chapter 11sections 1-2

Business LawBusiness LawChapter 11 Section 1-2Mr. WhiselChapter 11 Section 1-2Mr. Whisel

Section 11.1 GoalsSection 11.1 Goals

Describe general features of contracts which make them illegal.

Describe particular illegal contracts. Standards

Reading and Writing1.1.11 CDEFG, 1.2.11 AB, 1.3.11 C, 1.4.11

BCD, 1.5.11 ACE, 1.6.11 ACDF, 1.7.11 AC, 1.8.11 ABC

Civics and Government5.1.12 ABCDEFHIJM, 5.2.12 ABCDEFG,

5.3.12 AB






5.3.12 AB

HOT DEBATEHOT DEBATE

A friend offered Stacy $100 if he would “get rid of” a neighbor’s barking dog. “you’ll be the hero of this whole block,” said the friend. The dog had bitten a young boy who was teasing it. When the neighbors reported the barking to the animal control office, the owners were always able to make the dog stop barking just before the officers arrived on the scene. Stacey agreed. He “got rid of” the dog and asked for the money. His friend refused to pay. Stacey sued his friend.

1. Why should Stacey be able to collect the money?

2. Why shouldn’t Stacey be able to collect the money?

A friend offered Stacy $100 if he would “get rid of” a neighbor’s barking dog. “you’ll be the hero of this whole block,” said the friend. The dog had bitten a young boy who was teasing it. When the neighbors reported the barking to the animal control office, the owners were always able to make the dog stop barking just before the officers arrived on the scene. Stacey agreed. He “got rid of” the dog and asked for the money. His friend refused to pay. Stacey sued his friend.

1. Why should Stacey be able to collect the money?

2. Why shouldn’t Stacey be able to collect the money?

What’s Your Verdict?What’s Your Verdict?

Razer agreed with several published articles that criticized laws prohibiting the production, possession, and use of marijuana. The authors of the articles claimed such legislation was unrealistic and often violated civil rights. Razer agreed so heartily that he bought several dozen marijuana plants from a friend, Sara. Then he rented a patch of isolated land and persuaded the owner to accept a share of the anticipated crop as rent. After harvesting the first crop, Razer sold his share to Sara.

Were any of his agreements illegal?

Razer agreed with several published articles that criticized laws prohibiting the production, possession, and use of marijuana. The authors of the articles claimed such legislation was unrealistic and often violated civil rights. Razer agreed so heartily that he bought several dozen marijuana plants from a friend, Sara. Then he rented a patch of isolated land and persuaded the owner to accept a share of the anticipated crop as rent. After harvesting the first crop, Razer sold his share to Sara.

Were any of his agreements illegal?

Illegal AgreementsIllegal Agreements

Illegal Agreement happens when a contract is designed to commit an Illegal Act Always void and unenforceable Ex.

Hiring someone to commit murder

Sometimes contracts can have a violation of the law and yet be enforceable Ex.

Buying something from a company whose license to sell is expired.

Almost all agreements to commit a felony (serious crime) will be an illegal agreement.

Illegal Agreement happens when a contract is designed to commit an Illegal Act Always void and unenforceable Ex.

Hiring someone to commit murder

Sometimes contracts can have a violation of the law and yet be enforceable Ex.

Buying something from a company whose license to sell is expired.

Almost all agreements to commit a felony (serious crime) will be an illegal agreement.

4 Ways to Distinguish Illegal Agreements

4 Ways to Distinguish Illegal Agreements

Statutes sometimes explicitly state that certain contracts are unenforceable. Private Betting

Courts look at the impact of violation of a statute on the public welfare Murder-loss of life

Statutes sometimes explicitly state that certain contracts are unenforceable. Private Betting

Courts look at the impact of violation of a statute on the public welfare Murder-loss of life

Courts look at how directly the contract and the violation of the statute are connected. What the contract

was for? Courts look at how

involved the parties are in the violation of a statute Involvement

Courts look at how directly the contract and the violation of the statute are connected. What the contract

was for? Courts look at how

involved the parties are in the violation of a statute Involvement

Contract Made Illegal by Specific Statute


Illegal GamblingMost state forbid or regulateStatutes that make gambling

agreements voidGambling Agreements

Three ElementsPayment to participateChance to win based on luck rather than

on skillA prize for one or more winners

Illegal GamblingMost state forbid or regulateStatutes that make gambling

agreements voidGambling Agreements

Three ElementsPayment to participateChance to win based on luck rather than

on skillA prize for one or more winners



Gambling AgreementsWager

A bet on the uncertain outcome of an event, such as a football game.

