Chapter 8. Unenforceability on Grounds of Public Policy (178-199)

Question 1

A promises to pay B $1,000 if the Buckets win their basketball game with the Hoops, and B promises to pay A $2,000 if the Hoops win. A state statute makes wagering a crime and provides that a promise such as A’s or B’s is “void.” Are these promises enforceable under public policy?

Answer 1

A’s and B’s promises are unenforceable on grounds of public policy. Any claims of A or B to restitution for money paid under the agreement are governed by the rules stated in Topic 5 of §§ 178–199. See § 199(b) and Illustrations 4 and 5 to that section. Restatement 2d of Contracts § 178(a)

Question 2

A and B make an agreement by which A agrees to sell and B to buy, at a fixed price per bushel, one thousand bushels of wheat from A at any time that A shall choose during the following month. The state statute that makes wagering a crime does not apply to such an agreement and it does not offend any judicially declared public policy. Are these promises enforceable under public policy?

Answer 2

Enforcement of A’s and B’s promises is not precluded on grounds of public policy. Restatement 2d of Contracts § 178(a)

Question 3

A borrows $10,000 from the B Bank, promising to repay it with interest at the rate of twelve per cent. A state statute that fixes the maximum legal rate of interest on such loans at ten per cent provides that a promise to pay a greater sum is “void” as usurious as to all the promised interest but not as to the principal. Is A’s promise enforceable under public policy?

Answer 3

A’s promise to pay the interest is unenforceable on grounds of public policy. The rule stated in § 184(2) does not make A’s promise to pay interest enforceable up to ten per cent because the legislation provides otherwise. Compare Illustration 5 to § 184. Restatement 2d of Contracts § 178(a)

Question 4

A and B make an agreement for the sale of goods for $10,000, in which A promises to deliver the goods in his own truck at a designated time and place. A municipal parking ordinance makes unloading of a truck at that time and place an offense punishable by a fine of up to $50. A delivers the goods to B as provided. Is B’s promise enforceable under public policy?

Answer 4

Because the public policy manifested by the ordinance is not sufficiently substantial to outweigh the interest in the enforcement of B’s promise, enforcement of his promise is not precluded on grounds of public policy. Restatement 2d of Contracts § 178(c)

Question 5

A promises to employ B and B promises to work for A, all work to be done on weekdays. The agreement is made on Sunday in violation of a statute that makes the doing of business on Sunday a misdemeanor. Are these promises possibly enforceable under public policy?

Answer 5

If the court decides that the public policy manifested by the statute is not sufficiently substantial to outweigh the interests in enforcement of A’s and B’s promises, it will hold that enforcement of their promises is not precluded on grounds of public policy. Restatement 2d of Contracts § 178(c)

Question 6

A, the owner of a newspaper, promises B that he will publish a statement about C known by A and B to be false and defamatory if B pays him $10,000. B pays A $10,000. Is A’s promise enforceable under public policy?

Answer 6

A’s promise is one to commit a tort (§ 192) and is unenforceable on grounds of public policy. Restatement 2d of Contracts § 178(d)

Question 7

B promises to pay A, the owner of a newspaper, $10,000 if he will publish a statement about C known by A and B to be false and defamatory. A publishes the libel. Is B’s promise enforceable under public policy?

Answer 7

B’s promise is one tending to induce A to commit a tort (§ 192) and is unenforceable on grounds of public policy. Restatement 2d of Contracts § 178(d)

Question 8

A, the owner of a newspaper, promises B that he will publish a statement about C known by A and B to be false and defamatory if B will promise to pay him $10,000. B makes the promise. Are these promises enforceable under public policy?

Answer 8

A’s promise is one tending to induce A to commit a tort (§ 192). Both promises are unenforceable on grounds of public policy. Restatement 2d of Contracts § 178(d)

Question 9

B promises to convey a tract of land worth $11,000 to A, the owner of a newspaper, if A pays B $1,000, B’s duty to be conditional on A’s publishing a statement about C known by A and B to be false and defamatory. A pays B $1,000 and publishes the libel. Is B’s promise enforceable under public policy?

Answer 9

B’s promise is one tending to induce A to commit a tort (§ 192) and is unenforceable on grounds of public policy. Compare § 185. Restatement 2d of Contracts § 178(d)

Question 10

A pays B, a competitor, $10,000 for B’s promise not to compete with A for a year. Is B’s promise enforceable under public policy?

Answer 10

Although B’s refraining from competition with A would not in itself be improper, B’s promise not to compete with A unreasonably restrains B from competition (§ 186) and is unenforceable on grounds of public policy. Restatement 2d of Contracts § 178(d)

Question 11

A promises to pay B, a competitor, $10,000 if he will refrain from competing with A for a year. Is A’s promise enforceable under public policy?

Answer 11

Although B’s refraining from competing with A would not in itself be improper, A’s promise unreasonably tends to induce B to refrain from competition (§ 186) and is unenforceable on grounds of public policy. Restatement 2d of Contracts § 178(d)

Question 12

A induces B to make an agreement to buy goods on credit from A by bribing B’s purchasing agent. A delivers the goods to B. A’s bribe tends to induce the agent to violate his fiduciary duty. Is B’s promise enforceable under public policy?

Answer 12

B’s promise to pay the price is unenforceable on grounds of public policy. See § 193. Restatement 2d of Contracts § 178(d)

Question 13

A, who wants to induce B to buy goods from him, promises to pay C $1,000 if he will bribe B’s purchasing agent to arrange the sale. C does so. C’s bribe tends to induce the agent to violate his fiduciary duty. Is A’s promise enforceable under public policy?

Answer 13

A’s promise is unenforceable on grounds of public policy. See § 193. Restatement 2d of Contracts § 178(d)

Question 14

A, who wants to induce B to buy goods from him, promises to pay C $1,000 if he arranges the sale. C arranges the sale by bribing B’s purchasing agent. C’s bribe tends to induce the agent to violate his fiduciary duty. Is A’s promise enforceable under public policy?

Answer 14

A’s promise is unenforceable on grounds of public policy. See § 193. Restatement 2d of Contracts § 178(d)

Question 15

A and B make an agreement for exclusive dealing that is unenforceable because unreasonably in restraint of trade (§ 186). A sells and delivers goods pursuant to the unenforceable agreement to C, who promises to pay the price. Is C’s promise enforceable under public policy?

