PUBLIC POLICY AND ILLEGALITY

Question 1

R2C §178

Answer 1

contractual term may be held unenforceable on grounds of public policy if it appears to conflict with clear legislative intent or is contrary to other principles of equity and fairness that are well recognized and long standing. Disadvantaged party can be fully aware of the term in question and still use this as a defense

Question 2

Public policy may be raised as a defense to the enforcement of a contract in four contexts:

Answer 2

1) Subject matter of the contract is prohibited by law
a) I.e. prostitution, gambling, bribery

2) Where the contract is formed for the purpose of committing a crime
a) I.e. Contract between employers and a hired assassin
b) Clouse v. Myers- liquor

3) Where the contract performance would constitute a tort
a) I.e. a publicist being hired to spread a defamatory story

4) Where the contract would violate certain values and freedoms designated by the jurisdiction
a) A contract the prohibits one party from marrying for an extended period of time

Question 3

Clouse v. Myers

Answer 3

contract designed to get around liquor control board requirements

(i) R2C §197, 198, 199
(a) §197: Restitution is generally unavailable—denial of restitution would cause disproportionate forfeiture of the lease. Clouse’s best arguments was under this
(ii) The contract in its form didn’t violate the law. The court draws the inference that this was a violation
(iii) Both parties were in the wrong, so the court just left them where they were

Question 4

Typical contracts that raise public policy concerns

Answer 4

1) Non-Compete Agreements: courts generally disfavor them—see Lake Land (because they force people not to work, which puts them on state welfare)
a) If a non-compete has an unreasonable geographic, duration, or scope term, then enforcement would be a violation of public policy (promoting a citizen’s freedom to obtain gainful employment)
b) Blue Pencil Rule: most jurisdictions will remove the offending portion of the non-compete clause while enforcing the remainder of it (or impose narrower terms)

2) Sale of Goods via Bribery
3) Sale of Goods Intended for Unlawful Use

4) Liability-Limiting Provisions (exculpatory agreements)
a) Usually clauses that limit liability for recklessness are not okay, whereas limiting liability for negligence is okay

5) Unlicensed Goods or Services

Question 5

Hopper v. All Pet

Answer 5

we need to consider whether enforcing the non-compete would harm the public in some way (trade restraints, competition levels, etc.)
(i) Without non-competes, there is no protection of trade secrets, you wouldn’t hire new employees

Question 6

AZ v. BZ

Answer 6

Wife wants to take pre-embryo and get pregnant after she and her husband get divorced

a) Courts balance one party’s right to become a parents with the other party’s right not to. Almost always comes out in favor of the party that doesn’t want to become a party
b) Notion that children aren’t something that we should deal with through contracts
c) If you’re married, you can still contract with your spouse
d) Exception: if one party undergoes something that prevents him/her from producing more eggs/sperm (i.e. radiation) the court will enforce in that party’s favor