Most states have legalized some form of gambling under regulated conditions

Pari-MutuelState-Run LotteriesBingo

Gambling AgreementsWager

A bet on the uncertain outcome of an event, such as a football game.

Most states have legalized some form of gambling under regulated conditions

Pari-MutuelState-Run LotteriesBingo



Agreements to Pay Usurious InterestAlmost all states provide that, with

certain exceptions, lenders of money may not charge more than a specified maximum rate of interest.

If happens, still must pay principleWhat is PA’s Maximum Rate of Interest?

UsuryLending money at a rate higher than

the state’s maximum allowable rate.

Agreements to Pay Usurious InterestAlmost all states provide that, with

certain exceptions, lenders of money may not charge more than a specified maximum rate of interest.

If happens, still must pay principleWhat is PA’s Maximum Rate of Interest?

UsuryLending money at a rate higher than

the state’s maximum allowable rate.



Agreements to Pay Usurious InterestNo interest rate stated?

Must pay legal rate or interest. What is the legal rate of interest? 7 percent or

less per year

Small Loan Rate of InterestTypically as high as 36% or moreBased on small loans about as much as

$2000 Based on high overhead of small loan amounts

Agreements to Pay Usurious InterestNo interest rate stated?

Must pay legal rate or interest. What is the legal rate of interest? 7 percent or

less per year

Small Loan Rate of InterestTypically as high as 36% or moreBased on small loans about as much as

$2000 Based on high overhead of small loan amounts



Agreements Involving Illegal DiscriminationUnenforceable because the violate

anti-discrimination statutesEx. Only selling something to a certain

raceAny agreements that violate the

Constitution are also illegal

Agreements Involving Illegal DiscriminationUnenforceable because the violate

anti-discrimination statutesEx. Only selling something to a certain

raceAny agreements that violate the

Constitution are also illegal

Agreements That Obstruct Legal Procedures

Agreements That Obstruct Legal Procedures

Agreements that delay or prevent justice become void based on: Pay non-expert

witnesses in a trail to testify, or pay for false testimony

Bribe Jurors Refrain from informing

on or prosecuting an alleged crime in exchange for money or other valuable consideration(Compounding a Crime)

Agreements that delay or prevent justice become void based on: Pay non-expert

witnesses in a trail to testify, or pay for false testimony

Bribe Jurors Refrain from informing

on or prosecuting an alleged crime in exchange for money or other valuable consideration(Compounding a Crime)

Agreements Made Without a Required Competency

License

Agreements Made Without a Required Competency

LicenseAll states require that persons in

certain occupations and businesses pass exams and receive a license to ensure that they are competentTeachers, Doctors, Lawyers,

Accountants In contrast,

Revenue LicenseLicense to generate revenue rather than

protect public Contracts made by these people are valid and

enforceable.

All states require that persons in certain occupations and businesses pass exams and receive a license to ensure that they are competentTeachers, Doctors, Lawyers,

Accountants In contrast,

Revenue LicenseLicense to generate revenue rather than

protect public Contracts made by these people are valid and

enforceable.

Agreements That Affect Marriage Negatively

Agreements That Affect Marriage Negatively

Anything that would effect marriage is unenforceable. Illegal immigrant

paying a citizen for a promise to marry in order to get into the country.

Anything that would effect marriage is unenforceable. Illegal immigrant

paying a citizen for a promise to marry in order to get into the country.

Agreements That Restrain Trade Unreasonably


Pricing FixingCompanies getting together and

setting the price all the same.Bid Rigging

Multiple companies bidding on a job and bidding high so that the lowest gets the job but in turn still makes a considerable profit. The next time another company would get the job and they would do the same for them.

Pricing FixingCompanies getting together and

setting the price all the same.Bid Rigging

Multiple companies bidding on a job and bidding high so that the lowest gets the job but in turn still makes a considerable profit. The next time another company would get the job and they would do the same for them.



Allocation of Markets Only selling in your area and not allowing

anyone from outside that area to purchase your product

Covenants Not to Compete Doing Carpentry work for someone learning

the trade and acquiring customers then breaking off and starting up your own carpentry business using your former employers customers.

Usually regulated by time, area, and employers interest to protect self.

Allocation of Markets Only selling in your area and not allowing

anyone from outside that area to purchase your product

Covenants Not to Compete Doing Carpentry work for someone learning

the trade and acquiring customers then breaking off and starting up your own carpentry business using your former employers customers.

Usually regulated by time, area, and employers interest to protect self.







5.3.12 AB






5.3.12 AB

End of Section 11.1 Questions


Think About Legal ConceptsThink Critically About Evidence

Think About Legal ConceptsThink Critically About Evidence


Describe how courts help parties to illegal contracts under the common law.