Answer 15

Because the relation between C’s promise to pay the price and the unreasonable restraint is too remote, enforcement of C’s promise is not precluded on grounds of public policy. Restatement 2d of Contracts § 178(d)

Question 16

A and B make a wagering agreement in violation of a statute that makes such agreements “void.” When A loses, C pays B at A’s request, and A promises C to pay him that amount. Is A’s promise enforceable under public policy?

Answer 16

Because the relation between A’s promise to pay C and the improper wager is too remote, enforcement of A’s promise is not precluded on grounds of public policy. Restatement 2d of Contracts § 178(d)

Question 17

A agrees to reimburse B for any legal expenses incurred if B will go on C’s land in order to test a right of way that is disputed by A and C. B goes on C’s land. Is A’s promise enforceable under public policy?

Answer 17

Enforcement of A’s promise is not precluded on grounds of public policy, even if it is later determined that B has committed a trespass. Compare § 192. Restatement 2d of Contracts § 178(e)

Question 18

A, a trustee under a will, makes an agreement with B in violation of A’s fiduciary duty. Are these promises enforceable under public policy?

Answer 18

If enforcement of A’s and B’s promises is desirable for the protection of the beneficiaries, it is not precluded on grounds of public policy. Compare § 193. Restatement 2d of Contracts § 178(e)

Question 19

A, B, and C, directors of a bank, make notes payable to the bank in order to deceive the bank examiner. They agree that the notes shall be returned and cancelled after they have served their purpose. Are these promises enforceable under public policy?

Answer 19

Enforcement of the promises of A, B and C embodied in the notes is not precluded on grounds of public policy. Restatement 2d of Contracts § 178(e)

Question 20

A and B make a written agreement that contains a term providing that “no prior negotiations shall be used to interpret this agreement.” Prior negotiations would otherwise be admissible to establish the meaning of the writing (§ 214(c)). How might these promises be possibly unenforceable under public policy?

Answer 20

If the court decides that the term would unreasonably deprive it of relevant evidence that would enable it to resolve an ambiguity in the agreement and thereby hamper it in the fair administration of justice, it will hold that the term is unenforceable on grounds of public policy. Restatement 2d of Contracts § 179(a)

Question 21

A induces B to make an agreement to buy goods on credit from A by bribing B’s purchasing agent. A delivers the goods to B. A state statute makes such bribery a crime and gives B a civil action to recover the amount of the bribe against A. Is B’s promise possibly enforceable under public policy?

Answer 21

Although the statute already provides for a civil sanction, a court may decide that B’s promise to pay the price is unenforceable on grounds of public policy. Cf. Illustration 12 to § 178. Restatement 2d of Contracts § 179(b)

Question 22

A, a corporation, makes an agreement to do work for B, a city. C, an official of B, is also a principal shareholder of A, and a statute prohibits the making of such agreements and subjects those who make them to penalties. A’s performance of the agreement is defective. Is A’s promise enforceable under public policy?

Answer 22

Since the statute was enacted to protect a class of persons to which B belongs against a class to which A belongs, enforcement of A’s promise is not precluded on grounds of public policy and B can recover damages from A for breach of contract. Restatement 2d of Contracts § 179(c)

Question 23

A, an insurance company, issues a policy of fire insurance to B on his house. The policy differs from that required by a state statute prescribing a standard fire policy. B’s house is destroyed by fire. Is A’s promise enforceable under public policy?

Answer 23

Since the statute was enacted to protect a class of persons to which B belongs against a class to which A belongs, enforcement of A’s promise is not precluded on grounds of public policy and B can recover the insurance proceeds from A. Restatement 2d of Contracts § 179(c)

Question 24

A employs B to work in his factory and promises to pay him double for the overtime if B works ten hours a day instead of the usual eight. A state statute, designed to protect the health of workers in such factories, provides a maximum period of employment of eight hours a day and makes violation a crime for both employer and employee. B works ten hours a day but A refuses to pay him extra for the overtime. Is A’s promise enforceable under public policy?

Answer 24

A court may decide that the statute was enacted to protect a class of persons to which B belongs against a class to which A belongs and that therefore enforcement of A’s promise is not precluded on grounds of public policy. Restatement 2d of Contracts § 179(c)

Question 25

A, a bank, invests in a real estate mortgage. A statute prohibits it from making such investments and subjects it to penalties for doing so. Is the mortgage debt enforceable under public policy?

Answer 25

Since otherwise the creditors and shareholders of the bank, for whose protection the statute was enacted, would be injured, enforcement of the mortgage debt is not precluded on grounds of public policy and the bank may recover on the debt and foreclose the mortgage. Restatement 2d of Contracts § 179(c)

Question 26

A and B make an agreement under which B promises to deliver to A goods. B already has a contract to deliver the goods to C, but A neither knows nor has reason to know this. On learning of B’s contract with C, A refuses to take the goods or pay the price. Is B’s promise enforceable under public policy?

Answer 26

Enforcement of B’s promise to deliver the goods to A is not precluded on grounds of public policy and A has a claim against B for damages. But see § 194. Restatement 2d of Contracts § 180(b)

Question 27

A and B make an agreement under which A promises to pay B $10,000 in return for B’s promise to cut down trees on a specified tract of land. A knows that the land belongs to C rather than to A, but B neither knows nor has reason to know this. C prohibits entry on the land. Is A’s promise enforceable under public policy?

Answer 27

Enforcement of A’s promise to pay B $10,000 is not precluded on grounds of public policy and B has a claim against A for damages. As to the rights of A and B if A neither knows nor has reason to know that C is the owner, see § 198(b). Restatement 2d of Contracts § 180(b)

Question 28

A, an insurance company, makes an agreement with B under which it promises to employ B for a year. A has not obtained a license required for it lawfully to do business, but B neither knows nor has reason to know this. On discovering it after he has begun to work, B promptly refuses further services. Is A’s promise enforceable under public policy?

