lesson 10 Flashcards
criminal statues
contracts that violate these are illegal, court does not enforce them (killing, prostitution, drugs)
gambling
unless gambling is specifically permitted by the state, it is typically illegal, and courts will not enforce contracts based on those activities
gambling example
Man lives in CA, goes to NV to gamble. writes checks, returns to CA, tells his bank to stop payment on the checks. the casino sues him to collect the amount of the checks, but he says its illegal in CA for a casino to loan money to a person so they can gamble. Courts did not order man to pay, casinos now have language in loan documents to ensure disputes are heard in NV court
insurance
in most states there must be some connection between the person that buys the insurance policy and the person that is the subject of the insurance (insurable interest)
licensing
many trades and professions require that the individual be licensed by the state. if a person that is not licensed enters into a contract that is later breached, the courts will ordinarily not enforce the agreement (not paying an unlicensed plumber will NOT be enforced)
usury
charging a high rate of interest, many states have laws, severe penalties can apply if charged over the limit
credit card rates
court ruled banks that issue credit cards could charge the interest rate that’s allowed in the state they’re headquartered, not the state where the card is issued
contracts that violate public policy
Sometimes courts will decline to enforce a contract even if it doesn’t violate a statue or a law, but because it violates “public policy”, or is against good of society, is often criticized as hard to define and is simply something that judge or court does not like
example of contract that violates public policy
Couple was having difficulty conceiving, engaged in in-vitro fertilization. During the process, several additional eggs were fertilized with husband’s sperm and were frozen in case the couple decided to have additional children. Wife made a handwritten notation in forms that if they ever separated or divorced she could still use the saved frozen embryos. They later divorced, and she wanted to implant the embryos and have additional children. Ex husband sued her to prevent her from doing that. Court ruled that the contract violated public policy and that they did not have the authority to force the ex-husband to become a father again against his will
agreements not to compete
generally enforceable as long as they are for a reasonable distance and period of time, must be part of a larger agreement
agreement not to compete examples
- Andy agrees to sell his bowling alley to peter and also agrees not to open a new bowling alley within 5 miles during the next 2 years. This contract is enforceable since it is part of the larger agreement to see the bowling alley.
- Andy and peter have 2 bowling alleys in Blacksburg. They make an agreement that they will not hire away each other’s employees. As a result, the two owners decline to give their employees raises and keep the salaries down through their agreement. This contract is unenforceable since it is not part of a larger agreement
significance of King v Head Start Family Hair Salons
court considered more than the distant and duration of this contract, and also considered the harsh effects on the employee. they also did not simply enforce or decline to enforce, but rather modified the contract.
exculpatory clauses
disclaimers, often seen on ticket stubs, in parking lots, and in other areas where businesses try to limit their own liability. most occasions they are NOT valid.
common types of invalid disclaimers:
- if disclaimer attempts to exclude gross negligence or intentional torts (employee pushes child off horse)
- disclaimers that exclude activity in the public interest such as medical care, public transportation, or some essential service (surgeon leaves clamp in patients leg, cannot disclaim negligence)
- disclaimers that benefit one party that has significantly greater bargaining power (airline that disclaims any and all injury from negligence)
- disclaimers that are not clearly written or visible (flashes for 1 second on tv screen or written in unclear language)
unconscionable contracts
one that a court refuses to enforce because of fundamental unfairness, uncommon, must be extreme
in order to prove unconscionableness of a contract, plaintiff must prove
procedural unconscionability AND substantive unconscionability
procedural unconscionability
when there has been:
- oppression - stronger party forces an unfavorable contract, often taking advantage of lack of education
- unfair surprise - weaker party did not understand terms b/c they were hidden/contained in fine print
substantive unconscionability
terms of contract themselves are overly harsh or unfair
t/f: the UCC allows courts to find unconscionability in contracts that are subject to the UCC
true