Describe how courts help parties to illegal contracts under the UCC.

Standards Reading and Writing

1.1.11 CDEFG, 1.2.11 AB, 1.3.11 C, 1.4.11 BCD, 1.5.11 ACE, 1.6.11 ACDF, 1.7.11 AC, 1.8.11 ABC

Civics and Government 5.1.12 ABCDEFHIJM, 5.2.12 ABCDEFG, 5.3.12

AB






AB

How Do Courts Treat Parties To Illegal

Contracts?

How Do Courts Treat Parties To Illegal

Contracts?Courts have two ways depending

on Common Law and UCCCommon Law (Sale of Services or

Realty)UCC (Sale of Goods)

Courts have two ways depending on Common Law and UCCCommon Law (Sale of Services or

Realty)UCC (Sale of Goods)

Common LawCommon Law

Generally courts will not help neither party to a illegal agreement.

Courts will not enforce the agreement

Courts will leave the person(s) where they are.Restitution

Recovery of Payment

Four exceptions to the above

Generally courts will not help neither party to a illegal agreement.

Courts will not enforce the agreement

Courts will leave the person(s) where they are.Restitution

Recovery of Payment

Four exceptions to the above

Four ExceptionsFour Exceptions

Protected VictimsCases of Blue Sky lawFraud, Duress, Misrepresentation, or

Undue InfluenceThe Excusably Ignorant

Enforce legal parts or obtain restitution

Person must not know illegal and other party does know it is illegal or illegality is minor

Protected VictimsCases of Blue Sky lawFraud, Duress, Misrepresentation, or

Undue InfluenceThe Excusably Ignorant

Enforce legal parts or obtain restitution

Person must not know illegal and other party does know it is illegal or illegality is minor

Four ExceptionsFour Exceptions

Rescission Before the Illegal ActIncentive to stop illegal act by

allowing party to rescind.Divisible Contracts

Knowing and Contracting with Illegal and Legal Parts

Courts may enforce legal parts- Divisible

Rescission Before the Illegal ActIncentive to stop illegal act by

allowing party to rescind.Divisible Contracts

Knowing and Contracting with Illegal and Legal Parts

Courts may enforce legal parts- Divisible

The UCCThe UCC

UCC makes some contracts unconscionable unenforceable

UnconscionabilityWhen there is a grossly unfair

contract that parties under ordinary circumstance would not accept

Subject to the rules of illegality

UCC makes some contracts unconscionable unenforceable

UnconscionabilityWhen there is a grossly unfair

contract that parties under ordinary circumstance would not accept

Subject to the rules of illegality

Two Elements of UnconscionabilityTwo Elements of Unconscionability

Procedural Unconscionability How the contract is created? Fine Print

Substantive Unconscionability The terms of the agreement Unfair terms/One-sided terms

Most courts require both before the contract is deemed unconscionable and illegal

When found Unconscionable Refuse to enforce or enforce legal part May modify to make terms fair

Procedural Unconscionability How the contract is created? Fine Print

Substantive Unconscionability The terms of the agreement Unfair terms/One-sided terms

Most courts require both before the contract is deemed unconscionable and illegal

When found Unconscionable Refuse to enforce or enforce legal part May modify to make terms fair

What’s Your Verdict?What’s Your Verdict?

A young couple, the Guptas, wanted to provide for the college education of their infant daughter. They received this offer in the mail from the True Bonanza Mining Corporation, which seemed perfect for their need: “Join us now for only 10 cents a share of stock. Become part owner of a gold and silver mine with already proven mineral deposits. In ten years, you will be rich enough to retire!” The Guptas used all their savings to buy 10,000 shares of Bonanza stock. Months later they learned that Bonanza had violated the law. Its “proven mineral deposits” were commercially worthless aluminum oxides. The sales agreement was illegal.

Can the Guptas recover their $1,000?

A young couple, the Guptas, wanted to provide for the college education of their infant daughter. They received this offer in the mail from the True Bonanza Mining Corporation, which seemed perfect for their need: “Join us now for only 10 cents a share of stock. Become part owner of a gold and silver mine with already proven mineral deposits. In ten years, you will be rich enough to retire!” The Guptas used all their savings to buy 10,000 shares of Bonanza stock. Months later they learned that Bonanza had violated the law. Its “proven mineral deposits” were commercially worthless aluminum oxides. The sales agreement was illegal.

Can the Guptas recover their $1,000?







AB






AB



Think About Legal ConceptsThink Critically About EvidenceChapter in Review

Think About Legal ConceptsThink Critically About EvidenceChapter in Review