Answer 28

Enforcement of A’s promise to employ B is not precluded on grounds of public policy and B has a claim against A for damages. Restatement 2d of Contracts § 180(b)

Question 29

A and B make an agreement under which A, a builder, promises to build a house for B for $100,000. The plan and specifications involve violations of local building ordinances of which B neither knows nor has reason to know. On discovering the violations, B promptly refuses to allow A to proceed with the work. Is A’s promise enforceable under public policy?

Answer 29

Enforcement of A’s promise to build the house is not precluded on grounds of public policy and B has a claim against A for damages. Restatement 2d of Contracts § 180(b)

Question 30

A, the owner of a newspaper, promises B that he will publish a statement about C that A knows is false and defamatory if B pays him $10,000. B, who is ignorant of the law of torts and does not know the statement is actionable as libel, pays A $10,000. Is A’s promise enforceable under public policy?

Answer 30

A’s promise to publish the statement is unenforceable on grounds of public policy. Restatement 2d of Contracts § 180(b)

Question 31

A, an unlicensed broker, agrees to arrange a transaction for B, for which B promises to pay A $1,000. A city ordinance requires persons arranging such transactions to be licensed as a result of paying a fee, with no inquiry into competence or responsibility. A arranges the transaction. Is B’s promise enforceable under public policy?

Answer 31

Since the licensing requirement is designed merely to raise revenue and does not have a regulatory purpose, enforcement of B’s promise is not precluded on grounds of public policy. Restatement 2d of Contracts § 181(b)

Question 32

A, an unlicensed plumber, agrees to repair plumbing in B’s home, for which B promises to pay A $1,000. A state statute, enacted to prevent the public from being victimized by incompetent plumbers and to protect the public health, requires persons doing plumbing to be licensed on the basis of an examination, the posting of a bond, and the payment of a fee, and makes violation a crime. A does the agreed work. May B’s promise be enforceable under public policy?

Answer 32

A court may decide that the public policy against enforcement of B’s promise outweighs the interest in its enforcement, and that B’s promise is unenforceable on grounds of public policy. Compare Illustration 1 to § 183. Restatement 2d of Contracts § 181(c)

Question 33

A, an unlicensed milk dealer, promises to deliver to B, a licensed milk dealer, milk for which B promises to pay $20,000. A state statute designed for the purpose of economic regulation of the milk industry provides that “no dealer shall buy or sell milk without a license,” and makes violation a misdemeanor punishable by a fine of up to $500 and imprisonment for up to 6 months. A delivers the milk to B, but B refuses to pay the price. How could B’s promise be enforceable under public policy?

Answer 33

In view of all the circumstances, including the discrepancy between the forfeiture by A if B’s promise were not enforced and the penalty provided by the statute, a court may decide that the public policy against enforcement of B’s promise does not outweigh the interest in its enforcement and that enforcement of B’s promise is not precluded on grounds of public policy. Restatement 2d of Contracts § 181(c)

Question 34

A, an unlicensed plumber, agrees to repair plumbing in B’s home, for which B promises to pay A $1,000. A state statute, enacted to prevent the public from being victimized by incompetent plumbers and to protect the public health, requires persons doing plumbing to be licensed on the basis of an examination, the posting of a bond, and the payment of a fee, and makes violation a crime. A had once been licensed but his license had expired the week before because, unknown to him, his clerk had inadvertently forgotten to send in the renewal fee, although the bond had been extended. A does the agreed work. How could B’s promise be enforceable under public policy?

Answer 34

The court may decide that in all the circumstances including A’s ignorance of the fact that he was unlicensed, enforcement of B’s promise is not precluded on grounds of public policy. Restatement 2d of Contracts § 181(c)

Question 35

A, an unlicensed plumber, agrees to repair plumbing in B’s home, for which B promises to pay A $1,000. A state statute, enacted to prevent the public from being victimized by incompetent plumbers and to protect the public health, requires persons doing plumbing to be licensed on the basis of an examination, the posting of a bond, and the payment of a fee, and makes violation a crime. A does the agreed work. A’s work is defective. Is A’s promise enforceable under public policy?

Answer 35

Since the ordinance was enacted to protect a class of persons to which B belongs against a class to which A belongs, enforcement of A’s promise is not precluded on grounds of public policy and B can recover damages from A for breach of contract. Restatement 2d of Contracts § 181(d)

Question 36

A sells and delivers to B a shotgun on credit. The sale of firearms is legal, but B plans to use the gun in hunting without a license required by law and A knows this. Enforcement of B’s promise to pay the price is not precluded on grounds of public policy. Is B’s promise enforceable under public policy?

Answer 36

If B planned to use the gun to commit a robbery and A knew this, B’s promise to pay the price would be unenforceable on those grounds. Restatement 2d of Contracts § 182(b)

Question 37

A, who has lost $1,000 by playing faro, promises B, who regularly makes loans to gamblers, that he will repay B with interest in thirty days if B will make him three loans: $1,000 to cover his losses, $4,000 to recoup them by continuing to play faro, and $2,000 to support his family while he does so. B lends A a total of $7,000, and A loses it all playing faro. A state statute makes playing faro for money a crime. Is A’s promise enforceable under public policy? Is B’s promise enforceable under public policy?

Answer 37

Enforcement of A’s promise to repay the $1,000 to cover his losses and the $2,000 to support his family is not precluded on grounds of public policy. Since A lent him the $4,000 for the purpose of furthering B’s gambling, B’s promise to repay the $4,000 is unenforceable on those grounds. Restatement 2d of Contracts § 182(b)

Question 38

A sells and delivers to B a quantity of plants. The sale of such plants is legal, but B plans to transport them to a country where quarantine regulations forbid their importation. A not only knows this, but so packs and marks them as to conceal their character in order to aid B’s plan. Is B’s promise enforceable under public policy?

Answer 38

B’s promise to pay the price is unenforceable on grounds of public policy. Restatement 2d of Contracts § 182(b)

Question 39

A, an unlicensed plumber, agrees to install plumbing in B’s home for which B agrees to pay $1,000 for labor and $500 for materials. A city ordinance, designed to prevent the public from being victimized by incompetent plumbers and to protect the public health, requires persons doing plumbing to be licensed on the basis of an examination, the posting of a bond, and the payment of a fee, and makes violation a misdemeanor. A does the agreed work. Are B’s promises enforceable under public policy?

