Business Law Flashcards
A contract may be illegal if it involves an agreement to do something that violates….
Statutory law
Individuals who agree to commit crimes for a promised consideration are involved in what criminal law calls….
conspiracy
If it’s impossible to separate a contract into insolated promises and acts, each of which can be performed independently of the others, then the entire contract is
ILLEGAL
If certain promises and actions in a contract can be successfully performed by themselves, then the contract is said to be
divisible
The courts may enforce those parts of the agreement that are legal and revoke the parts that are not
in pari delicto
(in equal fault) if they both know that the agreement is illegal
- the court will aid neither party
-If one party is aware of the wrongdoing then the innocent party will be granted relief
State legislatures pass laws declaring that certain types of agreements are illegal and void because they violate
Civil and Criminal Statutes
Usury Statutes
Gambling Statutes
Licensing Statutes
Agreements that violate Civil and Criminal Statutes
Agreements that require one party to commit a tort or a crime are illegal
Agreements to protect one party from the consequences of torts or crimes committed are illegal
Agreements that violate Statutes: Usury
Each state sets a maximum interest rate that lenders can charge for loans by statute
Interest is the fee the borrower pays to the lender for using the money
Charging more than the maximum legal interest rate is usury
Agreements that violate Statutes: Gambling
State statutes also prohibit gambling agreements—agreements in which one party wins and another party loses, even if some skill may be involved
Gambling agreements include
Playing cards for money
Money wagers or bets on elections or sports events
Buying tickets in a sports pool
In the past, most states prohibited gambling, however, many states changed their laws to allow some regulated gambling, such as
Betting at racetracks
Certain forms of off-track betting
State-run lotteries
Agreements that violate Statutes: licensing
-All states have statutes that require people to have a license to practice certain trades or professions
- engaging in such a trade or profession without a license is illegal
Some state statutes require licenses simply to raise revenue… examples include…….
Examples: Vendors, fishing, hunting
Agreements made with these types of unlicensed persons would be valid
The unlicensed person is subject to penalties
Public Policy
a legal doctrine, that consists of a collection of mandates, regulations or laws established through certain political processes
The basis for making public policy decisions is the…
underlying principle that nobody should get away with doing something that harms the public at large
The law protects our rights to make a living and do business in a market economy
restraint of trade
a limitation on the full exercise of doing business with others
Three types of contracts that violate our right to Public Policy
Outright Contracts Not to Compete
Price Fixing
Agreements to Defeat Competitive Bidding
Price Fixing
Price fixing occurs when competitors agree on certain price ranges within which they set their prices
Price fixing discourages competition and raises prices
Covenants Not to compete in employment Contracts (under contracts not to compete)
People in middle / upper-level management positions sometimes agree not to work for competitors / start competing businesses for a specified period of time after they leave their job
Such contracts are enforced only as necessary to protect the former employer from unfair competition
The courts will uphold such a restriction if it is reasonable in time and geographic location
Outright Contracts Not to Compete
-Business owner sells a business -> restrictive covenant sometimes
-This enables seller to sell, and the purchaser to buy the goodwill (the market value of the good reputation) of an ongoing business
This means that the seller of the business will not open a competing business within a certain area for a period of time after the sale
The court will uphold such a restriction if it is reasonable in time and geographic location
Agreements to Defeat Competitive Bidding
Laws often require governments to construct public works or buy goods and services through competitive bidding
-Rivals submit bids for a project, lowest bid wins
-If these companies meet before hand and agree to bid low, this is illegal
Agreements to OBSTRUCT Justice
Any contract that interferes with the administration of justice is illegal
Such agreements include:
Protecting someone from arrest
Encouraging lawsuits
Giving false testimony
Bribing a juror
Paying a non-expert to testify at a trial
Agreement not to prosecute a person who has committed a crime in return for money
Agreements Inducing Breach of Duty or Fraud
Congressional/ State representatives / public officials hold positions of trust
These officials owe a duty to work for the best interest of the public
Any contract that tries to influence the representatives to use their positions for private gain is unenforceable
Agreements Interfering with Marriage
-The law encourages marriages and protects family relationships
-Contracts that discourage, harm, or interfere with good family relationships are illegal and unenforceable in court
If the bidders get together and agree not to bid lower than a certain price, then they are
-not bidding fairly
-These agreements and contracts are not enforceable
Why did some states change their laws to allow regulated gambling?
-Additional source of income for the government
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A bid
An offer to buy /sell goods /services at a stated price
-If an activity harms the health, safety, welfare, or morals of the public, that activity violates ……..
public policy
restrictive covenant
-When a business owner sells a business, sometimes the sales contract will include a provision called a restrictive covenant, which is a promise not to compete
