Week 6 - Test 1 Flashcards
remainder of agreement can be enforced without unenforeceable provision contained in the agreement
severable
court edits out part of an agreement
blue-penciling
the parties are equally at fault
in Pari Delicto
Statute violation; inherently bad
malum per se
statute violation; not inherently bad; less serious – enforceability may vary
malum prohibitum
If a licensing law is intended to (1), agreements in violation of the law are unenforceable.
protect the public
charges an illegal rate of interest on a loan
usurious contract
(1) and loans that do not involve (2) are most often regulated.
- consumer loans
2. regulated banks
loan for personal or family purposes
consumer loan
a clause that permits immediate entry of judgment without notice of an opportunity to present defenses
confession of judgment (“cognovits”)
legitimate financial interest in a person–without this, most states allow insuring a person (form of gambling)
insurable interest
multilevel arrangement in which money is made by recruiting new people
pyramid scheme
prohobits certain transactions on Sundays
Blue Law (Sunday statute)
a civil wrong that is sometimes based in statute and sometimes based in common law
tort
false statements that hurt the reputation of another
slander
not good for society – determinable by courts’ discretion
contrary to public policy
provision that attempts to excuse a party from liability for that party’s torts (generally unenforceable if involving intentional or reckless conduct)
exculpatory clause
constituting a tort
tortious
3 things a court will look at in determining whether an exculpatory clause should be enforceable for negligent actions
- Was the clause conspicuous and clear?
- What is the relationship between the parties and the relative “need” of the parties? (power to negotiate?)
- To what degree can the parties protect themselves? (obvious hazard? Control?)
relationship where parties have equal power to negotiate terms
arms-length transactions
one party agrees to compensate the other for losses arising from the contract
hold harmless clause (indemnification clause)
Contract provision that inhibits (1) is subject to scrutiny in court; the most common of these is the (2), which is enforceable only as part of a larger, legitimate agreement (not independently).
- free trade
2. covenant not to compete
provision under which party agrees to refrain from engaging in specified business activities
covenant not to compete (noncompete)
When a noncompete clause appears in a contract for the (1), it is generally enforceable, as long as it is reasonable in terms of (2), (3) and (4). What is reasonable is determined based on what is necessary to protect the (5).
- sale of a business
- time limit
- geographic limitations
- scope of activity covered
- buyer’s legitimate interests
Court are careful in scrutinizing noncompete restrictions in (1), and these must be related to the (2).
- employment contracts
2. employer’s legitimate interests
Another noncompete restriction is (1), which risk violating antitrust laws and should be examined carefully.
- exclusive dealing agreements
Legality asks whether contracts are in compliance with (1) and (2)–basically, whether they are (3).
- law
- public policy
- enforceable
A bargain is illegal if either the (1) OR its (2) is (3), (4) or (5).
- formation
- performance
- criminal
- tortious
- contrary to public policy
If a bargain is illegal, the courts leave the parties (1)
- where it finds them
If an agreement is illegal when made and subsequently becomes legal because the law is changed, the change (1), UNLESS the law says it is (2)
- does not validate the agreement
2. retroactive
An illegal contract is void, which means if executed, (1), and if executory, (2). The exception is (3). Another exception is (4), in which courts examine the fault of each party and try to avoid problems like unjust enrichment.
- there is nothing you can do
- neither party can enforce the contract
- Doctrine of Severability (allows for illegal part of the contract to be severed and the remainder enforced)
- In Pari Delicto (in equal fault)
If an attorney reaps the benefit of paralegal work and then refuses to pay because the work was illegal, the court upholding the contract is acting under (1)
In Pari Delicto
(1) leads to judicial policy.
public policy
- inherently bad - not enforced
2. kind of bad, maybe bad - may be enforced
- malum in se
2. malum prohibitum
For determining the badness of a license violation, courts will ask whether the licensing exists to (1) or for (2)
- protect the public
2. income
excessive rate of interest. Malum prohibitum, so rest of contract may be ok.
usury
(1) are void contracts even in states where gambling is legal. But a (2) is ok.
- Casino loans
2. lottery split
Life insurance requires an (1)
- insurable interest
Covenants not to compete will be upheld according to reasonableness of which 3 criteria?
- duration
- geographical area
- scope/subject matter
Courts usually strike sneaky exculpatory clauses because you can’t absolve yourself from (1) OR (2). However, if the clause makes it into the contract after (3) and it is (4), the court will probably uphold it.
- negligence
- intentional/reckless conduct
- negotiation
- reasonable
3 questions to ask when determining whether an exculpatory clause overreaches
- Does the clause go against long-established common law rules?
- Does the clause absolve the party in total?
- Does the state have an interest in protecting a large class of citizens who cannot protect themselves? (public policy)
clause relating to interest rates
acceleration clause
There can be no noncompete clauses between (1) because clients have a right to choose.
lawyers
Lawyers may (1) for clients–in which case the client pays them back if he loses. However, lawyers may not engage in (2)–“sponsorship” regardless of win or loss–or (3), in which the “sponsor” gets the payout in case of a win (not the same thing as a contingency fee)
- advance fees
- maintenance
- champerty