Answer 39

Even if the court decides that B’s promise to pay $1,000 for labor is unenforceable on grounds of public policy, it may decide that B’s promise to pay $500 for materials is not. If the price for materials is not separately stated, the court may reach the same decision if it can reliably ascertain it from A’s price lists or from market prices. Restatement 2d of Contracts § 183(b)

Question 40

A promises to deliver fish to B in ten equal monthly installments in return for B’s promise to pay for each installment within 90 days. After three installments have been delivered, B decides to resell the fish as sardines in violation of a statute that makes such mislabelling a misdemeanor, and A agrees to pack them so as to aid B in doing so. Are B’s promises enforceable under public policy?

Answer 40

Even though B’s promise to pay for the last seven installments is unenforceable on grounds of public policy (§ 182) his promise to pay for the first three is not. Restatement 2d of Contracts § 183(b)

Question 41

1. A employs B as head bookkeeper of his retail clothing store under an employment agreement in which B promises not to work in the retail clothing business in the same town for three years after the termination of his employment. B works for A for five years but does not deal directly with customers and acquires no confidential information in his work. Are B’s promises enforceable under public policy?

Answer 41

Although B’s promise is unreasonably in restraint of trade and is unenforceable on grounds of public policy, enforcement of the rest of the employment agreement is not precluded on those grounds. See Illustration 8 to § 188. Restatement 2d of Contracts § 184(a)

Question 42

A, who is engaged in business as a baker and confectioner, sells the business to B, and as part of the bargain promises not to engage in the business of “baker, confectioner, or other business” within the same town for three years. The provision is fairly bargained for. A’s promise is so broad as to be unreasonably in restraint of trade because A’s business is only that of baker and confectioner. Are A’s promises enforceable under public policy?

Answer 42

Although part of A’s promise is unenforceable on grounds of public policy (§ 188), it is enforceable with respect to the business of baker or confectioner. Restatement 2d of Contracts § 184(b)

Question 43

A sells his grocery business to B and as part of the agreement promises not to engage in that business “within the city where the business is situated or within a radius of fifty miles.” The provision is fairly bargained for. A’s promise involves an unreasonable restraint of trade because the business extends within the city and over a radius of only twenty-five miles. Are A’s promises enforceable under public policy?

Answer 43

Although part of A’s promise is unenforceable on grounds of public policy (§ 188), it is enforceable with respect to the city and twenty-five miles. Restatement 2d of Contracts § 184(b)

Question 44

A and B make an agreement for A to repair B’s building under which B promises not to hold A liable for a “willful or negligent breach of duty.” The provision is fairly bargained for. Is B’s promise enforceable under public policy?

Answer 44

Although part of B’s promise is unenforceable on grounds of public policy (§ 195), it is enforceable with respect to negligence. Restatement 2d of Contracts § 184(b)

Question 45

A lends B $10,000, taking a promissory note for that sum plus interest. In calculating the rate of interest, the parties make an error so that the amount of interest exceeds the highest permissible legal rate. Is B’s promise enforceable under public policy?

Answer 45

Although part of B’s promise to pay the stipulated interest is unenforceable on grounds of public policy, it is enforceable up to the highest permissible rate. If A knew when he made the loan that the amount exceeded the highest permissible legal rate, B’s promise to pay interest would be unenforceable in its entirety. Restatement 2d of Contracts § 184(b)

Question 46

A employs B as advertising manager of his retail clothing store. As part of the employment agreement, A promises to pay B a pension on B’s retirement on condition that B not work in the retail clothing business in the same town. B works for A for fifteen years, but does not deal with customers and acquires no confidential trade information in his work. Is the restraint reasonable? Is A’s promise enforceable under public policy?

Answer 46

The restraint is unreasonable under the rule stated in § 188, but the condition is not an essential part of the agreed exchange and its non-occurrence will be excused. A’s promise to pay the pension is enforceable even though B works as an advertising manager in the retail clothing business in the same town. Compare Illustration 8 to § 188. Restatement 2d of Contracts § 185(b)

Question 47

A employs B as a research chemist in his nationwide pharmaceutical business. As part of the employment agreement, A promises to pay B a pension on B’s retirement on condition that B not work in any branch of the chemical industry at any place in the country for three years after retirement. B works for fifteen years and acquires valuable confidential information that would be useful to A’s competitors and would harm A’s business. B can find employment as a research chemist outside of the pharmaceutical industry. Is the restraint enforceable under public policy? Is A’s promise enforceable under public policy?

Answer 47

The restraint is unreasonably broad under the rule stated in § 188, but the condition is not an essential part of the agreed exchange and its non-occurrence will be excused. If the court concludes that the confidential information acquired by B is such as unreasonably to harm A’s business, that B can find employment as a research chemist outside the pharmaceutical industry, and that B obtained the term in good faith and in accordance with fair dealing (see § 184), the court will hold that A’s promise to pay the pension is conditional on B’s not working in the pharmaceutical industry at any place in the country within three years of his retirement. Compare Illustration 7 to § 188. Restatement 2d of Contracts § 185(b)

Question 48

A, B and C, competing manufacturers, promise each other not to sell goods in which they deal at prices below fixed minimums. Are these promises enforceable under public policy?

Answer 48

Their promises are unreasonably in restraint of trade and are unenforceable on grounds of public policy. Restatement 2d of Contracts § 186(b)

Question 49

A, B and C, who are competing merchants in a city where there are many competitors, promise to become partners in order to reduce the expense of doing business. The economic situation of A, B and C is such as to make the partnership reasonable. Are these promises enforceable under public policy?

Answer 49

Their implied promises not to compete individually in the same market are not unreasonably in restraint of trade and enforcement is not precluded on grounds of public policy. Restatement 2d of Contracts § 186(b)

Question 50

A transfers a tract of land in fee simple to B. As part of the transaction, B promises never to transfer the land. Is B’s promise enforceable under public policy?

Answer 50

B’s promise is unreasonably in restraint of trade and is unenforceable on grounds of public policy. See Restatement of Property § 406. Restatement 2d of Contracts § 186(b)

Question 51

A is about to go into a business that would compete with B’s business in the same city. B pays A $50,000 in return for A’s promise not to compete. Is A’s promise enforceable under public policy?

