY WOULD NOT INVALIDATE CONTRACT
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CONTRACTS LEGALITY AND PUBLIC POLICY

CONTRACTS IN RESTRAINT OF TRADE
FEDERAL ANTITRUST LAW MONOPOLIES STATE STATUTES RESTRICTIVE COVENANTS

CONTRACTS LEGALITY AND PUBLIC POLICY

CREDIT SALE CONTRACTS

GENERALLY, NOT COVERED BY USURY LAW BECAUSE THERE'S NOT A LOAN
SOME STATES HAVE LIMITATIONS ON THE AMOUNT IN EXCESS OF THE CASH PRICE WHICH CAN BE CHARGED JUST AVOIDING "USURIOUS" SITUATION

USURIOUS AGREEMENTS
LOAN OF MONEY WITH INTEREST RATE IN EXCESS OF LAWFUL LIMIT
WILL GENERALLY NOT APPLY TO LOANS TO CORPORATIONS COULD INCLUDE CHARGES FOR SERVICES OR EXPENSES INCURRED BY LENDER IN EXCESS OF THEIR REASONABLE VALUE PREDATORY LENDING GENERALLY, BANKS ARE EXEMPT BECAUSE THEY'RE FEDERAL INSTITUTIONS OR THE STATE STATUTES EXEMPT THEM

REVOLVING CHARGE ACCOUNTS - NOT SUBJECT TO USURY LAWS

LAW OF STATE WHERE THE LOAN IS MADE APPLIES. DELAWARE OR SOUTH DAKOTA INVITES LENDERS
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CONTRACTS LEGALITY AND PUBLIC POLICY

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