ILLEGALITY T' Leigh Anenson, J'D', LL'M'

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ILLEGALITYT. Leigh Anenson, J.D., LL.M.
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In a free society the state does not administer
the affairs of men and women. It administers
justice among men and women who conduct their
own affairs. Walter Lippman
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CONTRACT LAW

• Introduction to Contracts
• The Agreement Offer
• The Agreement Acceptance
• Consideration
• Reality of Consent

• Capacity to Contract
• Illegality
• Writing
• Rights of Third Parties
• Performance Remedies

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LEARNING OBJECTIVES

• Meaning of illegality
• Types of illegal agreements
• Effect on contracts
• Special doctrines

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ELEMENTS OF A CONTRACT

• 1) AGREEMENT
• 2) CONSIDERATION
• 3) CAPACITY
• 4) LAWFUL OBJECT

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ILLEGALITY DEFINITION

• An illegal agreement involves an act or promise
  that violates a law or is against public policy
• even if there was voluntary consent between two
  parties
• not necessarily criminal

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THREE CATEGORIES

• 1. AGREEMENTS THAT VIOLATE STATUTES
• 2. AGREEMENTS THAT VIOLATE PUBLIC POLICY PER
  THE COURTS
• 3. UNCONSCIONABLE CONTRACTS

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AGREEMENTS THAT VIOLATE STATUTE TWO WAYS

• 1. STATUTE DECLARES AGREEMENT ILLEGAL
• 2. AGREEMENT FRUSTRATES PURPOSE (POLICY) OF THE
  STATUTE
• COMMIT CRIME
• PROMOTE VIOLATION (factors importance of policy,
  extent of interference, seriousness of
  wrongdoing, connection to agreement)
• i.e. Straub v. BMT
• PERFORM ACT WHERE PARTY IS NOT LICENSED
  (depends on if regulatory versus revenue)
• i.e. Riggs v. Woman v. Woman PC

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PUBLIC POLICY PER COURTS

• 1. AGREEMENTS IN RESTRAINT OF COMPETITION
• 2. NON-COMPETE AGREEMENTS
• 3. EXCULPATORY CLAUSES

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NON-COMPETE AGREEMENTS

• 1. ENDS serve legitimate business purpose
• customer base
• trade secrets
• good will
• 2. MEANS no greater than necessary to protect
  interest
• time
• geographical area
• scope of activities
• 3. NO UNDUE HARDSHIP

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EXCULPATORY CLAUSES

• 1. NOT VALID IF BEYOND NEGLIGENCE
• 2. NOT IF PUBLIC DUTY
• 3. NOT VALID IF NON-DELEGABLE PER COMMON LAW OR
  STATUTE
• i.e. McCune v. Myrtle Beach Indoor Shooting Range

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UNCONSCIONABILITY

• PROCEDURAL bargaining process
• economic need
• lack of time
• market conditions
• SUBSTANTIVE terms so unfair that they
  shock the conscience
• deprived of remedy
• price excessive to market
• one party bears disproportionate amount of risk

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EFFECT OF ILLEGALITY VOID

• LEAVE PARTIES WHERE IT FINDS THEM
• EXCEPTIONS
• 1. EXCUSABLE IGNORANCE OF FACTS OR LAW
• 2. NOT IN PARI DELICTO
• 3. RESCISSION BEFORE PERFORMANCE
• 4. DIVISIBLE CONTRACT