Answer 51

A’s promise is unreasonably in restraint of trade and is unenforceable on grounds of public policy. Restatement 2d of Contracts § 187(b)

Question 52

A and B, competing manufacturers, promise each other that A will not sell goods in one designated territory and that B will not sell goods in another designated territory. Are these promises enforceable under public policy?

Answer 52

Their promises are unreasonably in restraint of trade and are unenforceable on grounds of public policy. Restatement 2d of Contracts § 187(b)

Question 53

A and B attend an art auction. Both intend to bid on a valuable painting, but A, desiring to buy it himself at as low a price as possible, pays B $1,000 in return for B’s promise to refrain from bidding on the painting. Is B’s promise enforceable under public policy?

Answer 53

B’s promise is unreasonably in restraint of trade and is unenforceable on grounds of public policy. The result would be the same if the promise were made in connection with a private rather than a public sale of the painting. Restatement 2d of Contracts § 187(c)

Question 54

A, B and C, building contractors, make an agreement under which they will bid individually but each promises to pay to a fund 2 per cent of the gross amount of the contract price on any successful bid by one of them, the total amount of the fund to be divided equally among the three at the end of each year. Are these promises enforceable under public policy?

Answer 54

Their promises are unreasonably in restraint of trade and are unenforceable on grounds of public policy. Restatement 2d of Contracts § 187(c)

Question 55

A sells his grocery business to B and as part of the agreement promises not to engage in a business of the same kind within a hundred miles for three years. The business of both A and B extends to a radius of a hundred miles, so that competition anywhere within that radius would harm B’s business. Is A’s promise enforceable under public policy?

Answer 55

The restraint is not more extensive than is necessary for B’s protection. A’s promise is not unreasonably in restraint of trade and enforcement is not precluded on grounds of public policy. Restatement 2d of Contracts § 188(f)

Question 56

A sells his grocery business to B and as part of the agreement promises not to engage in a business of the same kind within a hundred miles for three years. Neither A’s nor B’s business extends to a radius of a hundred miles. The area fixed is more extensive than is necessary for B’s protection. Is A’s promise enforceable under public policy?

Answer 56

A’s promise is unreasonably in restraint of trade and is unenforceable on grounds of public policy. As to the possibility of refusal to enforce limited to part of the promise, see § 184(2). Restatement 2d of Contracts § 188(f)

Question 57

A sells his grocery business to B and as part of the agreement promises not to engage in business of any kind within the city for three years. The activity proscribed is more extensive than is necessary for B’s protection. Is A’s promise enforceable under public policy?

Answer 57

A’s promise is unreasonably is restraint of trade and is unenforceable on grounds of public policy. As to the possibility of refusal to enforce only part of promise, see § 184(2). Restatement 2d of Contracts § 188(f)

Question 58

A sells his grocery business to B and as part of the agreement promises not to engage in a business of the same kind within the city for twenty-five years, although B has ample opportunity to make A’s former good will his own in a much shorter period of time. The time fixed is longer than is necessary for A’s protection. Is A’s promise enforceable under public policy?

Answer 58

A’s promise is unreasonably in restraint of trade and is unenforceable on grounds of public policy. As to the possibility of refusal to enforce only part of the promise, see § 184(2). Restatement 2d of Contracts § 188(f)

Question 59

A, a corporation, sells its business to B. As part of the agreement, C and D, officers and large shareholders of A, promise not to compete with B within the territory in which A did business for three years. Are these promises enforceable under public policy?

Answer 59

Their promises are not unreasonably in restraint of trade and enforcement is not precluded on grounds of public policy. Restatement 2d of Contracts § 188(f)

Question 60

A employs B as a fitter of contact lenses under a one-year employment contract. As part of the employment agreement, B promises not to work as a fitter of contact lenses in the same town for three years after the termination of his employment. B works for A for five years, during which time he has close relationships with A’s customers, who come to rely upon him. B’s contacts with A’s customers are such as to attract them away from A. Is B’s promise enforceable under public policy?

Answer 60

B’s promise is not unreasonably in restraint of trade and enforcement is not precluded on grounds of public policy. Restatement 2d of Contracts § 188(g)

Question 61

A employs B as advertising manager of his retail clothing store. As part of the employment agreement, B promises not to work in the retail clothing business in the same town for three years after the termination of his employment. B works for A for five years but does not deal with customers and acquires no confidential trade information in his work. Is B’s promise enforceable under public policy?

Answer 61

B’s promise is unreasonably in restraint of trade and is unenforceable on grounds of public policy. Compare Illustration 1 to § 185. Restatement 2d of Contracts § 188(g)

Question 62

A employs B as an instructor in his dance studio. As part of the employment agreement, B promises not to work as a dance instructor in the same town for three years after the termination of his employment. B works for five years and deals directly with customers but does not work with any customer for a substantial period of time and acquires no confidential information in his work. Is B’s promise enforceable under public policy?

Answer 62

B’s promise is unreasonably in restraint of trade and is unenforceable on grounds of public policy. Restatement 2d of Contracts § 188(g)

Question 63

A employs B as a research chemist in his nationwide pharmaceutical business. As part of the employment agreement, B promises not to work in the pharmaceutical industry at any place in the country for three years after the termination of his employment. B works for five years and acquires valuable confidential information that would be useful to A’s competitors and would unreasonably harm A’s business. B can find employment as a research chemist outside of the pharmaceutical industry. Is B’s promise enforceable under public policy?

Answer 63

B’s promise is not unreasonably in restraint of trade and enforcement is not precluded on grounds of public policy. Restatement 2d of Contracts § 188(g)

Question 64

A employs B to work with rapidly changing technology, some parts of which entail valuable confidential information. As part of the agreement B promises not to work for any competitor of A for ten years after the termination of the employment. The confidential information made available to A will probably remain valuable for only a much shorter period. The time fixed is longer than is necessary for A’s protection. Is B’s promise enforceable under public policy?

Answer 64

B’s promise is unreasonably in restraint of trade and is unenforceable on grounds of public policy. As to the possibility of refusal to enforce only part of the promise, see § 184(2). Restatement 2d of Contracts § 188(g)

Question 65

A, B and C form a partnership to practice veterinary medicine in a town for ten years. In the partnership agreement, each promises that if, on the termination of the partnership, the practice is continued by the other two members, he will not practice veterinary medicine in the same town during its continuance up to a maximum of three years. The restraint is not more extensive than is necessary for the protection of each partner’s interest in the partnership. Are these promises enforceable under public policy?

