agreements that violate statutes section 9.1. understanding business and personal law agreements...

Agreements that Violate StatutesAgreements that Violate StatutesSection 9.1Section 9.1

Understanding Business and Personal Law

Agreements that Violate Agreements that Violate Statutes Statutes

Section 9.1Section 9.1

Legality

Section 9.1Section 9.1Agreements that Violate Statutes Agreements that Violate Statutes

Section 9.2Section 9.2Agreements Contrary to Public Policy Agreements Contrary to Public Policy

99ChapterChapter LegalityLegality




Legality

What You’ll Learn

How to explain what makes a How to explain what makes a contract illegal (p. 186)contract illegal (p. 186)

How to identify the consequences How to identify the consequences of illegality in relation to contract of illegality in relation to contract law (p. 186)law (p. 186)




Legality

What You’ll Learn

How to identify contracts that are illegal by How to identify contracts that are illegal by statutory law (p. 188)statutory law (p. 188)

How to identify different types of licenses How to identify different types of licenses (p. 191)(p. 191)




Legality

Why It’s Important

By understanding the concept of illegality in By understanding the concept of illegality in contract law, you will be able to avoid contract law, you will be able to avoid problems that might arise when you problems that might arise when you consider entering a contract.consider entering a contract.




Legality

Legal Terms

conspiracy (p. 186)conspiracy (p. 186)interest (p.189)interest (p.189)usury (p. 189)usury (p. 189)lottery (p. 190)lottery (p. 190)license (p. 191)license (p. 191)




Legality

The Nature and Consequences of Illegality

Illegality in Entire AgreementIn Pari Delicto and Divisible Contracts

Section OutlineSection Outline




Legality

Section OutlineSection OutlineAgreements that Violate Statutes

Civil and Criminal StatutesUsury StatutesGambling StatutesSunday StatutesLicensing Statutes




Legality

Pre-Learning Question Pre-Learning Question

What are the consequences of being party to an illegal contract?




Legality

Legality is the last of the six Legality is the last of the six elements that make up a valid elements that make up a valid contract.contract.Even if a contract has all the other Even if a contract has all the other elements, it may still be invalid if it elements, it may still be invalid if it lacks a legal purpose.lacks a legal purpose.

The Nature and Consequences The Nature and Consequences of Illegality of Illegality




Legality

A contract can be made illegal in A contract can be made illegal in many ways. It may be illegal if it many ways. It may be illegal if it involves an agreement to do involves an agreement to do something that violates statutory law. something that violates statutory law.





Legality

Making the agreement itself could be Making the agreement itself could be illegal. For example, individuals who illegal. For example, individuals who agree to commit crimes for a promised agree to commit crimes for a promised consideration are involved in what consideration are involved in what criminal law calls criminal law calls conspiracyconspiracy. .





Legality

Illegality in Entire Agreement Illegality in Entire Agreement

If it’s impossible to separate a contract If it’s impossible to separate a contract into isolated promises and acts, each into isolated promises and acts, each of which can be performed of which can be performed independently of the others, then the independently of the others, then the entire contract is rendered illegal.entire contract is rendered illegal.




Legality

Illegality in Entire Agreement Illegality in Entire Agreement

If any part of the agreement is If any part of the agreement is contaminated by illegality, a valid contaminated by illegality, a valid contract cannot result.contract cannot result.




Legality

In Pari DelictoIn Pari Delicto and and Divisible Contracts Divisible Contracts

If certain promises and actions in a If certain promises and actions in a contract can be successfully contract can be successfully performed by themselves, then the performed by themselves, then the contract is said to be divisible.contract is said to be divisible.




Legality


In such cases, the courts may enforce In such cases, the courts may enforce those parts of the agreement that are those parts of the agreement that are legal and revoke the parts that are legal and revoke the parts that are not.not.




Legality


Parties are said to be Parties are said to be in pari delictoin pari delicto (in (in equal fault) if they both know that the equal fault) if they both know that the agreement is illegal. In such cases, agreement is illegal. In such cases, the court will aid neither party.the court will aid neither party.




Legality


However, if one of the parties is However, if one of the parties is unaware of wrongdoing, then the unaware of wrongdoing, then the parties are not parties are not in pari delictoin pari delicto and and courts may grant relief to the innocent courts may grant relief to the innocent party.party.




Legality

Pre-Learning Question Pre-Learning Question

What type of agreements do you think would violate state statutes?




Legality

Agreements that Violate Statutes Agreements that Violate Statutes

State legislatures pass laws declaring State legislatures pass laws declaring that certain types of agreements are that certain types of agreements are illegal and void because they violate:illegal and void because they violate:

Civil and criminal statutesCivil and criminal statutesUsury statutes Usury statutes




Legality

Agreements that Violate Statutes Agreements that Violate Statutes

Gambling statutesGambling statutesLicensing statutesLicensing statutesSunday statutesSunday statutes




Legality

Civil and Criminal Statutes Civil and Criminal Statutes

Agreements that require one party Agreements that require one party to commit a tort or a crime are to commit a tort or a crime are illegal.illegal.Agreements to protect one party Agreements to protect one party from the consequences of torts or from the consequences of torts or crimes committed are also illegal.crimes committed are also illegal.




