TYPES OF ILLEGALITY

1
TYPES OF ILLEGALITY

• VIOLATIONS OF STATUTES AND CONSTITUTIONS
• VIOLATIONS OF PUBLIC POLICY

2
SANCTIONS FOR ILLEGAL CONTRACTS

• COMMON LAW CONTRACT WAS VOID
• EXCEPTIONS FOR WITHDRAWAL, UNEQUAL GUILT,
  STATUTORY PROTECTION OF ONE PARTY
• ALTERNATIVE PENALTY BY STATUTE (E.G., USURY) OR
  COMMON LAW

3
USURY LAWS

• SET A MAXIMUM RATE OF INTEREST ON A LOAN OF MONEY
  OR FORBEARANCE (EXTENSION) OF DEBT
• STATUTORY EXCEPTIONS (E.G. LOANS TO BUSINESS
  CORPORATIONS)
• TIME-PRICE DIFFERENTIAL RULE

4
LICENSING LAWS

• REGULATORY LICENSING LAWS
• DESIGNED TO PROTECT THE PUBLIC HEALTH, SAFETY, OR
  WELFARE
• FREQUENTLY HAVE CRIMINAL PENALTIES, COMPETENCY OR
  OTHER REQUIREMENTS TO SECURE LICENSE
• UNLICENSED PARTY CANNOT ENFORCE THE CONTRACT

5
LICENSING LAWS

• REVENUE LICENSING LAWS
• DESIGNED PRIMARILY TO RAISE MONEY
• USUALLY NO COMPETENCY STANDARDS OR CRIMINAL
  PENALTIES FOR VIOLATING THE LAW
• UNLICENSED PARTY CAN ENFORCE THE CONTRACT

6
NON-COMPETE AGEEMENTS

• GENERALLY AGREEMENT BETWEEN PERSONS NOT TO
  COMPETE WITH ONE ANOTHER VIOLATES PUBLIC POLICY
  AND IS UNENFORCEABLE
• ANTI-COMPETITIVE AGREEMENTS MAY ALSO VIOLATE
  ANTITRUST LAWS

7
LAWFULNON-COMPETE AGEEMENTS

• SALE OF BUSINESS
• EMPLOYMENT CONTRACT
• BUSINESS RELATIONSHIP

8
SALE OF BUSINESS

• NON-COMPETE DESIGNED TO PROTECT BUYERS INTEREST
  IN GOODWILL OF BUSINESS
• MUST BE REASONABLE IN TERMS OF TIME, GEOGRAPHIC
  AREA, AND BUSINESS ACTIVITY RESTRICTED BY
  AGREEMENT

9
EMPLOYMENT CONTRACT

• MUST BE NECESSARY TO PROTECT SOME LEGITIMATE
  INTEREST OF EMPLOYER
• MUST BE REASONABLE IN TERMS OF TIME, GEOGRAPHIC
  AREA, AND BUSINESS ACTIVITY RESTRICTED BY
  AGREEMENT

10
BUSINESS RELATIONSHIPS

• RULE OF REASON APPROACH TO NONCOMPETITION
  AGREEMENTS
• ANALYZE THE PURPOSE AND EFFECT OF THE RESTRICTIVE
  COVENANT ON COMPETITION IN MARKET

11
UNCONSCIONABILITY

• GROSSLY UNFAIR CONTRACT OR TERMS IN CONTRACT
• COURT MAY REFUSE TO ENFORCE THE CONTRACT OR
  UNFAIR TERMS

12
EXCULPATORY CLAUSE

• CONTRACT RELEASING A PERSON FROM LIABILITY FOR
  FUTURE TORTS

13
EXCULPATORY CLAUSE

• NOT ENFORCEABLE IF IT RELEASES A PARTY FROM
  LIABILITY FOR INTENTIONAL TORTS OR
  RECKLESSNESS/GROSS NEGLIGENCE
• COURTS ALSO CONSIDER PUBLIC INTEREST AFFECTED BY
  EXCULPATORY CLAUSE