Answer 65

Their promises are not unreasonably in restraint of trade and enforcement is not precluded on grounds of public policy. Restatement 2d of Contracts § 188(h)

Question 66

A, an experienced dentist and oral surgeon, takes into partnership B, a younger dentist and oral surgeon. In the partnership agreement, B promises that, if he withdraws from the partnership, he will not practice dentistry or oral surgery in the city for three years. Their practice is limited to oral surgery, and does not include dentistry. The activity proscribed is more extensive than is necessary for A’s protection. Is B’s promise enforceable under public policy?

Answer 66

B’s promise is unreasonably in restraint of trade and is unenforceable on grounds of public policy. As to the possibility of refusal to enforce only part of the promise, see § 184(2). Restatement 2d of Contracts § 188(h)

Question 67

A works for five years as a partner in a nationwide firm of accountants. In the partnership agreement, A promises not to engage in accounting in any city where the firm has an office for three years after his withdrawal from the partnership. The firm has offices in the twenty largest cities in the United States. Is A’s promise enforceable under public policy?

Answer 67

A’s promise imposes great hardship on him because this area includes almost all that in which he could engage in a comparable accounting practice. The promise is unreasonably in restraint of trade and is unenforceable on grounds of public policy. As to the possibility of refusal to enforce only part of the promise, see § 184(2). Restatement 2d of Contracts § 188(h)

Question 68

A, a doctor who has a general practice in a remote area, takes into partnership B, a younger doctor. In the partnership agreement, B promises that, if he withdraws from the partnership, he will not engage in the practice of medicine within the area for three years. Is B’s promise enforceable under public policy?

Answer 68

If B’s unavailability in the area will be likely to cause injury to the public because of the shortage of doctors there, the court may determine that B’s promise is unreasonably in restraint of trade and is unenforceable on grounds of public policy. Restatement 2d of Contracts § 188(h)

Question 69

A and B attend an art auction and each plans to bid on a valuable painting. They decide to acquire it as a joint venture and each promises the other to bid for its purchase jointly and, if successful, to deal with it jointly. Are these promises enforceable under public policy?

Answer 69

Their promises are not unreasonably in restraint of trade and are not unenforceable on grounds of public policy. Compare Illustrations 3 and 4 to § 187. Restatement 2d of Contracts § 188(h)

Question 70

A pays B, his twenty-one-year-old child, $100,000 in return for B’s promise not to marry for ten years. Is B’s promise enforceable under public policy?

Answer 70

B’s promise is unreasonably in restraint of marriage and is unenforceable on grounds of public policy. Restatement 2d of Contracts § 189(a)

Question 71

A, a man of seventy years, promises B, his fifty-year-old unmarried niece, that if she will remain in his home as housekeeper and will not marry, he will leave her $50,000 in his will. B does so until A’s death. Is A’s promise enforceable under public policy?

Answer 71

A’s promise is not unreasonably in restraint of marriage and its enforcement is not precluded on grounds of public policy. Restatement 2d of Contracts § 189(a)

Question 72

A and B, who are about to marry, make an antenuptial agreement in which A promises B that in case of A’s death B shall receive a specified income from A’s estate as long as B remains unmarried. Is A’s promise enforceable under public policy?

Answer 72

A’s promise is not unreasonably in restraint of marriage and its enforcement is not precluded on grounds of public policy. Restatement 2d of Contracts § 189(a)

Question 73

A and B, who are about to marry, make an antenuptial agreement in which A promises to leave their home at any time on notice by B and to make no further claims against B, and B promises thereupon to pay A $100,000. Are these promises enforceable under public policy?

Answer 73

The promises of A and B alter an essential incident of the marital relationship in a way detrimental to the public interest in that relationship and are unenforceable on grounds of public policy. Restatement 2d of Contracts § 190(a)

Question 74

A and B, who are married but have decided to separate, make a separation agreement that is fair in the circumstances, in which A promises to pay B a stated sum each month in return for B’s promise to relinquish all other claims to support. Are these promises enforceable under public policy?

Answer 74

Although the promises of A and B change an essential incident of the marital relationship, their enforcement is not for that reason precluded on grounds of public policy because they are part of a separation agreement. But see § 190, Subsection (2) and Comment c. Restatement 2d of Contracts § 190(b)

Question 75

A, who is married to B, promises to pay B $50,000 in return for B’s promise to obtain a divorce. Are these promises enforceable under public policy?

Answer 75

The promises of A and B tend unreasonably to encourage divorce and are unenforceable on grounds of public policy. The result does not depend on whether or not there are grounds for divorce or on whether or not B has performed. Restatement 2d of Contracts § 190(c)

Question 76

A, who was married to B but has obtained a divorce that can possibly be set aside for fraud, promises to pay B $50,000 in return for B’s promise not to attempt to have the divorce set aside. Are these promises enforceable under public policy?

Answer 76

The promises of both A and B tend unreasonably to encourage divorce and are unenforceable on grounds of public policy. The result does not depend on whether or not B has performed. Restatement 2d of Contracts § 190(c)

Question 77

A and B, who are about to be married, make an antenuptial agreement in which A promises that in case of divorce, he will settle $1,000,000 on B. Is A’s promise enforceable under public policy?

Answer 77

A court may decide that, in view of the large sum promised, A’s promise tends unreasonably to encourage divorce and is unenforceable on grounds of public policy. Restatement 2d of Contracts § 190(c)

Question 78

A, who has begun divorce proceedings against B, promises B that if divorce is granted, alimony shall be fixed at a stated sum, in return for B’s agreement to relinquish all other claims to alimony. Are these promises enforceable under public policy?

Answer 78

A court may decide that in view of the disintegration of the marriage relationship, the promises of A and B do not tend unreasonably to encourage divorce and their enforcement is not precluded on grounds of public policy. Restatement 2d of Contracts § 190(c)

Question 79

A and B, the parents of a child of ten, make an otherwise valid separation agreement in which A promises to give up custody of the child to B. Is A’s promise enforceable under public policy?