Legality

What does in pari delicto mean and how does it relate to illegal contracts?




Legality

ANSWERANSWER

It means “in equal fault” and refers to both parties of a contract who know that an agreement is illegal.




Legality

Usury Statutes Usury Statutes

Each state sets a maximum interest Each state sets a maximum interest rate that lenders can charge for loans rate that lenders can charge for loans by statute.by statute.

Interest Interest is the fee the borrower pays is the fee the borrower pays to the lender for using the money.to the lender for using the money.




Legality

Usury Statutes Usury Statutes

The interest rate the lender and The interest rate the lender and borrower agree upon must not exceed borrower agree upon must not exceed the maximum rate allowed by state the maximum rate allowed by state law. law.

Charging more than the maximum Charging more than the maximum legal interest rate is legal interest rate is usuryusury..




Legality

Gambling Statutes Gambling Statutes

State statutes also prohibit gambling State statutes also prohibit gambling agreements—agreements in which agreements—agreements in which one party wins and another party one party wins and another party loses, even if some skill may be loses, even if some skill may be involved.involved.




Legality


Gambling agreements include:Gambling agreements include:

Playing cards for money.Playing cards for money.Money wagers or bets on elections Money wagers or bets on elections or sports events.or sports events.Buying tickets in a sports pool.Buying tickets in a sports pool.




Legality


In the past, most states prohibited In the past, most states prohibited gambling. gambling.

Recently, however, many states Recently, however, many states changed their laws to allow some changed their laws to allow some regulated gambling, such asregulated gambling, such as




Legality


Betting at racetracks.Betting at racetracks.Certain forms of off-track betting.Certain forms of off-track betting.State-run lotteries. State-run lotteries.




Legality


A A lotterylottery is a game that consists of is a game that consists of drawing lots, typically tickets with drawing lots, typically tickets with different combinations of numbers different combinations of numbers printed on them, in which prizes are printed on them, in which prizes are distributed to the winners among distributed to the winners among persons buying a chance.persons buying a chance.




Legality

Sunday Statutes Sunday Statutes

In some states, it is illegal to make In some states, it is illegal to make or perform contracts on Sunday.or perform contracts on Sunday.These are called Sunday statutes or These are called Sunday statutes or blue laws.blue laws.The statutes vary greatly from state The statutes vary greatly from state to state.to state.




Legality

Licensing Statutes Licensing Statutes

A A licenselicense is a legal document stating is a legal document stating that the holder has permission from that the holder has permission from the proper authorities to carry on a the proper authorities to carry on a certain trade or profession.certain trade or profession.




Legality


All states have statues that require All states have statues that require persons to have a license to practice persons to have a license to practice certain trades or professions and certain trades or professions and engaging in such a trade or profession engaging in such a trade or profession without a license is illegal.without a license is illegal.




Legality


Some licenses are designed to Some licenses are designed to protect the public from dealing with protect the public from dealing with unqualified persons.unqualified persons.Some state statutes require Some state statutes require licenses simply to raise revenue.licenses simply to raise revenue.




Legality


In most states the following trade and In most states the following trade and professional workers must be professional workers must be licensed:licensed:

NursesNursesSurveyorsSurveyorsFuneral directors Funeral directors

BarbersBarbersPlumbers Plumbers




Legality

Reviewing What You Learned

1. What makes a contract illegal?

Section 9.1 Assessment




Legality


Illegal contracts may be created in many ways. A contract may be illegal if it involves an agreement to do something that violates statutory law.


Answer




Legality


2. What are the consequences of illegality in relation to contract law?





Legality


If the contract cannot be separated into isolated promises and acts that can be performed independently, the entire contract is rendered illegal. If any part of the agreement is illegal, a valid contract cannot result.


Answer




Legality


If the contract is divisible the court may enforce the legal parts of the agreement and revoke the illegal parts.


Answer




Legality


3. What contracts are illegal by statutory law?





Legality


Contracts that violate a state’s civil or criminal statutes, usury statutes, gambling statutes, licensing statutes, or Sunday statutes.


Answer




Legality


4. What are the different types of licenses?





Legality


Some licenses raise revenue, other are designed to protect the public.


Answer




Legality


Critical Thinking ActivityIllegal Contracts Why does the law usually refuse to uphold illegal contracts?




Legality


Answers will vary, but should recognize that in the eyes of the law, an illegal agreement is void. It has no legal effect.

Critical Thinking Activity AnswerIllegal Contracts




Legality


Legal Skills in ActionDiscouraging Illegal Contracts Inez and Chris have been in business together for three years. Their business is doing badly, so Chris comes up with a plan.




Legality


Legal Skills in ActionDiscouraging Illegal Contracts The plan involves contractual arrangements with illegal aliens willing to work for low pay. How would you help Inez talk Chris out of this scheme?




Legality


Answers will vary, but should recognize that an agreement to hire illegal aliens is illegal, and there would be no valid contract.

Legal Skills in Action AnswerDiscouraging Illegal Contracts

Agreements that Violate StatutesAgreements that Violate StatutesEnd of Section 9.1End of Section 9.1

agreements that violate statutes section 9.1. understanding business and personal law agreements...

Documents