Answer 79

Whether or not A’s promise is enforceable depends on whether custody by B is consistent with the best interest of the child. Restatement 2d of Contracts § 191(a)

Question 80

A and B, the parents of a child of ten, promise to give up custody of the child to C, a stranger, in return for C’s promise to support the child. Are these promises enforceable under public policy?

Answer 80

The promises of A, B and C affect A’s and B’s custody rights in a minor child and unless the court finds that these promises are consistent with the best interest of the child, they are unenforceable on grounds of public policy. Restatement 2d of Contracts § 191(a)

Question 81

A and B make an agreement under which A promises to bring an action against a corporation, and have its assets seized, although there is no reasonable ground to believe that there is a cause of action, for the sole purpose of lowering the price of its stock so that B can buy it at an advantageous price. Is A’s promise enforceable under public policy?

Answer 81

A’s promise is to commit a tort and is unenforceable on grounds of public policy. Restatement 2d of Contracts § 192(a)

Question 82

A makes an agreement with B under which A promises that he will excavate a city street without permission from the city. Is A’s promise enforceable under public policy?

Answer 82

A’s promise is to interfere tortiously with an interest in property of the city and is unenforceable on grounds of public policy. Restatement 2d of Contracts § 192(a)

Question 83

A, an insurance company, in consideration of a premium paid by B, promises to indemnify B against liability for injury to the persons or property of others whether caused by B’s negligence or not. Is A’s promise enforceable under public policy?

Answer 83

Enforcement of A’s promise is not precluded on grounds of public policy. Restatement 2d of Contracts § 192(b)

Question 84

A, a publisher, and B, an author, make an agreement for the publication of a book that B is about to write. Although it is neither expected nor desired that the book will contain false and defamatory matter, A is concerned about that possibility and requires a bond on which C, a surety company, promises to indemnify A for any liability that A may incur for such matter in the book. Is C’s promise enforceable under public policy?

Answer 84

Enforcement of C’s promise is not precluded on grounds of public policy. Restatement 2d of Contracts § 192(b)

Question 85

A, the owner of a newspaper, promises B that he will publish a statement about C known to be false and defamatory if B pays him $10,000 and furnishes a bond with B as principal and D as surety to indemnify A against liability for publishing the statement. Are these promises enforceable under public policy?

Answer 85

B’s and D’s promises on the bond tend to induce the commission of a tort and are unenforceable on grounds of public policy. That A’s promise is one to commit a tort and is unenforceable on grounds of public policy, see Illustration 6 to § 178. Restatement 2d of Contracts § 192(b)

Question 86

A, in consulting with B, his lawyer, informs B of some facts. Later C promises B $1,000 if B will disclose those facts. B discloses them to C. Is C’s promise enforceable under public policy?

Answer 86

C’s promise is one that tends to induce a violation of B’s fiduciary duty to A and is unenforceable on grounds of public policy. Restatement 2d of Contracts § 193(a)

Question 87

A sells all of his shares of stock in a corporation to B, who pays the price and promises to exercise his voting power in accordance with A’s instructions. Is B’s promise enforceable under public policy?

Answer 87

B’s promise is one to violate a fiduciary duty and is unenforceable on grounds of public policy. Restatement 2d of Contracts § 193(a)

Question 88

A, B and C, shareholders in a corporation who are dissatisfied with the policy of the directors, promise each other to vote for other directors. Are these promises enforceable under public policy?

Answer 88

Their promises are not ones to violate a fiduciary duty and their enforcement is not precluded on grounds of public policy. Restatement 2d of Contracts § 193(a)

Question 89

A and B make an agreement under which A promises to employ B to work full time and B promises to begin to work immediately. As A knows, B is under an existing contract of full time employment with C. Are these promises enforceable under public policy?

Answer 89

A’s promise tends tortiously to interfere with B’s contract with C, and B’s is a tortiously induced promise to commit a breach of that contract. Both promises are unenforceable on grounds of public policy. Compare Illustration to § 180. Restatement 2d of Contracts § 194(a)

Question 90

A induces B, a member of a stock exchange, to make an agreement under which B promises to charge A reduced commissions that A knows are in violation of the rules of the exchange by which B agreed to be bound when he became a member. Is B’s promise enforceable under public policy?

Answer 90

B’s promise is a tortiously induced promise to commit a breach of his contract with the exchange and is unenforceable on grounds of public policy. Compare § 194, Illustration 1, to § 180. Restatement 2d of Contracts § 194(a)

Question 91

A, a common carrier, issues a pass to B, one of its employees. A term of the pass exempts A from liability to B for any injury caused by A’s negligence. Is the term enforceable under public policy?

Answer 91

The term is unenforceable on grounds of public policy. Enforcement of a similar term in a pass given gratuitously to one who is not an employee would not be precluded on those grounds. Restatement 2d of Contracts § 195(a)

Question 92

A term in an agreement between A, a railroad, and B, an adjacent land owner, exempts A from liability to B for fires negligently caused by sparks from its engines. Is the term enforceable under public policy?

Answer 92

Because the term does not exempt A from liability for breach of its duty of public service, its enforcement is not precluded on grounds of public policy. The term would be unenforceable on those grounds if it exempted A from liability for harm caused either willfully, intentionally or recklessly. Restatement 2d of Contracts § 195(a)

Question 93

A and B sign a written agreement containing a term precluding B from asserting any misrepresentations made by A. Is the term enforceable under public policy?

Answer 93

The term is unenforceable on grounds of public policy with respect to both fraudulent and non-fraudulent misrepresentations. As to the effect of the parol evidence rule on prior or contemporaneous non-fraudulent misrepresentations, see § 196 Comment b and § 214(d). Restatement 2d of Contracts § 196(a)

Question 94

A, the owner of a newspaper, promises B that he will publish a statement about C known to A and B to be false and defamatory, if B pays him $10,000. B pays A $10,000. Is A’s promise enforceable under public policy? What recourse does B have?

Answer 94

Since A’s promise is unenforceable on grounds of public policy (§ 192), B has no claim in restitution against A. See Illustration 6 to § 178. Restatement 2d of Contracts § 197(a)

Question 95

A induces B to make an agreement to buy goods on credit from A by bribing B’s purchasing agent. A’s bribe tends to induce the agent to violate his fiduciary duty. A delivers the goods to B. Is B’s promise enforceable under public policy? What recourse does A have?

Answer 95

Since B’s promise to pay the price is unenforceable on grounds of public policy, A has no claim in restitution against B. See § 193 and Illustration 14 to § 178. Restatement 2d of Contracts § 197(a)

Question 96

A makes an agreement with B to sell to B for $10,000 a painting that A, as B knows, has already contracted to sell to C. B pays A $5,000 in advance of delivery. Is B’s promise enforceable under public policy? What recourse does B have?

Answer 96

Although B’s promise to pay the price is unenforceable on grounds of public policy (§ 194), denial of restitution would cause B disproportionate forfeiture. B has a claim in restitution against A for $5,000. Restatement 2d of Contracts § 197(b)

Question 97

A, a foreign corporation, makes an agreement with B to sell B goods for $1,000. A delivers the goods but does not comply with a state statute that prohibits a foreign corporation from doing business in the state without appointing an agent for service of process and provides that contracts made in violation of the statute are unenforceable. Is B’s promise enforceable under public policy? What recourse does A have?

Answer 97

Although B’s promise to pay the price is unenforceable on grounds of public policy, denial of restitution would cause A disproportionate forfeiture. A has a claim in restitution against B for the goods or their value to B. Restatement 2d of Contracts § 197(b)

Question 98

A, a city, makes an agreement with B under which B is to install traffic signals for $50,000. In making the agreement, A fails to comply with a state statute that prescribes procedures for making municipal contracts, so that A’s promise is unenforceable on grounds of public policy. Although B knows this, he installs the signals. What must the court consider regarding what claim B may have?

Answer 98

In determining whether B has a claim in restitution against A for the value of the signals to A, the court will consider the extent of the forfeiture that would result from the denial of such a claim in relation to the gravity of the public policy involved and the extent of the contravention. Restatement 2d of Contracts § 197(b)

Question 99

A, an insurance company, issues a policy of fire insurance to B on a building. A state statute makes A’s promise unenforceable as a wager because B has no insurable interest in the building. B pays A the premium but neither A nor B knows nor has reason to know that B has no legally insurable interest in the building. Is A’s promise enforceable under public policy? What recourse does B have?

Answer 99

Although A’s promise is unenforceable on grounds of public policy, B was excusably ignorant of the facts that make it unenforceable, and B has a claim in restitution against A for the amount of the premium paid. Restatement 2d of Contracts § 198(a)

Question 100

A deposits $1,000 with B on terms that both A and B know are prohibited by a state statute. Is B’s promise enforceable under public policy? What recourse may A have?

Answer 100

Although B’s promise is unenforceable on grounds of public policy, if the court decides that A belongs to the class of persons that the policy is intended to protect and is therefore not equally in the wrong with B, it will allow A a claim in restitution against B for $1,000. Restatement 2d of Contracts § 198(b)

Question 101

A, a lawyer, promises B, an uneducated person, that he will attempt to use his personal influence with city councilmen to secure the passage of an ordinance desired by B, in return for B’s promise to pay $5,000 immediately and $10,000 if the ordinance is passed. B believes A’s assurances that the agreement is not improper and pays A $5,000. Is A’s promise enforceable under public policy? What recourse does B have?

Answer 101

Although A’s promise is unenforceable on grounds of public policy, B is not equally in the wrong with A because of A’s misrepresentation and B’s ignorance. B has a claim in restitution against A for $5,000. The result does not depend on whether or not A has done anything to secure passage of the ordinance. Restatement 2d of Contracts § 198(b)

Question 102

A, an insurance company, issues a policy of fire insurance to B on a building. A state statute makes A’s promise unenforceable as a wager because B has no legally insurable interest in the building. B pays A the premium but, before the coverage becomes effective, B notifies A that he cancels the policy. Is A’s promise enforceable under public policy? What recourse does B have?

Answer 102

Although A’s promise is unenforceable on grounds of public policy, B withdrew from the transaction before the improper purpose had been achieved. B has a claim in restitution against A for the amount of the premium paid. Restatement 2d of Contracts § 199(a)

Question 103

A lends money to B for the purpose of enabling B to bet on a horse race in return for B’s promise to repay it in six months. A state statute makes betting on a horse race a crime. Before B has made the bet, A tells B that he wants the money back so that it will not be used for this purpose. Is B’s promise enforceable under public policy? What recourse does A have?

Answer 103

Although B’s promise to repay the money is unenforceable on grounds of public policy (§ 178), A withdrew from the transaction before the improper purpose had been achieved. A is entitled to restitution from B of the amount lent. The result does not depend on whether or not B makes the bet. Restatement 2d of Contracts § 199(a)

Question 104

A, who is engaged in organizing a prize contest, promises B that if B pays A $500, A will see that B wins a $5,000 automobile in the contest. Although organizing the contest is not itself a crime, a state statute makes participation in the fraudulent operation of such a contest a crime. B pays A $500, but when A demands another $100 from B, before the contest, B refuses, tells A that he does not want the automobile, and demands the return of the $500. Is A’s promise enforceable under public policy? What recourse does B have?

Answer 104

Although A’s promise that B will get an automobile is unenforceable on grounds of public policy, B withdrew from the transaction before the improper purpose had been achieved. B has a claim in restitution against A for $500. Restatement 2d of Contracts § 199(a)

Question 105

A and B make a wagering agreement under which each deposits $1,000 with C, who as a stakeholder promises to pay the total sum of $2,000 to the winner. Under a state statute it is a crime to make such a wager. A wins the wager, but before C has paid A, B notifies C that he claims restitution. What recourse does B have?

Answer 105

B has a claim in restitution against C for $1,000, the amount that he paid C. The result is the same even if C pays A after notice from B. Restatement 2d of Contracts § 199(b)

Question 106

The facts being otherwise as stated in Illustration 4, C refuses to pay A, although not requested by B to do so. Is C’s promise enforceable under public policy? What recourse does A have?

Answer 106

Although C’s promise to pay the total sum of $2,000 to A is unenforceable on grounds of public policy, A has a claim in restitution against C for $1,000, the amount that he paid C. Restatement 2d of Contracts § 199(b)